Resource Wars Class 4 Notes

Today we will look at trends and less obvious dynamics taking place.

• We need a market victory that will lead to a political victory over the oil companies.
• It is hard to disengage from the oil-surplus states because of current political and security environment
• Getting out of Iraq would be a clear signal that we would need to pursue alternate energy sources
• Problem with a resource intensive countries is that the entire economy starts to depend on oil rather than developing self-sustaining industries, the “Dutch Disease”

Moving Beyond Oil

Barry opened up the topic: How do we get out of oil dependency and move to another set of options that will give us hope? He wanted to talk about this in order to get these topics out in the open so that he can address them directly and get the class involved

Class Comments

• One comment was that we should first attempt to save energy in stationary sources versus mobile sources because it is easier
• Another comment is that coal gasification is also viable and Germany ran its economy on it during WWII and we have lots of coal
• I commented that electric vehicles are viable now and transportation uses 60% of oil in the US

Barry Comments

• Electric cars have a lot of resistance because they are to cheap to make and build and won’t increase car company profits
• We are so focused on the production end of alternative energy that it is hard to understand the response to it

Trends

• 70s oil crisis largely caused by the unforeseen difficulty of shifting over from oil we were exporting to oil we were importing from Saudi Arabia and we didn’t have the Strategic Reserve
• In the 80s we lost the urgency of conservation
• Turned over all production and distribution of oil to private companies
• At the time of first Bush presidency, plan changed to producing more oil in the US so that we didn’t need Saudi oil
• They were considering putting oil rigs in the Monterey bay
• However, number of discoveries we are making are decreasing while the amount we are using is increasing, so we will never be able to catch up
• The key is the difference between energy-deficient countries and energy-surplus countries as a zero-sum approach
• Many countries are dealing with energy problems by nationalizing oil concerns – “the commanding role of the state”.
• Chinese are being very aggressive with oil deals: Angola, Nigeria, Saudi
• So much is happening with oil deals these days that it is hard to keep up
• Now it is a new game focused on “Energy Security” that even Cheney recognizes

Unocal

• Unocal had good resources in southeast Asia in close proximity to China
• China started flexing their muscles investing abroad and saw a Unocal acquisition as a good opportunity
• Quickly became a hot-potato issue as the US was concerned about a foreign company, in particular China, acquiring a strategic resource
• So the U.S. passed a law requiring a “study” that effectively killed the deal

90s

• Price of gas started going up in the 90s
• First we went into Kuwait
• Saddam was hard to deal with. He wasn’t anti-American; he was just a thug. You had to make him think he was getting something for nothing
• The Iraq invasion of Kuwait was done for complex reasons
• At that time, Saddam was in favor with the U.S. He was “Our son-of-a-bitch”
• When Saddam raised his concern about Kuwait with the U.S. diplomat, we responded that we had no opinion on it
• Bill Clinton didn’t have a energy security policy even though there was a close relation with the African oil producers
• Clinton spent the better part of 8 years dealing with Iraq and containment of Al-Qaeda

Geopolitics

Middle East

• If we disengage in Iraq, what military presence will we have in the Middle East?
• Some candidates and military advisors say that being in Kuwait or Abu Dhabi is enough
• Some say the costs of being in Iraq outweigh the advantages
• Iran is unstable and the economy doesn’t work well
• Iran is trying to balance Pakistan and Israel with regard to nuclear capacity
• Iran does have chilly areas and has heating problems
• Not as bad off as North Korea but present a similar problem in trying to create a nuclear weapons capacity
• Recent intelligence reports indicates that Iran is having problems creating nuclear weapons, basically because they don’t have enough money to do it
• Many countries in Middle East are problematic but still produce most of the world’s oil
• Israel can take care of themselves but would be hard pressed if the U.S didn’t support them
• U.S. also supports Egypt
• Not many other countries will allow the U.S. to have a military presence
• Now that China is becoming a big buyer of oil, there is less of a need for Middle East countries to bow down to U.S. desires

North Oil

• Canada, Alaska, Arctic, Greenland
• Drilling might start on Greenland’s coast

Africa

• Nigeria is the biggest problem. It has a history of exploitation and people are treated badly by oil companies and government
• Many unemployed, increasingly angry males that try to tap the pipeline
• There have been a lot of environmental problems from this. In particular oil refining and natural gas burning produces a lot of pollutants
• There are some countries, Russia and others, that are looking at capturing the natural gas.
• All along West Africa there is natural gas even where there is no oil
• Chinese are going into Angola in a big way and are offering c
• Other countries with oil Congo, Sudan, Somalia, Ethiopia, Chad, Cameroon
• Nigeria is doing 2 to 2.5 million barrels a day and would like to go to 5 mbd

Latin America

• Venezula has been a major producer but is probably past peak
• Their Orinoco fields have a lot of oil but is a very heavy crude and difficult to refine
• Mexico big field Cantarell is past peak
• Columbia’s war on drugs was our excuse for sending 5 to 10 thousand troops
• One problem with Mexico and Venezuela’s oil production is that since nationalization they have not been using outside help and so have suffered from a technology loss

Russia

• Russia is having problems. They have been so tough on outside investors that they are not producing as much
• Putin overplayed his reform of unchecked capitalism with the effective nationalizing of the oil industry

Misc

Energy Security

• For energy security, it is necessary to control not only oil production, but also drilling, pipelines and shipping
• The U.S. controls much of the world’s sea shipping, but not all
• We are still caught in a trap that our military will trump anything, but really energy will be the power in the future

Saudi Arabia Instability

• Bill asked about Saudi falling to Wahabi’s.
• Saudi’s love us because we are their main market, not for any other reason
• Saudi Arabia is a son-of-a-bitch, but they are “our son-of-a-bitch”
• Barry will talk more about this in Week 8