The Peakist

by David S. Elliott

Decline of the world’s largest reserve could cripple the global economy.

Back in 2001, before the issue of energy scarcity ever entered my mind, I read a chilling online article called Ghawar Is Dying that bluntly speculated about the massive global upheavals modern industrial society would suffer if the largest oil field in Saudi Arabia were indeed running dry.

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Falling fuel costs probably not a coincidence, oil traders say

NBC News reports: Oil traders and others believe that the Saudi decision to let the price of oil tumble has more to do with Iran than economics. Their belief has been reinforced in recent days as the Saudi oil minister has steadfastly refused calls for a special meeting of OPEC and announced that the nation is going to increase its production, which will send the price down even farther. Saudi Oil Minister Ibrahim al-Naimi even said during a recent trip to India that oil prices are headed in the “right direction.” Not for the Iranians. Moreover, the traders believe the Saudis are not doing this alone, that the other Sunni-dominated oil producing countries and the U.S. are working together, believing it will hurt majority-Shiite Iran economically and create a domestic crisis for Iranian President Mahmoud Ahmadinejad, whose popularity at home is on the wane. The traders also believe (with good reason) that the U.S. is trying to tighten the screws on Iran financially at the same time the Saudis are reducing the Islamic Republic’s oil revenues. (more…)

AFP, 17 September 2006 - Despite forecasts that show no end to rising demand for crude over the coming decades, oil-producing nations are casting an uneasy eye on the growing number of measures being taken to tackle climate change.

“The main long term challenge is definitely the necessity to reconcile oil with environmental demands,” Claude Mandil, executive director of the International Energy Agency, told a recent conference organised by OPEC to examine the industry’s future.
Mandil also hinted that the 11 Middle Eastern, African and Asian nations in the Organisation of Petroleum Exporting Countries could not afford to ignore concerns about climate change, which are even winning over once sceptical consuming nations. (more…)

Nafeez Mosaddeq Ahmed writes: In a little-noted article printed in early August in the Armed Forces Journal, a monthly magazine for officers and leaders in the United States military community, early retired Major Ralph Peters sets out the latest ideas in current US strategic thinking. And they are extremely disturbing.

Ethnically Cleansing the Entire Middle East

Maj. Peters, formerly assigned to the Office of the Deputy Chief of Staff for Intelligence where he was responsible for future warfare, candidly outlines how the map of the Middle East should be fundamentally re-drawn, in a new imperial endeavor designed to correct past errors. “Without such major boundary revisions, we shall never see a more peaceful Middle East,” he observes, but then adds wryly: “Oh, and one other dirty little secret from 5,000 years of history: Ethnic cleansing works.” (more…)

Richard Heinberg writes: There is considerable danger that the smoke and fire from these three geographic flashpoints—Iraq, Iran, and Lebanon—could converge in a larger regional conflagration. In light of all this potential for apocalyptic mayhem, a discussion of the oil business may seem almost frivolous. But it is important to remember that, historically, the drawing of borders in the Middle East; the establishment of British, French, and later US-backed puppet governments in these faux nations; and the rise of a radical Islamic fundamentalist movement to challenge the Western-backed regimes, have all been fueled by the wealth produced by oil, and by the need for oil on the part of importing countries.

For decades there was a petroleum status quo of sorts in the Middle East: the capacity for production exceeded demand, and OPEC worked to restrain exports in order to keep prices from collapsing; meanwhile big producers like Saudi Arabia served as the world’s petroleum bankers, maintaining the solvency of the system. On only one occasion—the embargo of 1973-74—did the swing producers withhold needed oil flows for political reasons, or cause prices to reach levels unacceptable to consumers (the other major post-1970 oil shocks, due to wars or revolutions, were beyond OPEC’s control).

Now the status quo is crumbling—not so much for political reasons (though those are certainly imaginable, given the situations outlined above), but for reasons of geology. (more…)

 Terance Ward gave a presentation ASPO 5th International Conference on Peak Oil (Pisa 2006 July 18-19) in which he mapped out a disturbing scenario of US-Iranian confrontation:

 ”Here at San Rossore, we have heard projections and analyses about the future crisis facing global oil reserves. The gap between diminishing supply and rising demand now hinge on a crucial third factor: politics and conflict.

Violently intrusive tactics can generate chain reactions that are hard to anticipate, and even more difficult to control. Witness the $75 price for oil reflected from the escalation of violence between Israel, Hamas and Hezbollah, the bombing of Beirut, Southern Lebanon and the threat of extending strikes into Syria. Iran is a more dramatic case in point. (more…)

The Israeli offensive in Lebanon contributed to pushing oil prices rising above above $78 a barrel for the first time in the last week - just as demand for fuel is increasing with
the start of the U.S. holiday season. The US has given the green light to a massive Israeli offensive in order to hit the one element of what is perceived by the administration
as an emerging ‘Shi’a axis’ that it can without propelling the world into a total oil price meltdown. Having failed massively in its attempt to remodel the region to suit its own
hydrocarbon needs the US has instead unwittingly collapsed the Iraqi state and strengthened the position of Iran. (more…)

Money no object as the big players grab what is left of a diminishing resource

Terry Macalister reported in the Guardian on the huge prices oil companies are now paying for exploration rights - yet another signal of the unfolding depletion crisis and the shifting sands of global geopolitics as China positions itself for the oil end game and the producer nations gain unprecendented economic leverage. (more…)

“Oil has literally made foreign and security policy for decades…it…provoked the division of the Middle East after WW1; aroused Germany and Japan to extend their tentacles beyond their borders; the Arab oil embargo; Iran vs Iraq; the Gulf War. This is all clear.”

Bill Richardson, U.S. Secretary of Energy, 1999

“[The invasion of Iraq]… has nothing to do with oil, literally nothing to do with oil.”

Donald Rumsfeld, Nov 2002

“Let me deal with the conspiracy theory that this is somehow to do with oil. There is no way whatever if oil were the issue that it would not be infintely simpler to cut a deal with Saddam.”

Tony Blair to the House of Commons, 2003

“Every single empire, in its official discourse has said that is it not like all the others. That its circumstances are special , that it has a mission to enlighten, civilize, bring order and democracy, and that it uses force only as a last resort.”

Edward Said

Kevin Phillips is a former Republican strategist, (chief analyst on Nixon’s 1968 campaign) now bitterly opposed to the house of Bush and the religious right’s power in the
Republican Party. In his magisterial work “American Theocracy: the peril and politics of radical religion, oil, and borrowed money in the 21st century” (2006) Phillips argues
that every empire has been brought down by a combination of imperial over-reach , militant religion, ballooning debt and diminishing resources. Each of the modern world
powers depended on its leading command of an emerging energy technology regime – the Dutch water and wind power, the British coal and the US oil. And each
develops inertial forces that mitigate against it dominating the next historically emergent energy regime (such as the US built environments dependence on cars). For Phillips
it is not simply that American empire depends on oil, rather:

“…The Bush administration knew that the peak oil crisis probably posed strategic dangers far beyond those publicly acknowledged. The dollar’s role as the world’s reserve
currency was also tied to oil”. [p.69]

“…a final decision to invade Iraq seems to have been made in early 2001, for reasons that had been mounting since 1997. During the election year and 2001, five political
and policy end games – all felt by important constituencies to be pressing or even desperate [were] underway in what was historically an extraordinary convergence.” (more…)

Over the past two weeks, Saudi Arabian security authorities have conducted a series of raids across the country, including in the capital Riyadh and the cities of Mecca and Medina.

On March 29, a total of 40 suspected members of al-Qaeda were picked up in simultaneous arrests, almost half of these suspected of financially aiding terrorist attacks and propagating jihadist ideology materials online. (more…)

Further evidence that Saudi oil production is unable to meet increasing global demand emerged in a series of frank admissions by Saudi analysts in the Khaleej Times last week. A Saudi petroleum adviser with close ties to the government commented that if demand continues to increase at the current pace despite the Kingdom’s best efforts at increasing production “… you’ll have demand outstripping supply over the next five years by a wide margin.”

It’s a damning indightment of the head-in-the-sand approach of the US and the Chinese to the unfolding oil crisis, when it falls to Saudi analysts to warn the rest of the world the supply side crunch is already here and the only possible mitigation strategy is reduced consumption. (more…)