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The Impending Oil ShockNader ElhefnawyPublished online: 25 Mar 2008.

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Abrupt rises in the price of oil in recent years have helped revive concern about the long-term viability of a fossil-fuel-based economy. Many business writers have seen these rises as simply compensating for the oil glut of the 1990s, or due to specific, localised, temporary difficulties such as Hurricane Katrina, the war in Iraq or unrest in Nigeria. More pessimistic analysts, however, argue that world oil production is peaking, and will soon start dropping, even as the demand for energy continues to soar.1 That means that the beginning of the end of the oil age may be just around the corner, and the only question is whether the landing will be soft or hard – whether we will find ourselves in a truly post-industrial world, where new technol-ogy is effectively substituted for depleted natural resources, or in the midst of a Malthusian catastrophe and a new dark age.2

The coming energy crunch?It is frequently reported that the world’s proven reserves of liquid petroleum are on the order of a trillion barrels, but what exactly this means is rarely explained. Oil reserves are classed as ‘possible’, ‘probable’ or ‘proven’, the latter being the categorisation most often discussed. ‘Proven’ means there is a 90% chance of it being economically feasible to recover a given quantity of oil. (By contrast, there is a 50% chance with a ‘probable‘ reserve, and a 10% chance with a ‘possible’ one.) Of course, determining what is ‘eco-

The Impending Oil Shock

Nader Elhefnawy

Survival | vol. 50 no. 2 | April–May 2008 | pp. 37–66 DOI 10.1080/00396330802034242

Nader Elhefnawy currently teaches at the University of Miami. He has previously published on international and security issues in journals including Astropolitics, International Security and Parameters.

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38 | Nader Elhefnawy

nomically feasible’ means making assumptions about the price of oil and the technology available to extract it. Even if not a single additional barrel is found, a higher price for the commodity, by justifying more expensive recovery techniques, can increase a ‘proven’ reserve, as can improvements in technology. It is frequently noted, for instance, that the percentage of oil recovered from deposits has risen from 22% to 35% since 1980 because of such improvements.3

Current estimates of the world’s proven reserves are generally on the order of 1–1.2tr barrels. According to the US Geological Survey, it may become feasible to extract another 700 billion barrels from known supplies, and indeed optimists anticipate that these will meet the ‘proven’ standard in just a ‘few years’.4 The Survey also calculated that another 1tr barrels await discovery and exploitation.

This makes up to 3tr barrels of recoverable liquid oil.5 Translating as it does to a 100-year supply at current consumption rates, this would make any crisis appear far off.6 Nonetheless, oil consumption is expected to grow at a rate of 1–2% every year for the foreseeable future. A 1.5% rate of growth would double consumption in 50 years, and by itself reduce current esti-mates to a 70-year reserve.

Perhaps more importantly, the process of calculating the amount of oil that might be recoverable from a deposit is neither exact nor transparent, so that the 3tr-barrel estimate cannot be blithely accepted.7 There is plenty of room for over-optimism, wishful thinking and outright lying – a 50% ‘probable’ reserve easily turns into a proven one on paper. Close examina-tion of ‘proven’ reserve estimates from year to year often shows suspicious changes, or a suspicious lack of change. Reserves commonly stay the same for years or even decades despite continuing production and an absence of obvious compensating changes.8 As many as 300 of the estimated 700bn barrels reported by OPEC countries may be suspect.9

Of course, vast unproven (and unlocated) supplies could more than com-pensate for such shortfalls, but again there are profound uncertainties. By definition, ‘probable’ and ‘possible’ supplies are an even less certain matter than ‘proven’ ones. Additionally, even if the world’s untapped reserves are as large as some observers claim, this is no guarantee that they will con-

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The Impending Oil Shock | 39

veniently be found when needed, or even at all. It is certainly the case that newer supplies, such as the South Atlantic fields off Brazil and Angola, are being located and exploited.10 However, the rate at which new supplies are located started falling in the 1960s, and overall consumption has outpaced the rate at which oil has been discovered since the 1980s, so that today such discoveries replace only a quarter of what is used up each year.11 It should also be remembered that it takes at least ten years to get production going on an economic scale at a site after finding oil, so there is a considerable lag between discovery and production.12

Many observers point out that energy companies have invested com-paratively little in locating new supplies or expanding production since the 1980s – allowing their spare capacity to slip from 15% of the market in 1986 to a mere 2–3% in 2005.13 Until recently, this has usually been attributed to low oil prices, and taken as proof of justified confidence in the future. Additionally, given the glut of the 1990s and their high profits at present, both private and state-owned companies have little incentive to dramati-cally enlarge the oil supply through such investments.

There are alternative explanations. Considering the tendency of oil com-panies to exaggerate their reserves, it may simply be that the industry is deterred by diminishing returns on its investment.14 Not only is it taking more effort to get oil out of the ground, but there would seem to be relatively few places left to explore (as indicated by the emphasis on new technol-ogy and the importance of offshore and other difficult-to-reach supplies).15 Consequently, even if the present scarcity of oil is temporary, oil producers will not automatically and smoothly ramp up output when supplies tighten – precisely the issue addressed by the controversial ‘peak oil’ argument.

Peak oil?The peak oil theory, first propounded by Marion King Hubbert in 1956, asserts that oil production from a particular territory, whether a field, a country or the whole planet, follows a bell-shaped curve, rising exponentially early on, hitting a peak and then declining terminally. This is because production in an oil field does not stay constant until the moment the wells tap out. All other things being equal, production in a well rises to a maximum, then

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starts tapering back down to zero because of dropping field-pressure after roughly half the oil has been extracted.

All other things are rarely equal, however. Extraction rates can be raised with more effort and made practical by technological improvements or higher prices, which has caused some observers to characterise Hubbert’s theory as overly simplistic. Another problem with peak prediction is that it must be based on the size of an oil reserve, calculations of which are highly uncertain. Whether a prediction assumes the trillion-barrel ‘proven’ figure to be grossly exaggerated or unduly pessimistic makes a great deal of difference.16

Nonetheless, Hubbert’s work has received widespread attention because he accurately predicted that US oil production would peak between 1965 and 1970 (it actually peaked in 1971). Other Hubbert predictions have proved less accurate (for instance, that the global peak would come in the 1990s).17 Still, consistent with his projections, the world’s oil production is today concentrated in mature, ageing fields from which the extraction of additional supplies is increasingly costly in money and energy.18 Even Saudi Arabia increasingly depends on water injection (pumping seawater into oil deposits to keep field-pressure high) and mechanical aids to induce artificial lift.19 Consequently, a shrinking number of fields will produce a dwindling amount of oil as they each peak in their turn, causing the world’s total pro-duction to drop toward a point at which it will become too expensive to extract any more.20

Even inside the typical parameters of this argument there are large unknowns, which quickly become apparent when one crunches the numbers. While production might peak at any time, the peak is usually predicted for some time between 2010 and 2020.21 Afterwards, oil production is projected to drop at a rate of 2–6% a year.22 Such a sharp drop would necessitate massive adjustment. The most obvious is to produce oil in ways other than pumping liquid oil out of the ground, so ‘unconventional’ sources of oil such as sands, natural gas and coal have attracted great interest in recent years.

Unconventional oil – a closer lookIt is commonly estimated that the world possesses a reserve of 6tr barrels of ‘heavy’ oil, already being mined in the Canadian province of Alberta and

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The Impending Oil Shock | 41

in Venezuela’s Orinoco river valley.23 Trillions more barrels might also be extracted from natural gas and especially coal, a tonne of which has long been held by the proponents of such processes to be capable of yielding four barrels.24 But it is not so simple. One problem is that extracting a barrel of oil from tar sands or coal tends to be quite energy intensive, often requiring additional fossil fuels, so that such production is actually constrained by the scarcity and price of those fuels. The current process of mining and upgrad-ing heavy oil, for instance, uses very large quantities of natural gas.25 As of January 2002 the world’s proven reserves of natural gas came to 175tr cubic metres. With the annual consumption rate sitting at 2.675tr cubic metres, this means there is a 65-year supply at current rates of use.26 The world’s estimated trillion tonnes of recoverable coal is thought likely to last longer, for 180 years at current levels of usage.27

Even if these reserve estimates are taken at face value (and they may well be too conservative or too optimistic), linear projections are just as decep-tive with gas and coal as they are with oil. Their share of the world’s energy portfolio has not only risen steadily in recent decades, but is expected to continue rising for the foreseeable future, especially in the United States, where scores of coal-fired power plants are planned, and in China, which is rapidly expand-ing its own coal-based electrical production.28 One US Department of Energy projection has worldwide coal use doubling by 2030.29 Of course, the extraction of sig-nificant amounts of oil from coal would only accelerate this rise in consumption – and it should be remembered that the conversion of coal to oil is a relatively inefficient use of coal’s energy content. Additionally, while the engineering problems involved in the extraction of gas and coal differ from those of oil recovery, many geologists also expect their production to ‘peak’, perhaps as early as the 2030s in the case of coal, so that the supply will become considerably more difficult to recover at a given price or level of technological sophistication.30 Consequently, while the total supply of coal and gas may be more plentiful than oil, these other fossil fuels may not do much to ameliorate a dwindling oil supply.

Linear projections

are just as deceptive with

gas and coal

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Another limitation of unconventional oil sources is that none of them has ever been exploited on a scale remotely comparable to that of liquid oil, nor are they likely to be soon. The US Energy Information Administration estimates unconventional supplies will produce 11 million barrels a day by 2025, a tenth of likely consumption (100–125mn barrels a day) – and pos-sibly too little to compensate for the shortfall in other oil production.31 (The administration estimates that the much-hyped Canadian oil sands will raise their production by just 2.5mn barrels a day in the next 25 years.32)

A benign scenario in which continued high levels of oil production, bol-stered by supplies of unconventional oil, keep the oil economy financially (though perhaps not environmentally) viable through the twenty-second century is conceivable, but is not the most likely scenario. It seems more probable that exaggerated reserves (proven and unproven), a declining rate of oil discovery and peaking production in mature fields will combine to tighten supplies, perhaps more rapidly than can be fully compensated for by unconventional oil supplies. The timing and severity of that tight-ening is admittedly open to question. Belated discoveries or technological improvements that increase output, or a general economic downturn that suppresses the rise in oil consumption, are conceivable. Nonetheless, the evidence for a significant, prolonged and continuing contraction in produc-tion (or alternatively, of significantly raised prices) beginning by the 2020s is considerable.

The security dimensionIn the meantime, the scarcity of oil will have profound implications at the international level, particularly in the realm of security. Five aspects of this problem warrant special attention. The first is how the position of energy exporters will change. The second is the expected impact on importers, particularly the major industrial nations. The third is the extreme case of state failure, when states simply fail to secure adequate energy resources to remain functional. The fourth is the heightened risk of armed conflict over energy resources. The fifth is the likelihood of an abruptly and dramati-cally widened use of nuclear energy, and the worsening of its associated problems.

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The Impending Oil Shock | 43

Oil exporters

The scarcity of oil will work to the advantage of some states, and the dis-advantage of others. Major oil exporters will enjoy higher revenues and greater political leverage, particularly as their number shrinks, reversing the diversification of the world’s oil suppliers under way since the 1970s. The leverage of states like Saudi Arabia, Iraq and Iran may grow accord-ingly, and with them, that of OPEC (though less than may be imagined, if the reports of exaggerated supplies there are true). Outside the Middle East, Venezuela and Russia are both looming larger on the international stage because of their enlarged revenues from oil and gas exports.

However, this influence should not be exaggerated. A rapidly rising popu-lation and increasing production difficulties mean there will be no return to 1970s-style prosperity for Saudi Arabia, even were its profile as an oil producer to continue rising. Similarly, Russia’s status as a ‘natural gas superpower’ is a very slender foundation for its ambitions, or even for preventing the con-tinuing erosion of its power base.33 There are also consequences to using the ‘oil weapon’ against buyers, not least of these the forgoing of income from oil sales. This was not a major problem for the wealthy, industrialised United States when it refused to sell oil to Japan before the Second World War, or when it cut oil sales to the United Kingdom and France during the 1956 Suez crisis, but today, the potential economic cost of such a move is much greater for countries like Russia and Saudi Arabia which are so dependent on oil sales for foreign revenue. It should also be made clear that any gains in influence enjoyed by oil-exporting nations in an oil-scarce world would be temporary, lasting only as long as these states remained exporters, which might not be very long.34 (It is commonly estimated that Iran’s profile as an oil exporter will suffer badly during the second half of the next decade, for instance.35) The contraction of supplies at the global level is inseparable from the contraction of supplies in these states. These states are also voracious oil consumers, not only because they are developing, but also because their large oil supplies permit governments to subsidise domestic use, fostering inefficiency.36 This will constrain their exports long before they exhaust their oil supplies.

Moreover, it is unlikely that a period of higher revenue from oil will provide a launch pad for more permanent economic power, given the poor

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record of resource-exporting countries.37 Philippe Le Billon, among other experts, has identified a ‘clear pattern of economic underperformance and governance failure among resource dependent countries’ – the so-called ‘resource curse’.38 Rents from this revenue stream provide a cushion to gov-ernments that would otherwise be insolvent; raise the exchange rate of their currency sufficiently to undermine the competitiveness of other sectors; and discourage economic diversification away from a single commodity subject to dramatic market fluctuations.39 They also tend to be at the discretionary control of elites, fostering not only corruption, but rent-seeking by various interest groups, and a tendency on the part of policymakers to mollify dis-affection with that revenue rather than seek more fundamental solutions to problems.40 Indeed, corruption and overdependence on a single resource typically result in the ‘overextraction of rents from the resource sector’, at the expense of needed maintenance.41 Oil exporters have tended to perform especially poorly in this regard, their revenues typically providing elites with the means to placate domestic interest groups, and fortunes that are invested and secured abroad, as in the case of Saudi Arabia.42 The result has often been the frustration of hopes for development rather than their reali-sation, and it may be expected that such tendencies will be exacerbated by higher revenues.

Despite these caveats, the greater influence oil exporters will enjoy will be very real, and oil exporters may take radical action if they see their vital national interests as being at stake. Indeed, the most likely scenario for an attempt by Iran to disrupt the flow of oil from the Persian Gulf may be the event of a conflict with the United States over a different issue (such as Iran’s

nuclear programme). It also has to be remembered that, at least in the short term, oil consumption is relatively inelastic, and where consumer buying pat-terns are concerned, the tendency has been to revert to previous behaviour as soon as the crisis of the moment is over, as has been the case in the United States since the 1980s.43 Moreover, even if wealthy

states can endure price shocks, poorer countries will remain susceptible, as the recent history of Russia using its ability to supply cheap oil and gas as

Oil consumption is relatively inelastic

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The Impending Oil Shock | 45

an instrument of power over former Soviet republics such as Ukraine, and more recently Georgia, demonstrates.44

There are passive as well as active ways to manipulate prices, as in the case of countries that refuse to enlarge their production capacity in line with world demand (as many experts consider to be the case with Saudi Arabia).45 Moreover, the manipulation of supply and prices need not be part of an overt policy. An oil producer interested in following such a strategy can always conceal such tinkering behind ‘market’ decisions, or attribute delib-erate disruptions to other causes, an instrument Saudi Arabia has notably been thought to have wielded several times in recent decades.

Oil importers

While higher oil prices will mean increased cash flow to oil exporters, they simultaneously pose an increasing risk of economic stagnation to oil importers, whether as a result of a natural mismatch between supply and demand, or deliberate manipulations on the part of oil producers. Those importers that consume energy most efficiently, derive more of what energy they do use from alternatives to fossil fuels, and run the most favourable trade balances, will be least affected. It is commonly asserted that, among the major industrial nations, Japan and Western Europe are much more effi-cient energy users than the United States, and the available statistics bear this out. Adjusting for Purchasing Power Parity, the United States uses 30% more energy than France, 40% more than Japan and 50% more than the United Kingdom to produce an equivalent unit of GDP.46

That Japan and Western Europe are more energy efficient than the United States is further reflected in disparities in GDP per barrel of oil consump-tion. The United States gets roughly $1,750 of GDP for each barrel of oil consumed compared with $2,000 for Japan, $2,400 for France, $2,500 for Germany and $2,900 for the United Kingdom.47 The use of natural gas and coal skews the figures, with higher consumption of these resources offset-ting oil use, but most of these nations are markedly more efficient users of fossil fuels across the board.48 If anything, looking only at oil consumption understates the degree to which some of these other nations have reduced their overall fossil-fuel dependence. Most notable is France, which uses not

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only a third less oil, but one-half as much natural gas and one-ninth as much coal as the United States for each unit of output.49

Just as productivity per man-hour is now a key economic indicator, in the near future productivity per Btu or barrel of oil consumed will like-wise be a key index of a nation’s economic competitiveness, and this bodes ill for the US economy relative to other industrial powers.50 The superior energy efficiency of Germany and Japan is particularly striking given that a higher percentage of their GDP derives from energy-intensive manufactur-ing, where American (and British) energy savings can be partly correlated with their ‘lighter’ service economies.51 Additionally, where the United States runs a massive trade deficit, expanded by the price of its growing oil imports, Japan, Germany and France routinely run trade surpluses, making energy imports a smaller burden on their economies.52

Energy-efficient states will also have an easier time transitioning to alter-natives, and here again the United States is in an unenviable position. Even were America not already so far behind in this area, it faces two special diffi-culties that European and Asian nations do not. The first is that the ‘culture of

oil’ has much deeper roots in the national infrastructure and culture of the United States (for example in urban design and the status of public transport), which would force it to make more strenuous efforts just to keep up.53

The second difficulty, the exceptional strength of the oil lobby in the United States, reinforces this. It was largely because of oil-lobby pressure in the early 1980s

that the US Federal Government abandoned tax credits and regulations aimed at fostering alternative energy sources, measures intended to create a ‘free market’ in energy.54 Abandoning these measures tilted the market in favour of more established sources, not least because coal, oil, gas and nuclear energy attained their market position because of a long history of government subsidy. Given the complexity of the issue and that many forms of government assistance are indirect, such as favourable terms on leases of government land to oil drillers, estimates of such support vary wildly.55 Nevertheless, the figure easily ran into several hundred billion federal dollars during the last century – investments never made in renewable

The culture of oil has deep roots in the US

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The Impending Oil Shock | 47

energy.56 This remained the case even after the 1973 embargo, the federal government spending six times as much on researching energy production from fossil fuels and nuclear energy as on renewables between 1972 and 1995.57 Such support of oil is actually increasing, at least when the ‘security subsidy’ of military protection for energy production and transport is taken into account.58

As a result of these two factors, the ‘US alternative energy industry was not only left to sink or swim among more mature competition, but was put at a disadvantage and withered’, while the ‘oil, gas and nuclear lobbies received the lion’s share of government support’.59 To give one example, the US share of the world’s installed wind-energy capacity fell from 92% in 1988 to a meagre 35% by 1995, with American energy production from wind actually registering negative growth for several years during the 1990s.60 While growth since 1999 has been rapid, as of 2005 the US share of world capacity was still a mere 15%, behind Spain and Germany, the latter country producing twice as much electricity from wind as did the United States.61 Not surprisingly, wind energy’s contribution to American electricity pro-duction remains modest, well under 1% – compared with 6% for Germany and over 20% for Denmark.62

While the situation may yet change (the process of transitioning away from fossil fuels has been initiated, but remains in its early stages), the United States will embark on any effort to reduce its fossil-fuel dependency from a position of significant disadvantage relative to other industrialised countries. Indeed, the United States could ultimately lose its position as a world power: political commentator Kevin Phillips has shown that changes in the energy base of a given historical period have coincided with the rise and fall of great powers.63 Thus, just as the UK’s position declined along with the age of coal and steam it pioneered, so too could the United States decline as oil’s era passes. While the idea that a German-led European Union and Japan might eclipse the United States economically is no longer taken seri-ously, such predictions may yet find some validation in these trends.64

That leaves the question of China and India, both of which enjoy eco-nomic influence that is increasingly comparable to the major industrial nations. China’s overall energy efficiency is in fact roughly equal to that of

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the United States, and since 2002 has actually been slipping after nearly two decades of improvement.65 China is also a particularly voracious coal con-sumer, annually using twice what the US does in absolute terms.66 India is more energy efficient – its economic growth has been both slower and less driven by energy-intensive manufacturing than China’s.67

Additionally, the sheer size of both countries, their rapid GDP growth and the fact that the developed portions of their economies remain small rel-ative to the whole (half or more of the workforce in both countries remains engaged in agriculture), means that very large absolute increases in energy consumption are nearly inevitable.68 Already, China and India are the world’s second- and fourth-largest oil users, respectively, and they are still build-ing their energy bases. India is today one of the world’s largest investors in wind energy, in fourth place between the United States and Denmark in 2005, but even its fossil-fuel use is expanding dramatically.69 China, moreo-ver, appears set on a policy of expanded oil and gas use, a course that could prove increasingly problematic.70

State failure

Some states, particularly in the underdeveloped world, may not even be able to obtain sufficient energy resources to keep their economies function-ing. Less-developed nations differ widely in the energy-intensiveness of their economies as well, but given the relatively low resource productivity of many; their obsolete, poorly maintained or otherwise inadequate infra-structure; and their obligation to pay for high-priced oil in hard currency; low-income oil importers will be in an especially poor position. In contrast to developed states enjoying more developed institutions and better access to capital and technology, less-developed nations have fewer of the resources needed to adapt to new circumstances, and any price shock would weaken such resources as they do have.71 Indeed, with adequate supplies of energy priced out of the reach of consumers, businesses and government, basic services might fail and states cease to be viable, even as developed nations continue to get by.

Any price shock would come in an environment already favouring state failure: recent years have seen stagnating growth in Latin America and

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The Impending Oil Shock | 49

Africa; the removal of a great deal of foreign support for weak governments (a process that started with the Cold War’s end); and continued popula-tion growth in the poorest regions, putting pressure on infrastructure and resource bases. Many of these problems will get worse rather than better, particularly the relationship between population size and natural resources such as water and arable land. The salinated and damaged farmland on which a third of the world’s crops are presently grown is a case in point.72 Aside from the expensive repairs such lands require, drip-irrigation and other methods needed to keep them productive are much more energy intensive than current practices. Not having access to the required energy may mean disaster.

Moreover, there will be spillover effects, such as refugee flows and the emergence of havens for ter-rorism and organised crime, as in Afghanistan and Somalia. There is also the danger that where one state fails, another may move in, either formally or infor-mally. These interventions may be motivated by a sense of threat (guerrillas using the territory of failed states as a base of refuge), or the sighting of an opportunity to grab territory and resources – both of which were factors in the numerous invasions of the Democratic Republic of the Congo by its neighbours since the mid 1990s.73

The heightened risk of state failure will drive inreasingly desperate efforts to avoid it, especially given the lower efficacy of market-driven solutions in impoverished countries.74 Weak states may make ‘neo-feudal’ arrangements with sub-state actors like warlords, private militias and private corporations to shore up their positions. Alternatively, they may become more centralised and controlling, even totalitarian, and other, stronger nations may feel com-pelled to prop them up, despite the unsavoury character of their regimes.75

There may also be an increased demand for peacekeeping missions, demand that will likely overwhelm the ability of the major military powers to deliver; indeed, they have already been overwhelmed.76 The problem could become still more severe, not only because of more numerous crises, but because the lopsided conventional wars the major powers are most likely

Not having access to

required energy may mean

disaster

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to fight require relatively few ‘boots on the ground’, while nation-building in the ever more populous and urbanised developing world requires larger numbers.

Smaller countries are not the only ones at risk. The failure of large but economically fragile states on the model of the Soviet collapse is conceiv-able, and even more problematic at the global level, given that their size compounds their problems, making them more difficult to bail out or prop up, and introducing problems that are not a consideration with smaller states, such as the proliferation of sophisticated weaponry. The moment before a large nation collapses is especially fraught with peril.77 The Soviet Union made surprisingly little effort to resist dissolution in 1991, but there is no certainty that the next great power to go this way will not flail about dan-gerously prior to collapse. Great-power conflict is not out of the question; it may even be the most likely cause of conflict in the future, particularly if crises bring radical ideologies to the fore.78

Resource wars

Resources have historically been a factor motivating and fueling armed conflicts. According to a study by Paul Collier, ‘a country that is heavily dependent upon primary commodity exports, with a quarter of its national income coming from them, has a risk of conflict four times greater than one without primary commodity exports’.79 This connection may be clearest in the case of oil, which is not just ‘another natural resource’, particularly where the onset of civil wars is concerned.80 More than other resources, the presence of oil seems to increase the danger of harsh ‘preemptive repres-sion’ against insurgencies by central governments, as in Darfur; of other states interceding in internal conflicts, such as providing support for a sepa-ratist movement in an oil-rich state; and of secessionists prolonging conflicts by selling off future exploitation rights.81

Explanations include the developmental problems common to resource-dependent countries such as poor government, corruption, poverty and high levels of inequality. High oil prices can exacerbate these problems by enabling failing states to stave off needed reforms, and increasing the attrac-tiveness of the resource to rent-seekers, externally and internally. Dormant

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border disputes and secessionist movements could be reactivated as oil revenue becomes more attractive in places outside the Middle East, such as Latin America and sub-Saharan Africa. Where states have been thoroughly ‘privatised’, as by warlords, criminal syndicates or state leaders with links to multinational corporations, this risk is especially high.82 A global eco-nomic crisis of the kind made likely by pinched oil supplies (particularly in less-developed regions) may also create openings for radical groups.

Such problems affect not just oil-producing nations, but key states in the staggeringly complex worldwide energy distribution system. Besides the risk to overland pipelines, especially problematic in Central Asia, state collapse tends to translate into maritime insecurity as well, as with the intensified (although so far comparatively minor) pirate activity off the coast of Somalia in recent years.83 External powers routinely embroil them-selves in the domestic affairs of states key to the production and transport of oil, exposing themselves to all the hazards such intervention can entail. For example, supporting repressive governments can provoke resentment among the local population, which may manifest itself in terrorist acts (as in Saudi Arabia). Overthrow of a client government can mean inter-state conflict, as with the US and Iran since the 1979 revolution. Another risk is that major powers might find themselves on opposite sides of an internal conflict, as in Georgia, the territory of which is crossed by a key pipeline for oil from the Caspian Sea basin. There, a US-backed government battles Russian-backed separatists in Abkhazia and South Ossetia – a conflict some experts have identified as resembling a Cold War proxy war.84 Even private companies, as they seek to develop resources in ever more unstable areas, may be implicated in local conflicts. Oil companies have run up large private-security bills in recent years, and oil corporations were among the earliest clients of private military corporations, as in Angola.

The formation of new international alliances can also be a driver of con-flict as large states pursue energy security. In Central Asia, Russia and China actively seek to counter US influence through bilateral military agreements and with the formation of regional blocs such as the Shanghai Cooperation Organisation and the Collective Security Treaty Organisation.85 Outside the Caspian Sea basin China is actively securing access to oil through relation-

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ships with Iran and Sudan, and through the ongoing build-up of its naval capabilities.

The problem of interstate conflict over oil may be exacerbated as an unintended consequence of some solutions to the world’s energy problems. For example, new technologies that permit cost-effective drilling for oil in deeper waters could create new flashpoints. Cheaper deep-water drilling, for instance, would make the oil under the contested South China Sea a more valuable prize.86 It might be hoped that deep-water oil will be less likely to cause conflicts because the facilities and workers are relatively dif-ficult for disgruntled local populations to reach. While this may make the facilities less accessible, however, offshore oil still figures into international conflicts because of territorial sea and Exclusive Economic Zone claims. (Timor Leste’s claims to rich offshore oil fields were a factor in Indonesia’s attempts to control that country.) The development of alternative energy technologies may raise the value of particular natural resources – such as platinum, which can be used as a catalyst in hydrogen fuel cells – with similar results.

The nuclear threat

Expansion of nuclear power as an alternative energy source is especially likely to compound international security problems. Oil shortages, or the prospect of them, are already putting pressure on states to follow the path France took in the 1970s and invest heavily in nuclear power for their elec-tric grids.

There are currently 443 nuclear reactors operating worldwide, which as of 2004 produced 2,619bn kilowatt-hours of electricity every year.87 This amounts to roughly 17% of global electricity consumption. France, by con-trast, gets 77% of its electricity this way. Were the entire world to follow the same path, this would mean a nearly fivefold increase in output, and perhaps 2,000 reactors online. From a technical standpoint, this would seem a reasonable way of reducing the world economy’s oil dependence, and many analysts are advocating exactly this path.88

Nonetheless, a global rush to build another 1,600 (or more) atomic reac-tors is no cause for comfort. While nuclear-power advocates are confident

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that properly built, operated and maintained reactors are safe, there is no assurance that the reactors providing these new energy supplies will be any of these. A rushed enlargement of the number of working nuclear reac-tors in poorer, less-developed nations would be extremely dangerous. A repeat of the 1986 Chernobyl accident cannot be ruled out, and given the threat that such an incident poses to neighbouring states, the political wran-gling over reactor construction programmes can be expected to multiply. Controversies like the one over Cuba’s Juragua nuclear power plant could well become routine.89 The safe storage of spent nuclear fuel, given the long-term radioactivity of its waste products, is also a problem unresolved after more than five decades of experience, and underlies the controversy in the United States over the Yucca Mountain Repository.90

The burden on the surveillance mechanisms charged with protecting the non-proliferation regime will also grow, as trade in nuclear technology expands and the list of installations needing monitoring lengthens. This will heighten the risk of nuclear proliferation, though it is difficult to say by how much, given uncertainties about, for instance, the types of nuclear technology that energy purchasers will opt for. Of most concern are fast-breeder reactors, which are so called because they produce more fissile material than they consume by converting non-fissile uranium isotopes into fissile plutonium. In the 1970s this feature raised the possibility of a ‘plutonium economy’ in which the world economy would depend on plutonium-fueled reactors for its electricity.91 Higher-than-expected costs and surprisingly low uranium prices diminished the attractiveness of this path. However, this model is being actively pursued in several countries, including China, India and Japan, and changes in uranium prices (already rising) or the technological state of the art may bring back the concept on a broader scale.92

Increased production of fissile material by itself does not necessarily mean more nuclear states. The non-proliferation regime works largely because potential nuclear-weapons states commonly calculate that the weapons would do little to improve their security position. In future,

The burden on surveillance

mechanisms will grow

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however, the increased use of nuclear power could coincide with generally greater insecurity, altering those calculations. In particular, the nucleari-sation of a single state can produce a chain reaction across its region in which other countries arm themselves, especially as it becomes easier to do so. The possibility that North Korea’s nuclearisation may lead South Korea, Japan or even Taiwan to acquire nuclear weapons of their own is fre-quently raised. In the Middle East there have been signs that Saudi Arabia is reviewing its nuclear option, and a nuclear-armed Iran would be a strong spur to Saudi nuclearisation.93

Additionally, even if the risks of nuclear accidents, and of more states with nuclear-weapons programmes, were ameliorated, there would still be more facilities vulnerable to terrorist attack. It should be noted that it would be extremely difficult for terrorists to attack a reactor so as to produce a large-scale release of radiation; in theory even an 11 September-style attack with a hijacked airliner would be insufficient, at least in the case of US reac-tors. Nonetheless, there would be more targets, and an attack on a reactor can have effects far outside the targeted country, both from the radiation release, and the political and economic consequences that could follow. There would also be a larger stock of fissile material susceptible to theft, frequently in countries unable to bear the cost of securing it.

Responding to the crisisIn the face of growing resource scarcity oil importers must seek to minimise the cost of their imports and the leverage energy exporters enjoy over them. Governments must see that they do not fall behind other nations in maxim-ising their energy efficiency and developing alternative energy sources. It is also in the interest of most nations to minimise the disruption resulting from conflicts over resources (sometimes, but not always, at the margins of the global economy); the dangers of an enlarged dependence on nuclear power; and the threat to international order posed by additional state failures.

In the global struggle to respond to the oil crisis traditional military means will have some uses. When a genuine threat appears to resources on which states depend – whether for foreign earnings or to keep vital infrastructure running – they will find it in their interest to at least have the option of

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military action. Situations of conventional conflict between sizeable military forces are likely to remain rare, however, as today’s resource conflicts tend to take the shape of civil wars (in which outside countries are, to be sure, likely to intervene), and there is little reason to expect this to change. It is more likely that the major militaries will be called on to perform missions ‘other than war’, such as peacekeeping, as a result of the tightening of the world’s oil supply, and greater alertness and enlarged capabilities in these areas (which, at any rate, are only partly military) would be desirable.

In the end, then, a nation’s ability to sustain its economy and preserve its influence will depend less on military capability and more on an ability to insulate its economy from oil shocks: in short, on its success in reducing its reliance on fossil fuels sooner rather than later. The question all nations must confront is how to effect a speedy change.

The experience of the United States since the 1980s, especially when com-pared to that of Europe and Japan (which have had much greater success at de-linking their economic growth from expanded fossil-fuel use), dem-onstrates the practical limitations of a ‘market-led’ approach. Such a project would preferably be undertaken before the tightening of supplies becomes so serious that the market finally forces consumers to make a change, not only in the interest of minimising the difficulties of the transition, but because such a moment would be an especially poor starting point for such an ambi-tious programme.94

The high profits energy companies (already given to a short-term, low research and development outlook) will make from scarce, expensive oil, and the likelihood that depressed economic circumstances will discourage investment and exacerbate conflicts over priorities, will complicate efforts to reconstitute an energy base. Neoliberals, confident in the market’s penchant for creative destruction and its ability to deliver ‘disruptive technologies’ like renewable energy, offer information and communications technolo-gies as examples of how innovations previously overcame such resistance.95 But other technologies, especially capital- and infrastructure-intensive technologies like energy production, tend to proliferate much less rapidly. Additionally, even in the case of mobile phones a stable regulatory frame-work – the Global System for Mobile communications established by the EU

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– was key to rapid proliferation. Replacing the fossil-fuel economy will be far more complex than putting a mobile phone in each hand.

As with other national priorities, governments must set energy targets, and make active efforts to meet those targets. They must encourage energy conservation and energy production from alternative sources, to include unconventional oil and possibly nuclear power in the near term, but with renewable energy production ultimately winning the day. Unfortunately, with the exception of hydroelectric energy, which is a major energy source, there has been a tendency to dismiss renewable sources, or defer their use to an indeterminate ‘future’ date in which they have been made economically viable by ‘more research’. Such rhetoric is often a way of avoiding present action. It also implies that renewable energy sources are too expensive, too difficult to scale up or too dependent on a fossil-fuel platform to represent even a partial solution today.

The evidence contradicts such assertions. ‘Cheap’ oil is only deceptively so. Subsidies aside, the per-barrel price of oil represents the externalisation of much of its cost, as the price of health problems caused by air pollu-tion from the burning of oil, the clean-up of ecological damage caused by pipeline leaks and tanker spills, and, of course, the consequences of climate change, appears elsewhere.96 Additionally, the price of oil seems to be set on an upward trajectory, measured both in dollars and cents and in the energy that must be invested to get each additional barrel.

Similarly, the arguments against the scalability of renewable energy pro-duction tend to be straw men. It is not necessary for a single type of energy production to satisfy 100% of the needs of a nation’s economy, any more than this is expected of coal, oil, gas or nuclear energy. Moreover, wind tur-bines have already been successfully used to supply industrialised nations with as much as a quarter of their electricity, and that with current technol-ogy. Innovations such as windmills based on floating platforms, and (rather more experimental) ‘flying windmills’, may ultimately revolutionise the field.97 Solar energy is more expensive, but more efficient in land use and more easily installed because, rather than requiring tall towers, any rooftop will do. This form of energy may be particularly helpful when incorporated into energy-efficient buildings, which can become net energy producers.98

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Tidal energy, scarcely exploited because of high capital costs, also promises high returns.

While large-scale, high-return energy production from renewable sources only requires a ‘fossil-fuel platform’ for the initial set-up, if at all, other industries are likely to remain dependent on conventional oil for much longer. Modern agriculture and industry depend on oil-based plas-tics, pharmaceuticals and fertiliser, and there are no obvious substitutes for many of these (though they are comparatively minor users of fossil fuels). Transportation, long the largest user of oil, also remains an issue – this is the main reason why France’s nuclear use has freed it from reliance on natural gas and coal to a much higher degree than on oil. In the short term there are numerous ways to maximise the transportation industry’s efficient use of oil, and every barrel of conventional or unconventional oil not used to power an electric grid is freed up for other uses.99 Over the longer term, however, much will depend on the degree to which vehicles like buses, cars and trains shift to electric power; and the ability to translate electrical gen-eration from renewables into gaseous fuels like hydrogen and ethanol, the large-scale economies of which remain unproven.100

Achieving a combination of energy conservation and expanded energy production from non-fossil-fuel sources will bring demand closer in line with the sustainable supply.101 However, this goal is unlikely to be achieved without significant state inputs. The contribution of public money to research and development efforts would be a necessary part, but is not the only role that government can play. Other actions could include setting high fuel-efficiency standards for vehicle fleets; requiring utility companies to produce set portions of their total energy output from alternatives; pur-chasing energy from renewable sources whenever possible; and offering assorted subsidies, such as tax breaks and loans, to defray the costs of the changeover to consumers.102

Efforts in this area have so far been piecemeal, with modest goals: a common target across the industrialised world is to attain a double-digit percentage of energy needs from renewable sources by 2010 or 2020, much of that to come from long-established hydroelectric power. Nonetheless, there are signs that governments are beginning to consider more ambitious

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and comprehensive plans. Last year, for instance, the Swedish government announced a plan to end Sweden’s dependence on fossil fuels by 2020.103

Accomplishing this in 15 years may seem over ambitious, and not every country enjoys Sweden’s combination of affluence and geography. Nonetheless, that time frame is an accurate reflection of both the problem’s severity and the availability of practical tools for coping with it, and is a model for other states following the same course, ideally in cooperation with one another. As with climate change, the impending oil shock is too complex for any nation to fully address on its own. The global integration of the economy, the fact that every country draws on a common pool of oil, and the particular difficulties facing underdeveloped states, make carefully considered collaboration on the planetary level the only way forward.

Notes

1 The seminal paper on the subject is M. King Hubbert’s ‘Nuclear Energy and the Fossil Fuels’, Publication no. 95, Shell Development Company, June 1956. Also see Kenneth S. Deffeyes, Hubbert’s Peak: The Impending World Oil Shortage (Princeton, NJ: Princeton University Press, 2001).

2 See James Howard Kunstler, The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century (New York: Atlantic Monthly Press, 2005).

3 Leonardo Magueri, ‘Two Cheers For Expensive Oil’, Foreign Affairs, vol. 85, no. 2, March–April 2006, p. 150.

4 Ibid., p. 150.5 This would be 50% of an estimated

world supply of 6tr barrels of oil. Other estimates are rather more con-servative, assuming that only 30% might be recoverable – a difference of over a trillion barrels. See John H. Wood, Gary R. Long and David

F. Morehouse, ‘Long-Term World Oil Supply Scenarios: The Future is Neither as Bleak or Rosy as Some Assert’, 18 August 2004, http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2004/worldoilsupply/oilsupply04.html.

6 Annual oil consumption is today in the area of 30bn barrels a year. See Central Intelligence Agency, CIA World Factbook 2006, https://www.cia.gov/cia/publications/factbook/index.html.

7 Colin J. Campbell and Jean H. Laherrere, ‘The End of Cheap Oil’, Scientific American, March 1998, pp. 78–84.

8 As Matthew Simmons has noted, Saudi Arabia’s reserves have been set at 260bn barrels for nearly two decades, despite the production of nearly 50bn barrels. Matthew Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and The World

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Economy (Hoboken, NJ: John Wiley & Sons, 2005). Optimists claim, by contrast, that the 260bn figure is low: Magueri, for instance, asserts that it is just a third of Saudi Arabia’s actual oil wealth. Magueri, ‘Two Cheers’, p. 153.

9 Campbell, ‘The End’, pp. 79–80.10 Daniel Yergin, ‘Ensuring Energy

Security’, Foreign Affairs, vol. 85, no. 2, March–April 2006, p. 74.

11 Leonardo Magueri, ‘Never Cry Wolf – Why The Petroleum Age Is Far From Over’, Science, no. 304, 21 May 2004, pp. 1114–15.

12 Deffeyes, Hubbert’s Peak, p. 10.13 Magueri, ‘Two Cheers’, p. 151.14 See Thomas Homer-Dixon, The Upside

of Down (Washington DC, Island Press, 2006).

15 This is a matter of some controversy. ‘Oil optimists’ contend that while this may be the case with North America, the territory of some major producers like Russia and the Middle East may be under-explored, and they point to the smaller number of exploratory wells drilled inside these territories. Magueri, ‘Two Cheers’, pp. 150–1.

16 Colin Campbell’s widely publicised estimate is that there may be a total of a trillion barrels remaining to be recovered, just one-third of the USGS estimate, so that roughly half the world’s supply has already been used up, rather than a quarter or so in the USGS estimate. Campbell, ‘The End’, p. 81.

17 This can be explained to some degree by OPEC’s deliberate production cutbacks, which did not figure into Hubbert’s calculations.

18 Over 80% of production comes from fields found before 1973. Campbell, ‘The End’, p. 80.

19 Simmons, pp. 134–48. Water injection can cause such problems as the corro-sion of the extraction equipment, and the biodegradation of the oil by bacte-ria in the water. Simmons, pp. 103–4.

20 John Dillin, ‘How Soon Will World Oil Supplies Peak?’, Christian Science Monitor, 9 November 2005, p. 3.

21 Some studies set the date much later than that, one putting the outside figure early in the twenty-second cen-tury – though this study judged the US Geological Survey to be conserva-tive in its estimates, and assumed field growth outside the United States. See Wood, ‘Long-Term’.

22 The 6%-a-year drop may at first seem surprising, since according to peak theory, the production of oil drops at approximately the rate at which it rose. However, the use of more aggressive recovery techniques to stave off the peak is likely to mean an even more rapid drop when the peak finally does hit, given that well over 50% of the supply will have been depleted by then.

23 Brendan I. Koerner, ‘The Trillion-Barrel Tar Pit’, Wired, vol. 12, no. 7, July 2004, http://www.wired.com/wired/archive/12.07/oil.html.

24 Wills H. Miller, ‘Pacific Coast Oil and Natural Gas’, Economic Geography, vol. 12, no. 1, January 1936, pp. 86–90.

25 Dan Wyonillowicz, Chris Severson-Baker and Marlo Raynolds, Oil Sands Fever: The Environmental Implications of Canada’s Oil Rush (Drayton Valley, AB: The Pembina Institute, 2005), pp. 15–6. Using the current procedure, 30 cubic metres of natural gas are recov-ered for each barrel of oil. Recovering the world’s supply of heavy oil would

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thus use up the planet’s entire proven natural gas supply, even if it were set aside solely for this purpose.

26 Central Information Agency, ‘World’, CIA World Factbook 2006, https://www.cia.gov/cia/publications/factbook/geos/xx.html#Econ. There are those who argue that proven natural gas reserves may be only a fraction of the possible total, and that there are also ‘unconventional’ natural gas sources, such as coalbed methane. Natural Gas Supply Association, ‘Unconventional Natural Gas Resources’, NaturalGas.org, http://www.naturalgas.org/ overview/unconvent_ng_resource.asp.

27 Energy Information Administration, ‘World Coal Markets’, International Energy Outlook 2006, http://www.eia.doe.gov/oiaf/ieo/coal.html. As with oil, the standard estimate has been attacked (most recently, by a report of the National Academy of Sciences) as being over-optimistic about the recoverability of known coal sup-plies. Matthew L. Wald, ‘Science panel disputes estimates of coal supply’, International Herald Tribune, 21 June 2007, http://www.iht.com/arti-cles/2007/06/21/business/coal.php.

28 Jeff Goodell, Big Coal: The Dirty Secret Behind America’s Energy Future (Boston, MA: Houghton & Mifflin Co., 2006), p. 205.

29 EIA, ‘World Coal Markets’.30 Gregson Vaux, ‘The Peak in US Coal

Production’, From The Wilderness.com, http://www.fromthewilderness.com/free/ww3/052504_coal_peak.html.

31 Energy Information Administration, ‘World Oil Markets’, International Energy Outlook 2006, http://www.eia.doe.gov/oiaf/ieo/oil.html.

32 Energy Information Administration, International Energy Outlook 2007, http://www.eia.doe.gov/oiaf/ieo/pdf/oil.pdf.

33 Russia’s oil sector provides 25% of the country’s GDP – and just 1% of employment. US Department of Energy, ‘Russia’, Country Analysis Briefs, May 2004, http://www.eia.doe.gov/emeu/cabs/russia.html.

34 Given its massive supplies of uncon-ventional oil, however, Venezuela’s staying power in this area may be lengthier than its reserves of oil sug-gest as they are ordinarily calculated.

35 Substantiating such expectations is the fact that Iran currently produces oil below the level of its OPEC quota, at an estimated cost to its economy of over $5bn a year. Barry Schweid, ‘Iran oil revenue quickly drying up, analysts say’, Boston Globe, 26 December 2006, http://www.boston.com/news/world/articles/2006/12/26/iran_oil_revenue_quickly_drying_up_analysts_say/. There is, however, considerable argument over the extent to which this is due not to the exhaustion of its supplies, but simply the country’s failure to modernise its fields and explore for oil adequately, with some observers arguing that Iran could in fact rapidly expand its production. EIA, ‘Iran Country Analysis Brief’, August 2006, http://www.eia.doe.gov/emeu/cabs/Iran/pdf.pdf.

36 Russia’s oil use has tended to be only half as efficient as the United States’; moreover, Russia has used its oil to subsidise its influence abroad, as through sales at below-market prices to former Soviet republics.

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37 For a survey of the literature on this subject, see Michael L. Ross, ‘The Political Economy of the Resource Curse’, World Politics, vol. 51, no. 2, 1999, pp. 297–322.

38 Philippe Le Billon, Fuelling War: Natural Resources and Armed Conflict, Adelphi Paper 373 (Abingdon: Routledge for the IISS, 2005), p. 82.

39 Anil Markandya and Alina Averchenkova, ‘Reforming a Large Resource-Abundant Transition Economy: Russia’, in Richard M. Auty (ed.), Resource Abundance and Economic Development (New York: Oxford University Press, 2001), pp. 292–3; Le Billon, Fuelling War, p. 12. The declin-ing terms of trade for commodities (not a historical constant, though evident in recent decades) can also be a factor. For a nuanced discussion of the issue, see Paul Bairoch, Economics and World History: Myths and Paradoxes (Chicago, IL: University of Chicago Press, 1993).

40 Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley, CA: University of California Press, 1997), pp. 44–67.

41 Le Billon, Fuelling War, p. 17.42 Richard M. Auty, ‘A Growth Collapse

With High Rent Point Resources: Saudi Arabia’, in Auty (ed.), Resource Abundance, pp. 205–6.

43 Fuel-efficiency standards for cars are a case in point. American car mileage flatlined in the area of 25–30 miles per gallon following the price drop, with manufacturers and consum-ers alike opting for large, powerful vehicles rather than efficient ones. See Amory B. Lovins and L. Hunter Lovins, ‘Mobilizing Energy Solutions’,

American Prospect, 28 January 2002, pp. 18–25.

44 ‘Georgia In Talks With Russia’s Gazprom after More Than Doubling of Price for Gas’, International Herald Tribune, 3 November 2006, http://www.iht.com/articles/ap/2006/11/03/business/EU_FIN_Georgia_Russia.php.

45 Edward Luttwak, ‘The Truth About Global Oil Supply’, The First Post, http://www.thefirstpost.co.uk/index.php?menuID=1&subID=18.

46 The figures for every dollar of GDP as of 2004 were 9,300 Btus (British ther-mal units) for the US; 7,200 for France; 6,500 for Japan; and 6,200 for the UK. Calculated using data from: Energy Information Administration, ‘World Energy Intensity – Total Primary Energy Consumption per Dollar of Gross Domestic Product Using Purchasing Power Parities, 1980–2004’, International Total Primary Energy Consumption And Intensity, 23 August 2006, http://www.eia.doe.gov/emeu/international/energyproduction.html. Considered in terms of electricity, the US gets $3.40 of GDP to the kilowatt-hour, compared with $4.20 for France, $4.25 for Japan, $5.00 for Germany and a remarkable $5.30 for the UK. Calculated from national data in CIA World Factbook 2006.

47 Calculated from national data in CIA World Factbook 2006.

48 The United States and the United Kingdom get roughly $19.50 of GDP for every cubic metre of natural gas consumed, but Germany gets $26.70, France $41.50 and Japan $46.50. Ibid. The US gets $10,700 to the (short) ton of coal – which puts it slightly

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ahead of Germany (which in this case fares poorly with just $9,900 to the ton), but Japan gets $26,700, the UK $32,000, and France a staggering $100,000 to the ton. Calculated from US Department of Energy statistics, http://www.eia.doe.gov/.

49 Because coal and gas are used princi-pally for electrical generation, nuclear energy more readily substitutes for these fuels than for oil.

50 Ricardo Bayon, ‘The Fuel Subsidy We Need’, The Atlantic Monthly, February 2003, 117–19. Energy efficiency improved by a substantially larger margin in the United States than the other industrial nations discussed here, excepting the United Kingdom. In 2004 the US used approximately 61% of what it did in 1980, compared with 82% for France and 84% for Japan – though it may be argued that this is because the US was so much less efficient to begin with.

51 As a sector, industry makes up 27.8% of Japan’s GDP, and 29.6% of Germany’s, compared with 20.4% for the US and 19.1% for the UK. CIA World Factbook 2006.

52 If an alternative to the dollar emerges as the currency of the oil trade (as seems possible with the euro), the pressure on the United States would immediately worsen. Of course, domestic energy supplies would alleviate the problem of paying in a foreign currency – though in free-market economies, domestic supplies will not do much to affect world market prices. Additionally, with American oil production in decline and the North Sea set to follow a simi-lar course, the major industrial nations

will only be able to meet part of their domestic demand for fossil fuels, unless unconventional oil supplies (which the US possesses in abun-dance) are counted.

53 The low population density of the United States, while one cause of its inefficient energy use, could also be a boon, given the large land area required by wind- and solar-energy installations.

54 Salvatore Lazzari, ‘Energy Tax Policy’, report, Congressional Research Service, 24 August 2001.

55 For two conflicting views of the matter as it stood in the late 1990s, see Douglas Koplow and Aaron Martin, Fueling Global Warming: Federal Subsidies to Oil in the United States (Washington DC: Greenpeace, June 1998); and American Petroleum Institute, ‘Fueling Confusion: Deceptive Greenpeace Study Premised on Flawed Estimates of Subsidy’, November 1999.

56 According to one study, federal sup-port of the oil industry between 1918 and 1980 came to some $268bn (as measured in 1999 dollars). Battelle Report, ‘Analysis of Federal Incentives Used to Stimulate Energy Production’, Pacific Northwest Laboratory, February 1980 (Revision no. 2), p. 276. Cited in National Environmental Trust, America, Oil and National Security: What Government Data Really Show (Washington DC: National Environmental Trust, 2002). Some $145bn were also spent on subsidis-ing nuclear energy between 1947 and 1999. Marshall Goldberg, ‘Federal Energy Subsidies: Not all Technologies are Created Equal’, Renewable Energy

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Policy Project, Research Report, July 2000, p. 2.

57 The figures are $20bn for fossil fuels, $40bn for nuclear and $10bn for renewables. Fred J. Sissine, ‘Energy Efficiency: A New National Outlook?’, Congressional Research Service Reports, 12 December 1996, http://www.cnie.org/nle/crsreports/energy/eng-28.cfm.

58 While precise figures are hard to establish given that security policy is often determined by a number of fac-tors, the statistics available indicate substantial costs. Michael Klare has calculated that in recent years the United States has spent $150bn annu-ally on safeguarding the oil supplies of the Persian Gulf – $12 for every barrel the region produces, and $100 for every barrel the United States imports from the region. This does not include what Washington spends on energy security outside that area, or the expenditures of other countries. Michael Klare, Blood and Oil, p. 182.

59 See Elhefnawy, ‘Toward’, pp. 109–10.60 Energy Information Administration,

‘Wind Power’, Renewable Energy Annual 1996, 16 April 1997, http://www.eia.doe.gov/cneaf/solar.renewables/renewable.energy.annual/chap05.html.

61 Earth Policy Institute, ‘Wind Electricity-Generating Capacity by Country and World Total, 1980–2005’, Wind Energy-Data, http://www.earth-policy.org/Indicators/Wind/2006_data.htm#table3.

62 Energy Information Administration, ‘U.S. Electric Net Summer Capacity’, Renewable Energy Trends 2004, August 2005, http://www.eia.doe.gov/cneaf/

solar.renewables/page/trends/table12.html.

63 Kevin Phillips, American Theocracy: The Peril and Politics of Radical Religion, Oil and Borrowed Money (New York: Viking, 2006).

64 Indeed, recent years have seen the renewal of literature anticipating future European world leadership on this and other grounds. See Jeremy Rifkin, The European Dream: How Europe’s Vision of the Future is Quietly Eclipsing the American Dream (New York: Jeremy P. Tarcher, 2004); Mark Leonard, Why Europe Will Run The 21st Century (New York: Public Affairs, 2005).

65 In 1980 China required 23,500 Btus for each dollar of GDP (adjusted for Purchasing Power Parity). This fell to 7,700 in 2002, and was already back over 9,000 by 2004, in roughly the same range as the US. Data from Energy Information Administration, ‘World Energy Intensity’.

66 US Department of Energy, ‘China’, Country Analysis Briefs, August 2006, http://www.eia.doe.gov/emeu/cabs/China/Profile.html.

67 India used 4,300 Btus to produce every dollar of GDP in 1980, a figure which rose steadily until reaching 5,300 in 1995, after which it dropped back down to 4,200 in 2004 – compared with 9,000 for China and the US, and around 6,000 for the UK. Data from Energy Information Administration, ‘World Energy Intensity’.

68 Earth Policy Institute, ‘Wind Electricity-Generating Capacity’.

69 By contrast, Europe, Japan, and the United States, in part because they are already developed and growing

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more slowly, can much more readily decouple GDP growth from increased energy use.

70 Michael Klare, Blood and Oil: The Dangers and Consequences of America’s Growing Dependency on Imported Petroleum (New York: Henry Holt & Co., 2004), pp. 161–79.

71 Thomas Homer-Dixon, Environmental Scarcity and Global Security (Ithaca, NY: Foreign Policy Association, 1993), pp. 67–8.

72 Russell Clemings, Mirage: The False Promise of Desert Agriculture (San Francisco, CA: Sierra Club Books, 1996).

73 John Clark (ed.), The African Stakes of the Congo War (New York: Palgrave Macmillan, 2002).

74 Homer-Dixon, Environmental Scarcity, pp. 67–9.

75 Robert Kaplan, ‘The Coming Anarchy’, The Atlantic Monthly, February 1994, pp. 44–76.

76 Michael O’Hanlon and P.W. Singer, ‘The Humanitarian Transformation: Expanding Global Intervention Capacity’, Survival, Spring 2004, pp. 77–96..

77 Again, China and India represent par-ticular dangers. Both are very densely populated and resource poor, with serious internal cleavages between their more- and less-developed regions (India further suffers from a high level of ethnic, religious and lin-guistic fragmentation). Additionally, despite their impressive rates of economic growth, simple arithmetic dictates that they will remain develop-ing nations for decades to come.

78 Harold James, The End Of Globalization (Cambridge, MA: Harvard University Press, 2001).

79 Importantly, Collier notes that resources are not by themselves the cause of conflicts, and that they do not make it inevitable; he also identifies a correlation between low GDP growth and low education levels with the out-break of these conflicts. Paul Collier, ‘Doing Well Out of War’, in Mats Berdal and David M. Malone (eds), Greed and Grievance: Economic Agendas in Civil Wars (Boulder, CO: Lynne Rienner Publishers, 2000), p. 97.

80 Klare, Blood and Oil, pp. xii–xiii; Michael L. Ross, ‘What do We Know about Natural Resources and Civil War?’, Journal of Peace Research, vol. 41, no. 3, pp. 337–56.

81 Michael L. Ross, ‘How does Natural Resource Wealth Influence Civil War? Evidence from 13 Cases’, International Organization, Winter 2004.

82 Scott Pegg, ‘Globalization and Natural-Resource Conflicts’, Naval War College Review, Autumn 2003, p. 82–95. For a more general discussion of ‘criminalised states’, see Jean-François Bayart, Stephen Ellis and Beatrice Hibou, The Criminalization of the State in Africa (Bloomington, IN: Indiana University Press, 1999).

83 While the figures provided by the International Maritime Bureau’s Piracy Reporting Centre indicate several hundred attacks a year, only a handful involve the removal of large quantities of bulk goods, or the outright seizure of ships. Moreover, the targeted vessels have generally been smaller than 10,000 tonnes displacement.

84 Fred Weir, ‘Georgia Risks War Over Separatists‘, Christian Science Monitor, 12 August 2004, p. 6. A similar risk

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exists in the conflict between Armenia and Azerbaijan.

85 Anton Koslov, ‘Russia and the US in the New Balance of Power in Central Asia’, in Hall Gardner (ed.), NATO and the European Union: New World, New Europe, New Threats (Aldershot: Ashgate, 2004), pp. 232–41.

86 Mark J. Valencia, China and the South China Sea Disputes (London: Oxford University Press, 1995).

87 Energy Information Administration, ‘World Net Nuclear Power Generation, 1980–2004’, 7 July 2006, http://www.eia.doe.gov/fuelnuclear.html.

88 This includes proponents of the ‘hydrogen economy’, who envision nuclear-generated electricity produc-ing fuels for vehicles (like hydrogen), rather than renewable sources like wind and solar. Thomas P. Barnett, Blueprint for Action: A Future Worth Creating (New York: Putnam, 2005).

89 See ‘Cuba’s Nuclear Power Plants at Juragua’, FAS.org, http://www.fas.org/nuke/guide/cuba/main.html.

90 Office of Civilian Radioactive WasteOffice of Civilian Radioactive Waste Management, Department of Energy, Yucca Mountain Repository, July 2007, http://www.ocrwm.doe.gov/index.shtml.

91 H.A. Feveison, T.B. Taylor, F. von Hippel and R.H. Williams, ‘Plutonium Economy’, Bulletin of the Atomic Scientists, vol. 32, no. 10, December 1976, pp. 10–21, 46–55.

92 Arjun Makhijani, Plutonium End Game: Managing Global Stocks of Separated Weapons-Usable Commercial and Surplus Nuclear Weapons Plutonium, Institute for Energy and Environmental Research, Report, Jan. 2001.

93 Ewen Askill and Ian Traynor, ‘Saudis Consider Nuclear Bomb’, Guardian, 18 September 2003, http://www.guardian.co.uk/saudi/story/0,11599,1044402,00.html.

94 Thomas Homer-Dixon notes that ‘as environmental degradation pro-ceeds, the size of the potential social disruption will increase, while our capacity to … prevent this disruption decreases. It is therefore not a reason-able policy response to assume we can intervene at a late stage, when the crisis is upon us.’ See Homer-Dixon, ‘On The Threshold: Environmental Changes as Acute Causes of Conflict’, International Security, vol. 16, no. 2, Fall 1991, pp. 76–116.

95 Clayton Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fall (Cambridge, MA: Harvard University Press, 1997).

96 For an examination of how conven-tional economic measures distort cost–benefit calculations, see Clifford Cobb, Ted Halstead and Jonathan Rowe, ‘If the GDP is Up, Why is America Down?’, The Atlantic Monthly, vol. 276, no. 4, October 1995, pp. 59–78.

97 Windmills on floating platforms (compared with conventional off-shore windmills that take advantage of stronger offshore winds) may cost only a third as much to build and set up, and can be redeployed easily to meet shifting demand and operated in a wider range of locations (such as in deep water, hundreds of miles out to sea), while possibly tripling the output of land-based turbines. Ker Than, ‘Floating Ocean Windmills Designed to Generate More Power’, LiveScience,

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http://www.livescience.com/technol-ogy/060918_floating_windmills.html. Flying windmills exploit the wind stream and return the energy pro-duced to electrical grids on the ground through a tether. Given the very high levels of relatively inexpensive power a small number of such clusters can produce (it has been estimated that a few thousand could meet Canada’s present demand for electricity), this approach would seem especially attractive for the purposes of a rapid changeover. Lawrence Solomon, ‘Flying Windmills’, National Post, 19 March 2005, http://windenergynews.blogspot.com/2005_03_01_archive.html.

98 See Andrew Murr, ‘No More Electric Bills’, Newsweek, 15 August 2005, p. 43.

99 The options include not just more mass transit, rail lines, telecommut-ing and small cars, but diesel engines, electric cars, hybrid vehicles making partial use of batteries, internal com-bustion engines using ‘lean burn‘ technologies, and new materials that are lighter and stronger than those presently used.

100 At this point one of the highest pri-orities for research and development in this area is arguably to develop methods that maximise the energy efficiency of biofuels processing.

101 Some studies contend that the growth in energy efficiency can outpace plausible economic growth rates in the advanced economies. See Ernst von Weizsacker, Amory Lovins and Hunter Lovins, Factor Four: Doubling Wealth, Halving Resource Use, the New Report to the Club of Rome (London: Earthscan, 1997).

102 Such initiatives can of course be financed through money withdrawn from subsidies for fossil-fuel use, and fuel taxes, which also appear to have been a powerful contributor to Europe’s relative fuel efficiency.

103 ‘Sweden Aims for Oil-Free Economy’, BBC News, 8 February 2006, http://news.bbc.co.uk/2/hi/science/nature/ 4694152.stm. John Vidal, ‘Sweden Plans to be World’s First Oil-Free Economy’, Guardian, 8 February 2006, http://www.guardian.co.uk/ environment/2006/feb/08/ frontpagenews.oilandpetrol.

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