Oil Rules!

Commentary: The end of the world as you know it, and the rise of the new energy world order.

By Michael T. Klare, TomDispatch

April 15, 2008

TOOLS E-mail article Print article BACKTALK E-mail the editor

[Introduction by Tom Engelhardt]

It's strange that the business and geopolitics of energy takes up so little space on American front pages—or that we could conduct an oil war in Iraq with hardly a mention of the words "oil" and "war" in the same paragraph in those same papers over the years. Strange indeed. And yet, oil rules our world and energy lies behind so many of the headlines that might seem to be about other matters entirely.

Take the food riots now spreading across the planet because the prices of staples are soaring, while stocks of basics are falling. In the last year, wheat (think flour) has risen by 130%, rice by 74%, soya by 87%, and corn by 31%, while there are now only eight to 12 weeks of cereal stocks left globally. Governments across the planetary map are shuddering. This is a fast growing horror story and, though the cry in the streets of Cairo and Port au Prince might be for bread, this, too, turns out to be a tale largely ruled by energy: Too many acres turned over to corn (and sugar cane) for the creation of biofuels; a historic drought in Australia and other climate-change-induced extremes of weather—a result of the burning of fossil fuels—that have affected crop yields; and many new middle-class consumers, in China and elsewhere, coming on line, with a growing desire for meat, the production of which is heavily petroleum based.

From resource wars to oil wars (the subjects of his last two books), Michael Klare, Tomdispatch's energy expert, has long been ahead of the curve when it came to ways in which our planet was being reshaped at the most basic level. Today, he offers Tomdispatch readers a peek into some of the key themes in his staggering new book, Rising Powers, Shrinking Planet: The New Geopolitics of Energy. If you want to grasp the true shape of our shaky world, of where exactly we've been and where we might be going, this is a book not to be missed. It offers the profile-in-formation of a shape-shifting planet, a planet in transition and on a road to nowhere pretty. Check out as well, the latest Tomdispatch brief video (produced by TD's Brett Story)—in which Klare discusses key issues in his new book—by clicking here. Tom Engelhardt

Oil Rules!
The end of the world as you know it, and the rise of the new Energy world order.
By Michael T. Klare

Oil at $110 a barrel. Gasoline at $3.35 (or more) per gallon. Diesel fuel at $4 per gallon. Independent truckers forced off the road. Home heating oil rising to unconscionable price levels. Jet fuel so expensive that three low-cost airlines stopped flying in the past few weeks. This is just a taste of the latest energy news, signaling a profound change in how all of us, in this country and around the world, are going to live—trends that, so far as anyone can predict, will only become more pronounced as energy supplies dwindle and the global struggle over their allocation intensifies.

Energy of all sorts was once hugely abundant, making possible the worldwide economic expansion of the past six decades. This expansion benefited the United States above all—along with its "First World" allies in Europe and the Pacific. Recently, however, a select group of former "Third World" countries—China and India in particular—have sought to participate in this energy bonanza by industrializing their economies and selling a wide range of goods to international markets. This, in turn, has led to an unprecedented spurt in global energy consumption—a 47% rise in the past 20 years alone, according to the U.S. Department of Energy (DoE).

An increase of this sort would not be a matter of deep anxiety if the world's primary energy suppliers were capable of producing the needed additional fuels. Instead, we face a frightening reality: a marked slowdown in the expansion of global energy supplies just as demand rises precipitously. These supplies are not exactly disappearing—though that will occur sooner or later—but they are not growing fast enough to satisfy soaring global demand.

The combination of rising demand, the emergence of powerful new energy consumers, and the contraction of the global energy supply is demolishing the energy-abundant world we are familiar with and creating in its place a new world order. Think of it as: rising powers/shrinking planet.

This new world order will be characterized by fierce international competition for dwindling stocks of oil, natural gas, coal, and uranium, as well as by a tidal shift in power and wealth from energy-deficit states like China, Japan, and the United States to energy-surplus states like Russia, Saudi Arabia, and Venezuela. In the process, the lives of everyone will be affected in one way or another—with poor and middle-class consumers in the energy-deficit states experiencing the harshest effects. That's most of us and our children, in case you hadn't quite taken it in.

Here, in a nutshell, are five key forces in this new world order which will change our planet:

1. Intense competition between older and newer economic powers for available supplies of energy: Until very recently, the mature industrial powers of Europe, Asia, and North America consumed the lion's share of energy and left the dregs for the developing world. As recently as 1990, the members of the Organization of Economic Cooperation and Development (OECD), the club of the world's richest nations, consumed approximately 57% of world energy; the Soviet Union/Warsaw Pact bloc, 14% percent; and only 29% was left to the developing world. But that ratio is changing: With strong economic growth in the developing countries, a greater proportion of the world's energy is being consumed by them. By 2010, the developing world's share of energy use is expected to reach 40% and, if current trends persist, 47% by 2030.

China plays a critical role in all this. The Chinese alone are projected to consume 17% of world energy by 2015, and 20% by 2025—by which time, if trend lines continue, it will have overtaken the United States as the world's leading energy consumer. India, which, in 2004, accounted for 3.4% of world energy use, is projected to reach 4.4% percent by 2025, while consumption in other rapidly industrializing nations like Brazil, Indonesia, Malaysia, Thailand, and Turkey is expected to grow as well.

These rising economic dynamos will have to compete with the mature economic powers for access to remaining untapped reserves of exportable energy—in many cases, bought up long ago by the private energy firms of the mature powers like Exxon Mobil, Chevron, BP, Total of France, and Royal Dutch Shell. Of necessity, the new contenders have developed a potent strategy for competing with the Western "majors": they've created state-owned companies of their own and fashioned strategic alliances with the national oil companies that now control oil and gas reserves in many of the major energy-producing nations.

China's Sinopec, for example, has established a strategic alliance with Saudi Aramco, the nationalized giant once owned by Chevron and Exxon Mobil, to explore for natural gas in Saudi Arabia and market Saudi crude oil in China. Likewise, the China National Petroleum Corporation (CNPC) will collaborate with Gazprom, the massive state-controlled Russian natural gas monopoly, to build pipelines and deliver Russian gas to China. Several of these state-owned firms, including CNPC and India's Oil and Natural Gas Corporation, are now set to collaborate with Petróleos de Venezuela S.A. in developing the extra-heavy crude of the Orinoco belt once controlled by Chevron. In this new stage of energy competition, the advantages long enjoyed by Western energy majors has been eroded by vigorous, state-backed upstarts from the developing world.

2. The insufficiency of primary energy supplies: The capacity of the global energy industry to satisfy demand is shrinking. By all accounts, the global supply of oil will expand for perhaps another half-decade before reaching a peak and beginning to decline, while supplies of natural gas, coal, and uranium will probably grow for another decade or two before peaking and commencing their own inevitable declines. In the meantime, global supplies of these existing fuels will prove incapable of reaching the elevated levels demanded.

Next Page
Page 1 of 2

Comments: