15 December 2010

Oil or Terrorism: Which Motivates U.S. Policy More?

As published by Foreign Policy In Focus (Institute for Policy Studies, Washington D.C.)

Among the batch of classified diplomatic cables recently released by the controversial whistle-blowing website WikiLeaks, several have highlighted the vast extent of the financial infrastructure of Islamist terrorism sponsored by key U.S. allies in the ongoing "War on Terror."

One cable by U.S. Secretary of State Hillary Clinton in December 2009 notes that “donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide.” Despite this, “Riyadh has taken only limited action to disrupt fundraising for the UN 1267-listed Taliban and LeT [Lashkar e-Tayyiba] groups that are also aligned with al-Qaeda.”

Clinton raises similar concerns about other states in the Gulf and Central Asia. Kuwait remains reluctant “to take action against Kuwait-based financiers and facilitators plotting attacks outside of Kuwait.” The United Arab Emirates is “vulnerable to abuse by terrorist financiers and facilitation networks” due to lack of regulatory oversight. Qatar’s cooperation with U.S. counter-terrorism is the “worst in the region,” and authorities are “hesitant to act against known terrorists.” Pakistani military intelligence officials “continue to maintain ties with a wide array of extremist organizations, in particular the Taliban [and the] LeT.”

Despite such extensive knowledge of these terrorism financing activities, successive U.S. administrations have not only failed to exert military or economic pressure on these countries, but in fact have actively protected them, funnelling billions of dollars of military and economic assistance. The reason is oil.

It's the Hydrocarbons, Stupid

Oil has always been an overwhelming Western interest in the region, beginning with Britain’s discovery of it in Persia in 1908. Britain controlled most Middle East oil until the end of World War II, after which the United States secured its sphere of influence in Saudi Arabia. After some pushback, Britain eventually accepted the United States as the lead player in the region. “US-UK agreement upon the broad, forward-looking pattern for the development and utilisation of petroleum resources under the control of nationals of the two countries is of the highest strategic and commercial importance”, reads a 1945 memo from the chief of the State Department’s Petroleum Division.

Anglo-U.S. geo-strategy exerted this control through alliances with the region’s most authoritarian regimes to ensure a cheap and stable supply of petroleum to Western markets. Recently declassified secret British Foreign Office files from the 1940s and 1950s confirm that the Gulf sheikhdoms were largely created to retain British influence in the Middle East. Britain pledged to protect them from external attack and to “counter hostile influence and propaganda within the countries themselves.” Police and military training would help in “maintaining internal security.” Similarly, in 1958 a U.S. State Department official noted that the Gulf sheikhdoms should be modernized without undermining “the fundamental authority of the ruling groups.”

The protection of some of the world’s most virulent authoritarian regimes thus became integral to maintaining Anglo-U.S. geopolitical control of the world’s strategic hydrocarbon energy reserves. Our governments have willingly paid a high price for this access – the price of national security.

Still Funding Radicalism

One of al-Qaeda’s chief grievances against the West is what Osama bin Laden dubs the “Crusader-Jewish” presence in the lands of Islam, including support for repressive Arab regimes. Under U.S. direction and sponsorship, many of these allies played a central role in financing and supporting bin Laden’s mujahideen networks in Afghanistan to counter Soviet influence. It is perhaps less well understood that elements of the same regimes continued to support bin Laden’s networks long after the Cold War – and that they have frequently done so in collusion with U.S. intelligence services for short-sighted geopolitical interests.

In fact, Afghanistan provides a rather revealing example. From 1994 to 2001, assisted by Saudi Arabia and Pakistan, the Clinton and Bush II administrations covertly sponsored, flirted and negotiated with the Taliban as a vehicle of regional influence. Congressman Dana Rohrabacher, former White House Special Assistant to Ronald Reagan, also testified before the Senate Foreign Relations Subcommittee on South Asia about the “covert policy that has empowered the Taliban,” in the hopes of bringing sufficient stability to “permit the building of oil pipelines from Central Asia through Afghanistan to Pakistan.”

The Great Game is still in full swing. “Since the U.S.-led offensive that ousted the Taliban from power, the project has been revived and drawn strong U.S. support” reported the Associated Press in 2005. “The pipeline would allow formerly Soviet Central Asian nations to export rich energy resources without relying on Russian routes. The project’s main sponsor is the Asian Development Bank” – in which the United States is the largest shareholder alongside Japan. It so happens that the southern section of the proposed pipeline runs through territory still under de facto Taliban control, where NATO war efforts are focused.

Other evidence demonstrates that control of the world’s strategic energy reserves has always been a key factor in the direction of the "War on Terror". For instance, the April 2001 study commissioned by then-Vice President Dick Cheney confirmed official fears of an impending global oil supply crunch, energy shortages, and “the need for military intervention” in the Middle East to maintain stability.

Energy and Iran

Other diplomatic cables released by Wikileaks show clearly that oil now remains central to U.S. policy toward Iran, depicting an administration desperate to “wean the world” off Iran’s oil supply, according to the London Telegraph. With world conventional oil production most likely having peaked around 2006, Iran is one of few major suppliers that can potentially boost oil output by another 3 million barrels, and natural gas output by even more. The nuclear question is not the real issue, but provides ample pretext for isolating Iran.

But the U.S. anti-Iran stance has been highly counterproductive. In a series of dispatches for the New Yorker, Seymour Hersh cited U.S. government and intelligence officials confirming that the CIA and the Pentagon have funnelled millions of dollars via Saudi Arabia to al-Qaeda-affiliated Sunni extremist groups across the Middle East and Central Asia. The policy – officially confirmed by a U.S. Presidential Finding in early 2008 – began in 2003 and has spilled over into regions like Iraq and Lebanon, fuelling Sunni-Shi’ite sectarian conflict.

Not only did no Democratic members of the House ever contest the policy but President Obama reappointed the architect of the policy – Robert Gates – as his defence secretary. As former National Security Council staffers Flynt and Hillary Mann Leverett observe, Obama’s decision earlier this year to step up covert military operations in North Africa and the Middle East marked an “intensification of America’s covert war against Iran.”

This anti-Iran directive, which extends covert U.S. support for anti-Shi’ite Islamist militant networks linked to al-Qaeda, hardly fits neatly into the stated objectives of the "War on Terror." Unless we recognize that controlling access to energy, not fighting terror, is the primary motive.

Beyond Dependency

While classified covert operations continue to bolster terrorist activity, the Obama administration struggles vainly to deal with the geopolitical fall-out. Getting out of this impasse requires, first, recognition of our over-dependence on hydrocarbon energy sources to the detriment of real national security. Beholden to the industry lobbyists and the geopolitical dominance that control of oil provides, Western governments have supported dictatorial regimes that fuel widespread resentment in the Muslim world. Worse, the West has tolerated and until recently colluded in the sponsorship of al-Qaeda terrorist activity by these regimes precisely to maintain the existing global energy system.

Given the convergence of peak oil and climate change, it is imperative to transition to a new, renewable energy system. Such a transition will mitigate the impact of hydrocarbon energy depletion, help prevent the worst effects of anthropogenic global warming, and contribute to economic stability through infrastructure development and job creation.

By weaning us off our reliance on dubious foreign regimes, a shift to renewables and away from supporting oil dictatorships will also make us safer.

24 November 2010

Avoiding Catastrophe

Published in today's Independent Editor's choice Blogs

The revelation that carbon dioxide emissions are set to increase this year by over 3 per cent, despite temporarily falling 1.3 per cent between 2008 and 2009 due to global recession, signals an urgent warning that current efforts on climate change have simply failed. Even while we are still in the midst of recession – where the recovery is so fragile that another bank bailout is being pushed through in hopes of preventing a full-blown eurozone crisis – fossil fuel emissions have never been higher, and are projected to accelerate in coming years.

Officially, climate policy targets are aiming to cap emissions at around 450 parts per million (ppm), which would theoretically prevent global average temperatures rising beyond a ‘safe’ 2 degrees Celsius. The first problem is that we are long passed the danger point. In mid-2005, the Intergovernmental Panel on Climate Change (IPCC) confirmed that the total atmospheric concentration of greenhouse gases (accounting for nitrous oxide, methane and so on) was already 455 ppm. This implies that we are already well on course to surpass 2 degrees.

The second problem is that as a growing number of leading climate scientists are now telling us, climate policy targets lag far behind the peer-reviewed science. The IPCC’s and most other conventional climate models used to inform policy, do not sufficiently account for the complex role of uncertainties linked to positive-feedbacks – that is, the capacity of global warming to trigger changes which, in turn, trigger further changes, leading to a self-reinforcing feedback-cycle.

A disturbing body of data indicates that if we stray for too long above 350 ppm, as we are already, we are in grave danger of raising global temperatures by 1C (we are now at 0.8C), triggering exactly such positive-feedbacks with the potential to lead to dramatic, irreversible changes that could possibly culminate in runaway global warming. We don’t even need to get to 2C.

James Hansen, who heads the NASA Goddard Institute for Space Studies, warns that if our “present overshoot” of the 350 ppm upper limit “is not brief, there is a possibility of seeding irreversible catastrophic effects.” According to a 2009 paper in Nature co-authored by 28 international climate scientists, these effects would include “the risk of irreversible climate change, such as the loss of major ice sheets, accelerated sea-level rise and abrupt shifts in forest and agricultural systems.”

It is likely that some of these feedbacks are already underway. The IPCC had originally projected the disappearance of the Arctic’s late summer sea ice by the end of the century. But this year, Mark Serreze, head of the US National Snow and Ice Data Center, reported: “The Arctic sea ice has reached its four lowest summer extents (area covered) in the last four years. I stand by my previous statements that the Arctic summer sea ice cover is in a death spiral. It’s not going to recover.” Scientists fear the summer sea ice could disappear within three years.

The implications could be catastrophic. The accelerating sea ice melt is linked to the thawing of the Arctic permafrost, beneath which is trapped in the form of methane double the amount of carbon in the atmosphere. Current emissions levels, if unchanged, would lead local Arctic temperatures to rise up to around 8C. World permafrost expert Vladimir Romanovsky of the University of Alaska notes that this would be enough for half the world’s permafrost to thaw to a depth of several metres, releasing the vast stores of methane into the atmosphere. Another permafrost expert, Ted Schuur of the University of Florida, observes that the process of thawing and methane release could rapidly accelerate over decades, most likely in the form of a 50-year meltdown intensifying due to rapid feedbacks. The result would be a process of irreversible, runaway warming that would make life on earth largely uninhabitable – “Venus syndrome”, in Hansen’s words.

Unfortunately, even peak oil will not save us. While the International Energy Agency recently confirmed that world crude oil production most likely peaked in 2006 – leading the watchdog’s chief economist Fatih Birol to observe that “the age of cheap oil is over” – there is still enough oil shale, tar sands, coal and natural gas to burn through the first quarter of this century. To be sure, that is not long – but it is long enough to potentially push us off a climate cliff.

Rapid decarbonisation of the economy is therefore not an option. It is a last ditch emergency response necessary for our survival in the emerging post-carbon age. But we cannot achieve this as long as we cling to the mantra of unlimited economic growth on a finite planet. As University of Surrey economist Tim Jackson proves in his Prosperity Without Growth, efforts to ‘decouple’ growth from availability of cheap fossil fuels have not only failed, they have actually gone in reverse.

This means we need to fundamentally re-think the very definition of prosperity if we are to ensure that our children inherit viable societies on a liveable planet. The economics of the fossil fuel age is now obsolete. It needs to be written for the post-carbon age.

16 November 2010

The Oil Drum Book Review of A User's Guide to the Crisis of Civilization

Oil Drum contributing editor Jeff Vail reviews of my book here for one of the world's leading online energy analysis journals:

Anyone who has spent much time discussing peak oil, the collapse of civilizations, climate change or modern security issues eventually confronts the issue of historical antecedents. The [Insert choice of vanished civilization here] collapsed because of X, and that’s the same thing that is happening now . . . . For those who have delved more deeply into such lines of argument, one thing becomes abundantly clear: historical civilizations did not collapse for a single reason. Rather, their troubles, descent and eventual demise or transition were the result of a system of crises. Fast-forward to present, and there is no shortage of commentary forecasting crisis or collapse of our modern civilization. Perhaps for purposes of marketing, simplicity, or simple ignorance, we are awash in commentary on how climate change will spell disaster, or how peak oil will spell disaster, or famine or disease, etc. But these analysts have failed to advance a comprehensive systems-theory approach to our civilization’s troubles. Enter Nafeez Mosaddeq Ahmed.

The end of cheap oil - a critical view

First published in Le Monde diplomatique

The implications of the International Energy Agency’s (IEA) new report, World Energy Outlook 2010, are stark. Its 25-year ‘New Policies Scenario’ projects that it is most probable that conventional crude oil production “never regains its all-time peak of 70 million barrels per day reached in 2006.” In this scenario, crude oil production is most likely to stay on a plateau of around 68-69 million barrels per day. So there you have it. We are now, in all likelihood, living in a ‘post-peak’ world.

The IEA blames a number of factors for this – a combination of supply constraints due to below-ground geological resource limits, and above-ground factors such as political obstacles to fully exploiting existing reserves (such as in Iraq), as well as international commitments to reducing fossil fuel emissions to meet climate targets.

So is this the end of industrial civilization as we know it? The IEA insists - not yet. Despite the peak of conventional oil production, the IEA concludes that total growth in liquid fuels from other unconventional sources – such as tar sands, oil shale and natural gas liquids – will not only make-up for the short-fall in crude, but actually rise as high as around 99 million barrels per day (mbd) until around 2035. Despite this apparent optimism – by this scenario, there are no imminent fuel shortages – we have passed a historic tipping point. In the words of IEA chief economist Fatih Birol, “The age of cheap oil is over.”

The problem is that unconventional sources of oil and gas are far more expensive to get out of the ground and process into usable petroleum, and environmentally problematic. This means that over the next decade, oil prices are likely to become more expensive. Driven largely by industrial growth in places like China and India demand is projected to grow by 36 per cent up to 2035 – at which point, the price of oil will rise beyond $200 a barrel. On the way, by around 2015, we could see price hikes above $100 a barrel.

Unfortunately, a large body of independent scientific literature suggests that the IEA’s favoured scenario is far too optimistic, on a whole range of issues. The Agency forecasts, for instance, that Iraq will be able to triple its production by 2035, and that Saudi Arabia’s production will double. Yet this looks rather unlikely. IHS Cambridge Energy Research Associates (CERA), a leading energy consultancy firm vehemently opposed to the idea of peak oil, nevertheless project that the most we can hope for is for Iraq to increase its output to of 6.5 mbd by 2020 – half of Iraq’s actual target.

As for Saudi Arabia, the late energy investment analyst Matthew Simmons concluded in his extensive book, Twilight in the Desert (2005) that the Saudi oil fields are largely in decline. “Today, the entire field still contains a great deal of crude oil”, reports US energy consultant Michael Lynch of Gerson Lehrman Group, referring to Saudis’ most prized field, Ghawar, responsible for six per cent of the world’s oil supplies – “but it is much harder to get and the production rates continue to fall off.” He characterizes Ghawar as “largely depleted.”

The IEA’s hopes that unconventional oil and gas could rise rapidly to meet expected demand may also be misplaced. “If conventional oil production is at peak production then projected unconventional oil production cannot mitigate peaking of conventional oil alone”, concluded a study by University of Newcastle chemical engineer, Steve Mohr, published in Energy Policy. A Boston University study, concurred, finding that the Energy Return On Investment (EROI) – the energy you get out compared to what you put in – is simply infinitesimal, at around 1:1 or 2:1, compared to conventional oil’s EROI at the well head of 20:1. What about unconventional gas? Although EROI is quite high at inception, the EROI of all gas production rapidly declines as energy costs of compression and distribution to consumers is factored in. An extensive analysis by former Amoco petroleum geologist and World Oil columnist Arthur Berman, who has consulted for ExxonMobil and Total, fundamentally undermines industry forecasts for natural gas production based on shale gas inputs. He argues that actual shale gas production rates are less than half of official industry projections – this is because production decline rates at shale wells are far higher than assumed.

“Many believe that the high initial rates and cumulative production of shale plays prove their success”, says Berman. “What they miss is that production decline rates are so high that, without continuous drilling, overall production would plummet. There is no doubt that the shale gas resource is very large. The concern is that much of it is non-commercial even at price levels that are considerably higher than they are today.”

If the IEA is right about everything, we are in for a rough ride. But if as the above suggests, the IEA is right about us passing the peak of conventional oil in 2006, but almost fanatical in its faith in the prospects for expanded production from unconventional sources, then we are in for an even rougher ride.

The ‘post-peak’ world clearly does not imply the End of the World: but it implies an extremely volatile one, whose dynamics will be difficult to predict. It is a world not of easy abundance, but of declining – and increasingly expensive – carbon-based resources. If we are to develop sufficient resilience to the various price shocks and converging crises of the ‘post-peak’ world, we will need to recognize that they are symptomatic of an inevitable civilizational transition toward an emerging post-carbon age. There is no time for denial. Governments and communities need to start adapting now.

The Age of Cheap Oil is Over

First published in New Statesman

We are now inhabiting a ‘post-peak’ world. That is the implication of the International Energy Agency’s (IEA) new report, World Energy Outlook 2010, which in its 25-year ‘New Policies Scenario’ projects that it is most probable that conventional crude oil production “never regains its all-time peak of 70 million barrels per day reached in 2006.” In this scenario, crude oil production is most likely to stay on a plateau of around 68-69 million barrels per day.

The IEA blames a number of factors for this – a combination of supply constraints due to below-ground geological resource limits, and above-ground factors such as political obstacles to fully exploiting existing reserves (such as in Iraq), as well as international commitments to reducing fossil fuel emissions to meet climate targets.

So is this the end of industrial civilization as we know it? Not quite. Or perhaps, not yet. Despite the peak of conventional oil production, the IEA concludes that total growth in liquid fuels from other unconventional sources – such as tar sands, oil shale and natural gas liquids – will continue to make-up for the short-fall in crude until around 2035. But while this means there will be no imminent fuel shortages as such, it also means, in the words of IEA chief economist Fatih Birol, “The age of cheap oil is over.”

The problem is that unconventional sources of oil and gas are far more expensive to get out of the ground and process into usable petroleum, and environmentally problematic. This means that over the next decade, oil prices are likely to become more expensive. Driven largely by industrial growth in places like China and India demand is projected to grow by 36 per cent up to 2035 – at which point, the price of oil will rise beyond $200 a barrel. On the way, by around 2015, we could see price hikes above $100 a barrel.

Even if the ‘post-peak’ world by no means implies the End of the World, it will nevertheless be an extremely volatile one if business-as-usual continues. The convergence of food and financial crises we saw in 2008 was one of the first signs of a strained system. Oil price volatility due to peak oil was a major factor that induced the 2008 banking crash. The collapse of the mortgage house of cards was triggered by ‘post-peak’ oil price shocks, which escalated costs of living and led to a cascade of debt-defaults. A study by US economist James Hamilton for the US Congress Joint Economic Committee confirmed there would have been no recession without the oil price shocks.

The oil shocks also impacted on food prices. The global industrial food system is heavily dependent on fossil fuels, consuming ten calories of fossil fuel energy for every one calorie of food energy produced. As noted by Australian agricultural expert Julian Cribb in his book The Coming Famine (2010), the six-fold rise in food prices between 2003 and mid-2008 was triggered by escalating oil prices (among other factors), and impacted severely on “farmers’ fuel, fertilizer, pesticide, and transportation costs.” While “financial pain was high” in developed countries, in the less developed world – from where the developed countries import much of their food – “farmers simply could not afford to buy fertilizer, and crop yields began to slip.”

All this was exacerbated by a debt-dependent economic system that systematized the very kinds of dodgy derivatives trading which generated subprime mortgage blowback – with speculators throwing money into futures markets for oil and staple food commodities, rocketing prices even higher. The recession that such price hikes partially inflicted, leading consumption and production to drastically contract, allowed prices to drop. But as economies tentatively recover, as populations grow, as demand rises, the danger that we once again hit the ceiling of the world’s oil capacity limits will remain.

So if the IEA is anywhere near right, we are in for a rather rough ride. The volatility of the ‘post-peak’ world will be difficult to predict. It is a world not of easy abundance, but of declining – and increasingly expensive – carbon-based resources. If we are to develop sufficient resilience to the various price shocks and converging crises of the ‘post-peak’ world, we will need to recognize that they are symptomatic of an inevitable civilizational transition toward an emerging post-carbon age. There is no time for denial. Governments and communities need to start adapting now.

11 November 2010

On George W. Bush's Torture Lauding - my letter in the Evening Standard

I had a letter published in the Evening Standard earlier this week. It was a slightly abridged version of the following:

Dear Sir,

One need only read between the lines of George W. Bush’s memoirs to realise that his unapologetic lauding over torture is merely a front of bravado, designed to disguise serious questions about deeper US intelligence failures which facilitated the 9/11 attacks – failures that occurred on his watch.

Former CIA official Robert Baer, a case officer assigned to the Middle East for two decades, told MSNBC Hardball’s Chris Matthews over a year ago that Khalid Sheikh Mohammad had been water-boarded 183 times, leaving him “almost brain dead.” The ex-CIA operator also pointed out that absolutely no useful intelligence was gained from this exercise.

In Time Magazine, Baer dissected transcripts of KSM’s interrogations released by the Pentagon, finding that while he “comes across as boasting, at times mentally unstable”, he is also clearly “making things up.” But worse, Baer points out that the transcripts, for whatever reason, systematically obscure “evidence of state support to al-Qaeda”. He cites well-known evidence in the intelligence community that major US geopolitical allies in the ‘War on Terror’ – Pakistani intelligence services, along with members of the Qatari and Saudi royal families – have harboured and aided al-Qaeda generally and KSM specifically. Worse, and contradicting Bush’s narrative again, Baer emphasises that KSM had “offered no information about European networks”, and that he “apparently knew nothing” about militants planning attacks on London.

Bush played a central role in crushing pre-9/11 intelligence investigations into the deleterious effects of US relations with countries like Saudi Arabia. Multiple FBI leads identifying key financial and other links between Saudi elites, members of the bin Laden family, and Osama bin Laden himself were shut down in 2001, despite a growing crescendo of warnings of an impending attack involving planes being used as bombs. The fact that this may have had something do with cosy financial Bush-Saudi family deals – such as through the defence investment conglomerate Carlyle Group (where both Bush and the bin Laden family had investments) – raises awkward questions about Bush’s current efforts to vindicate his unconscionable failures both before and after 9/11.

In this context, Keith Vaz's pointed question about US-UK intelligence sharing is on the mark. That is not to suggest that such sharing should simply cease, but it is certainly legitimate to wonder to what extent American strategic interests - and ideology - determine the way trans-atlantic intelligence cooperation works. It is not only a matter of how much MI6 might have known about US methods such as torture, but ultimately about the way the US conducts its whole approach to security, and whether it is undermining our own - with fatal consequences at home.

Dr. Nafeez Mosaddeq Ahmed

The Next Crisis: How business-as-usual will kill us all

First published in Ceasefire Magazine

2008 was the year of crisis convergence. Escalating oil price spikes coincided with similar spikes in the prices of staple foods, both driven by a combination of production-supply constraints, rocketing demand, and the ensuing bonanza of commodity trading on futures markets. Then the banks collapsed, prompting massive government bailouts designed to shore-up a crumbling financial system.

As I argued in my previous article for Ceasefire, this convergence of energy, food and economic crises was no accident, but the inevitable outcome of a business-as-usual model of behaviour for a global political economic system that was now reaching its own internal limits, as well as breaching the limits of the natural environment.

Despite official assurances that the worst is over, that economies are now recovering and re-growing, current trends illustrate that the worst is yet to come – and that policymakers are clueless about the fundamental structural causes of crisis convergence.

The first fundamental problem is that orthodox neoliberal economists fail to understand the obvious reality of the embeddedness of the economy in the natural environment. For the economy to grow requires increasing inputs of energy, obtained from exploitation of natural resources – currently, for the most part, fossil fuels such as oil, gas and coal.

In theory, orthodox economists like to argue that capitalism can solve the energy-dependence problem by maximizing efficiency, so that the greater the economic growth, the more efficient the use of resources, and thus the less actual energy is required. This sort of argument underpins government support for the oxymoron of ‘high growth, low carbon’ societies. As is common with neoliberal economic theory, the empirical data raises serious questions about this argument. As Tim Jackson shows unequivocally in his Prosperity Without Growth (pp. 74-6), global trends in fossil fuels and carbon emissions as well as extraction of metal ores and non-metallic minerals have escalated dramatically in the last two decades. In many cases, Jackson observes: “Global resource intensities (the ratios of resource use to GDP), far from declining, have been increasing significantly across a range of non-fuel minerals. Resource efficiency is going in the wrong direction.” (p. 75)

Between 2005 and 2008, world conventional oil production has struggled along an undulating plateau that is unprecedented in the history of world oil production, and is unlikely to be able to rise significantly beyond 2008 levels. As noted by Dr. James Schlesinger – a former US Secretary of Energy (1977-79), Defense Secretary (1973-75) and CIA Director – “given projected decline curves running from 4 to 6 percent, and the projected increase in demand during the next quarter century, we shall require the new capacity equivalence of five Saudi Arabias.” Whatever the uncertainties over deepwater and unconventional reserves and so on, he points out that “in general we must expect to get along without what has been our critical energy source in expanding the world’s economy for more than half a century.”

While supply levels appear to be wavering, a resurgence in demand due to a fragile economic recovery indicates the probability of another near-term oil price spike as rising demand hits relatively flat capacity limits. Much of the rising rampant demand for oil is not from the West, but from emerging industrial economies, such as China, and has already led financial institutions such as JP Morgan to predict an imminent rise in oil prices to $100 per barrel.

Simultaneously, with oil prices set to rise again, we are witnessing a return to spiralling prices for meat, sugar, rice, wheat and maize. As financial forecaster Addison Wiggin warned in a Forbes article at the end of October, “we could be just one supply shock away from a full-blown food crisis that would make the price spikes of 2008 look like a happy memory”. He points out that the 2008 food crisis “never really went away”, given that key farm commodities, although not as high as 2008 levels, are still higher than pre-2008 levels:

  • Corn: Up 63%
  • Wheat: Up 84%
  • Soybeans: Up 24%
  • Sugar: Up 55%

Meanwhile, the US Department of Agriculture has warned of falling wheat production next year, largely due to the impact of the Russian drought on agriculture, and highlighted a considerable drop in US corn production this year – apparently the biggest drop in harvest expectations “ever.”

The link between current food supply shortfalls and climate change can no longer be ignored in the aftermath of the devastating impact of the Russian heat-wave and Pakistan floods on agriculture, fitting into the long-term predicted pattern of increased erratic weather and natural disasters due to global warming. The latest projections from the US National Center for Atmospheric Research (NCAR) based on a business-as-usual model suggest that within 30 years, the world could face an extreme permanent drought over parts of Asia, the US, southern Europe, as well as large areas of Africa, Latin America and the Middle East – with a devastating impact on agriculture and water resources.

The plateau in world oil production is not helping matters. Higher oil prices will generate an inflationary effect on the economy, exacerbating food price hikes. Further, because the industrial food system in its current form is so heavily dependent on fossil fuel inputs at multiple levels – onsite machinery; synthesis and production of fertilizers; processing, packaging, storage and transport of food – the energy supply plateau will enforce fundamental limits on world food production, worsening the price spikes.

Unfortunately, the orthodox economic toolbox is likely to accelerate rather than ameliorate the convergence of these crises over the next few years. Currently, despite promising indicators of continuing GDP growth – taken by many as evidence of a continuing if fragile economic recovery – the underlying realities tell a very different story. Current total world derivatives trades remain at around the same levels as they were in late 2008 – about $1 quadrillion (thousand trillion) – which is a colossal 23 times world GDP. As noted by DK Matai, a leading global strategic risk analyst and government advisor on complex security threats, “The entire derivatives-based structured finance pyramid can keel over when the asset prices begin to decline and as a result, some of the counter-parties are unable to meet obligations”, as happened in the lead-up to the 2008 crash.

The problem is that this danger has hardly been eliminated – but perhaps has even increased. Matai continues: “Even if 1% of the derivatives pyramid loses counterparties because they have become insolvent, that is more than 10 trillion dollars of a black hole. If that 1% becomes 5%, that is more than 50 trillion dollars, ie, more than the GDP of the entire world.”

Currently, orthodox government economic strategy, based on neoliberal principles, has been focused on attempting to kick-start economic ‘growth’ through more asset-price inflation and derivatives trading – including on commodities like oil and food: that is, re-inflating the unsustainable debt-bubble that burst two years ago. The extensive bank bailouts – quantitative easing – served only to shore-up insolvent banks and financial institutions with tax-payers money. This reduced the amount of money in circulation – contracting the real-world economy rooted in actual production, buying and selling – while permitting financiers to re-engage in their traditional activities. But both the US and UK authorities have acknowledged the probability of further quantitative easing purportedly to sustain continued economic recovery. Simultaneously, massive IMF-style austerity measures are set to constrain consumption and manufacturing, cut-down public services, while increasing unemployment.

The upward pressures in terms of price spikes for oil and food, both driven by fundamental production constraints impinging on supply in combination with regressive derivatives futures trading, will over the coming years generate an inflationary effect that will, as it did prior to 2008, impact on consumers massively. More quantitative easing, by taking taxpayers’ money out of the real-world economy and plunging it into the virtual financial world, in effect amounts to re-inflating a fictional bubble of ‘growth’ while simultaneously reducing the size of the real-world box in which the bubble is supposed to grow.

Consumers and businesses will struggle to continue to repay debts, even as the debt-derivatives bubble becomes re-inflated in the context of more quantitative easing. Simultaneously, as debt-driven ‘growth’ continues to fuel a semblance of a seeming economic recovery, increasing economic activity will inevitably hit the limits of the world’s plateauing and gradually declining hydrocarbon energy base.

Inevitably, the bubble will breach the limits of sustainability, both in terms of the capacity for debt-settlements as well as in terms of energy inputs from hydrocarbon resources. The result will be another crisis convergence, another comprehensive crash, encompassing the food, energy and economic sectors simultaneously with price hikes intensifying debt-defaults and thus deflating the derivatives bubble – all driven ultimately by a global political economy whose structural organization requires the physically impossible: infinite growth on a finite planet.

The next crisis, moreover, is hardly likely to be the last, as we continue to strain the earth’s hydrocarbon resources while thereby increasingly devastating the planet’s ecosystems and altering its climate. Rather it will be the second of several more rounds of crisis convergence, symptomatic of a protracted process of global system failure.

The question we all need to ask ourselves is, how much crisis can we take, before we wake up and realize that business-as-usual is killing us?

29 October 2010

First Book Review - A US economist on my 'A User's Guide to the Crisis of Civilization'

I've just found the first print review of my new book, published by ArtVoice, which is apparently the number one weekly newsmagazine in western New York, Buffalo. The review is part of a wider article on government water policy in the Great Lakes region, and comes courtesy of Bruce L. Fisher, Director of the Center for Economic and Policy Studies, Buffalo State College at the State University of New York, and also a Visiting Professor of Economics and Finance there.

Fisher sums up the book as "dense, brilliant and frightening." You can read the whole thing here, but the excerpts focusing on my book are below:


The scientific evidence and the near-universal consensus about the reality of man-made climate change—which results mainly from burning oil and coal—is being met with phenomena like the Democratic Senate candidate from West Virginia, who is running on a platform of opposition to climate-change legislation, a position quite comfortable for every Republican. But as British think-tanker Nafeez Mossadeq Ahmed’s new book shows, not only is there a consensus among scientists about catastrophic climate change, there’s a growing recognition that climate change, looming global food shortages, recent and future financial crises and the ongoing plague of political violence and terrorism are all linked by the fossil fuel business.

Ahmed’s A User’s Guide to the Crisis of Civilization is a tough read. It is dense, brilliant, and frightening. Ahmed has done the job that has needed doing: He has connected the dots for the non-specialist. His first depressing achievement is to have collated the dense scientific literature on global warming into a chapter that sums it all up simply: The governments of the major industrialized countries have all come to understand that climate change is for real, and that the catastrophe of a four degree Celsius rise in global temperatures will happen by 2050, but because we are stuck in a global system dominated by petroleum, the governments that should be taking urgent, radical steps to move us to a post-carbon economy are not doing so. Nor, Ahmed says, can they be expected to do so.

Ahmed follows his summation of what the scientists are saying with a still-salient report on the recent global financial crisis, a review of the ongoing Third World food-production crisis, and a long, unsparing look at America’s global lust for oil, a lust that has sometimes put us on both sides of the “war on terror.” The result is a difficult volume that is hard to put down. It is a truly impressive book that is terrifying, but that, sadly, because Ahmed is a Marxist, is destined to be ignored. But you can’t ignore his sources, which include US military documents that concur on the inevitability of major climate change, but that strangely do not map out energy alternatives for America.

Where is President Obama on this? One would think that Obama and his Nobel Prize-winning secretary of energy would have galvanized the nation and created a crash national program on wind and solar power, instead of hurrying up the construction of nuclear power plants—of which there could never be an adequate supply, according to Ahmed’s sources. The creator of the Gaia hypothesis, James Lovelock, pooh-poohed wind and pushed nuclear, but wind power is gaining: Google executives just last week announced that they will spend $5 billion of their pocket change to create a near-shore East Coast wind-powered grid to power more than million homes. Ahmed’s book reports on the astounding strides that the government of Germany has already made in fostering alternative, renewable, carbon-neutral energy. He also gives kudos to some local British successes. But it’s hard to be hopeful in the US today, as the fossil-fuel lobby may be about to retake the House of Representatives.


Read more: http://artvoice.com/issues/v9n42/global_and_local_carbon

Exclusive: Former BP Geologist Confirms 2005 Global Oil Peak

We have just published a new report at the Institute for Policy Research & Development (IPRD) which finds that world oil production peaked between 2005 and 2008, and is currently in inexorable decline. Authored by the renowned 40-year veteran petroleum geologist Dr. Colin J. Campbell, who has worked and consulted for leading oil companies such as British Petroleum (BP), Shell and Exxon, the report warns that the “first half of the Oil Age” is over, and the “second half” – characterized by a gradual but increasing decline in production, has now arrived.

Drawing on an extensive country-by-country analysis of oil production data, Dr. Campbell concludes that world regular conventional oil peaked in 2005, prompting oil prices to rise dramatically as traders bought contracts on the oil futures market. The oil price shocks were instrumental in triggering the 2008 economic recession, which dampened demand and allowed prices to reduce. Regular conventional oil is currently declining at 3 per cent a year, with the decline of all categories of oil being about half that rate for the next decade or so before edging upwards.

“We are now inhabiting a post-peak economy”, said Dr. Campbell. “In the first half of the oil age, cheap, mainly oil-based energy has fuelled economic prosperity and related money supply. There is a fundamental difference between going up and going down. In the second half of the oil age, although the decline has begun gently, it represents a turning point of historic magnitude.”

In May 2005, Dr. Campbell predicted that an imminent peak in world oil production would lead to a stock market decline and banking crisis between 2008 and 2012. Dr. Campbell now forecasts a future price limit of around $100 per barrel – at current dollar value – noting that coming oil price shocks will impose further economic recession, dampening demand. He further critiques government bank bailouts to stimulate consumerism by pumping out more credit as doomed to failure, as any economic recovery would lead to a rise in demand for oil, again hitting the supply barrier leading to another price shock and renewed recession. Such policies could lead to “rampant inflation and dollar devaluation.”

The £100 price limit would restrain investments in more expensive unconventional oil and gas, which in any case will “have little impact on peak itself” but may be “important in ameliorating the post-peak decline.” World production of conventional gas is likely to peak around 2015 – with unconventional gas peaking much later, though subject to “slow and costly extraction rates.”

The Campbell report also warns that “resource wars” for control of the world’s remaining oil reserves have already begun, noting efforts to kick-start oil production in postwar Iraq, and that the war in Afghanistan, although less successful, “lies on a planned pipeline route from the Caspian.” Similarly, tensions with Iran cannot be de-linked from its substantial oil and gas resources. Dr. Campbell calls for greater governmental efforts at adaptation, highlighting that a failure to develop viable alternative energy supplies would make projected population growth unsustainable.

Dr. Campbell's outstanding new report confirms my own findings, as elaborated in my new peer-reviewed study, A User's Guide to the Crisis of Civilization, which examined a variety of academic and industry reports both for and against 'peak oil'. Despite every year insisting that peak oil will not happen for another 40 years, BP's own 2010 production data shows that world oil production was on a plateau between 2005 and 2008, and has been declining every since. The data is now unequivocal: we inhabit a 'post-peak' world, and it is imperative for policymakers to pay attention.

Dr. Colin Campbell's new IPRD report can be downloaded here. Learn more about my new book here.

8 October 2010

The Great Transition (beyond carbon)

Shorter variations of this article have been published by the United Nations University's 'OurWorld 2.0'; Daily News Egypt, and Pakistan Observer. The longer versions are available at the Public Intelligence Blog, and Energy Bulletin.

If there is one thing that defines the 21st century, it is the end of oil. But not just oil. Over the coming decades, we face the prospect of terminal depletion of the world’s major mineral energy reserves, with major ramifications for the future of industrial civilization.

A survey of about a hundred of the world’s most respected petroleum geologists by the Association for the Study of Peak Oil found that the vast majority expected world oil production to peak between 2010 and 2020, and that “the ‘peak’ is more likely to look like a bump on a long ridge than the classic bell-shaped curve.”

As the late geoscientist M. King Hubbert first noted, ‘peak oil’ occurs when world oil production reaches its maximum level at the point when half the world’s reserves of cheap oil have been depleted, after which it becomes geophysically increasingly difficult to extract it. This means that passed the half-way point, world production can never reach its maximum level again, and thus continuously declines until reserves are depleted. Using his model, Hubbert successfully predicted, to the shock of detractors, the peak of US oil production in the 1970s, after which the US became a net importer.

Unfortunately, the data suggests that world oil production has either already peaked, or is very close to peaking – and that we may well now inhabit a post-peak world. Until 2004, world oil production had risen continuously but thereafter underwent a plateau all the way through to 2008. Then from July to August 2008, world oil production fell by almost one million barrels per day. It is still falling. According to BP’s Statistical Review of World Energy 2010 – which as usual assures us that world oil production will not peak for another 40 years – in 2009 world oil production was 2.6 percent below that in 2008 (falling 2 million barrels per day), and is now below 2004 levels – indicative of a gradually accelerating decline rate.

2004 80371 thousand barrels per day
2005 81261
2006 81557
2007 81446
2008 81995
2009 79948

BP’s own data contradicts its professed optimism. This plateau in world production over half a decade is unprecedented, and suggests we have already started on the “long ridge” whose overall trajectory despite fluctuation will be inexorably downwards. The outlook is likely to be worse, given that according to a new peer-reviewed study by the UK government’s former chief scientific adviser Sir David King in the journal Energy Policy (38, 8, 08/10), official estimates of world total oil reserves (including conventional, deepwater and unconventional resources) should be downgraded from 1,150-1,350bn barrels to between 850-900bn barrels. This corroborates the International Energy Agency’s (IEA) admission in its World Energy Outlook 2009 that the apparent doubling of world reserves since 1980 were politically-motivated, coming largely from upward revisions by OPEC countries “driven by negotiations at that time over production quotas and have little to do with the discovery of new reserves or physical appraisal work on discovered fields.”

Reserve size by itself matters only insofar as it practically translates into actual annual oil flows and rates of production. The problem, as noted by Matt Mushalik – presenting the findings of former BP oil analyst Chris Skrebowski – is that “almost half of the current global oil production (45%) comes from a very narrow reserve base of just 190 Gb or around 1/5th of the remaining reserves. It is depleting rapidly at a rate of around 7 % pa., with annual production declining consistently since 2002.” Remaining reserves contribute to “little over half the global annual flows” and “at much lower production rates”, most likely because they “are not able to increase production.”

Dallas petroleum geologist Jeffrey J. Brown’s Export Land Model projects a maximum of nine years between the time an oil-producer peaks and the reduction of its oil exports to zero. No wonder then that various experts warn we could see an actual oil supply crunch between 2012 and 2015, after which prices would rise inexorably as supplies drop and demand rises – fuelled by industrial and population growth in emerging markets like China and India.

Unfortunately, oil is not the only problem. Unconventional oil, coal, and natural gas may well be unable to compensate for the shortfall.

For the first time, in 2005 ExxonMobil’s own world oil production forecast showed no contribution from ‘oil shale’ even by 2030. Similarly, the Hydrocarbon Depletion Study Group at Uppsala University in Sweden investigated the viability of a crash programme for the Canadian tar sands industry between 2006 and 2018, and up to 2050. It concluded that even adopting “a very optimistic scenario Canada’s oil sands will not prevent Peak Oil.” Another study commissioned by the investor coalition Ceres warns that production costs, market instability, and low energy return on investment (EROI) of less than a third of conventional oil’s EROI, are endangering the viability of investments in unconventional oil.

Of course, the Gulf oil spill has put to rest previously widespread (but misplaced) optimism about the potential of deepwater reserves, due to the moratorium on future deepwater exploration. In any case, even before the disaster, the data points to a “sharply slowing and then flattening deepwater growth profile” by 2011, amidst acceleration in “the pace of deepwater decline.” As Bob MacKnight, analyst at the Washington-based PFC Energy, thus concludes, “We are really approaching a peak production in deep water” and new discoveries will only “shallow the decline rather than move the peak.”

The situation looks similar for the future of natural gas production. The interplay between prices and technological breakthroughs may permit deeper drilling of unconventional gas reserves for a longer period – 118 years at “current demand” according to one optimistic projection. But estimates of world demand project a massive 49 percent increase up to 2035 – fueled particularly by China and India. According to former Total geologist Jean Laherrere, who has conducted one of the most comprehensive surveys of the available conventional and unconventional gas reserve and production data, global natural gas production will peak around 2025 – cohering with Canadian geologist David Hughes’ projection of peak gas arriving in 2027.

As for coal supplies, an extensive study by the Energy Watch Group (EGW) warns that global coal production is likely to peak around 2025, at 30 percent above 2007 levels of production. US coal production in terms of energy will only remain at current levels for another 10–15 years. However, just this year the journal Science published a study predicting that world coal production from existing reserves could peak as early as 2011, and that it is “unlikely” future discoveries would ameliorate the decline.

In a separate study, EGW warned that world production of uranium for nuclear energy would peak between 2030 and 2035. This corroborates the International Atomic Energy Agency’s (IAEA) 2001 projections for uranium production up to 2050 that “presently known [uranium] resources fall short of demand” and that “future exploration will be more difficult”; as well as industry warnings, such as that in 2005 by Cameco – the world’s largest uranium producer – to the effect that global demand will “outpace existing supply over the next decade by more than 400 million pounds.”

Although thorium has been advocated as a potential ‘magic bullet’ due to wide availability and potentially higher EROI, according to the Institute for Energy and Environmental Research in Washington DC thorium still requires uranium to “kick-start” a nuclear chain reaction. Additionally, despite decades of research, no one has yet developed a commercially-viable thorium breeder fuel cycle, not even in India. The other problem is simply that the mining, transporting, refining, milling, waste reprocessing and construction processes of nuclear power are still heavily dependent on fossil fuels. Indeed, an extensive study published in the International Journal of Nuclear Governance, Economy and Ecology finds that nuclear power is simply not efficient enough to replace fossil fuels in any case, requiring nuclear production to increase by 10.5 per cent every year from 2010 to 2050 – an “unsustainable prospect.”

The cumulative implications are unequivocal: industrial civilization faces multiple, converging shortages in the supply of energy across the spectrum of traditional hydrocarbon-linked reserves. These shortages are all likely to converge within the first quarter of this century.

The exponential demographic, economic, and technological growth associated with the birth and expansion of industrial civilization we have experienced for the last century or so, has been tied indelibly to the seemingly unlimited availability of carbon-based energy. This growth has also been made possible only by quite deliberate efforts on the part of the major powers to dominate the world’s strategic energy reserves, particularly in the Middle East and Central Asia – a matter which has played a central role in geopolitical competition and conflict in the postwar period. The neoliberal doctrine of unlimited growth, however, overlooks the finite reality of the earth’s resources. We now face the fact that our traditional resource-base for continued exponential industrial growth simply does not exist. This suggests that industrial civilization in its current form simply cannot survive this century.

As international security expert Michael Klare points out, “major oil-consuming nations are more dependent than ever on supplies from countries that are prone to rebellion, ethnic strife, separatism, sabotage and coups d’├ętat – often instigated by the lure of oil wealth” – and the ‘War on Terror’ serves usefully to sanitize this stark reality. But given the speed of resource depletion, militarization offers no lasting solution beyond the spectre of renewed geopolitical competition, if not major conflict, to dominate the world’s fast diminishing hydrocarbon energy supplies.

As we have never before experienced the energy-economic system of a ‘post-peak’ world, it is difficult to accurately model how it might look in practice. Both alarmists and optimists may find themselves surprised. But one thing is clear: if governments and international institutions continue their current failure to grasp the significance of this hydrocarbon-energy crisis convergence, then there will be serious consequences for the ability of states to continue to deliver public goods and services.

Given the scale of supply constraints across the spectrum of traditional energy sources, we may find it very difficult to scale-up a viable supply of energy to replace cheap, conventional oil in time to avoid the collapse of critical infrastructures. The converging complexity of major stresses including energy depletion, climate change, food insecurity, economic instability and violent conflict – combined with the increasingly obvious inability of states to keep up with and respond to these crises meaningfully – could create a perfect storm culminating in “synchronous failure”, leading to collapse. And a short-sighted reversion to traditional military solutions would more likely accelerate, rather than avoid, this collapse.

When might such “synchronous failure” occur? In mid-2009 the UK government’s chief scientific adviser Sir John Beddington warned that we could expect a ‘perfect storm’ of food, water and energy crises by 2030. However, my own assessment of ‘crisis convergence’ – based on six years of interdisciplinary research poring over thousands of academic studies and industry reports – suggests that “synchronous failure” could arrive as early as 2018 on a business-as-usual model.

The imperative, then, is to work toward facilitating a comprehensive transition to cleaner, renewable sources of energy; while doing our best to downsize our current levels of consumption and increase resilience. As study, after study, after study, after study has proven, the mix of technologies to achieve this transition already exist – a major impasse, of course, is how fast the process of transition could occur. Unfortunately, sheer social, political and technological inertia, if nothing else, could slow the transition process significantly (ecologist Vaclav Smil notes that historically, energy transitions have been a generations-long process). While we may be unable therefore to avoid catastrophic short-falls, these could be ameliorated by focusing efforts to radically reduce fossil fuel consumption through conservation and energy efficiency.

The economic model of an ‘ideal-world’ 100 per cent, post-carbon renewable energy system is still only theoretical, but it is clear that it cannot be based on exponential growth for its own sake. This speaks to a new post-carbon civilization based on greater consciousness of human-embeddedness in our natural environment; of the significance of mutual cooperation rather than self-seeking competition as an evolutionary imperative for species survival; and thus of less-materialistic values oriented around health, freedom, education, and well-being as central to sustainable prosperity.

The 21st century may well signify the end of industrial civilization as-we-know-it – but it also points to the unprecedented opportunity to envision, and work toward, a far more equitable, sustainable and harmonious post-carbon civilization.

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