The risks of oil supply disruption for the transport sector

by Dan Plesch, Senior Research Fellow at the Royal United Service Institute in London.

No country could survive economically if its goods and people could not move from place to place. Highest priority should be given to replacing oil as the main transport fuel in view of the unstable nature of the regions where most of the world's supplies are found.

Editor's Note: this paper was written in October 2002, before the Anglo - American invasion of Iraq.

If oil, the raison d'être of a large part of the Western military complex since the Soviet Union collapsed, could be removed from its central role in economic life, then that would have a very significant positive political effect on the international situation. At present, half the United States' military is devoted to and justified by potential wars to do with oil in North- West Asia.

To bring about a reduction in oil's importance, we need to establish a new set of coalitions and alliances between the security community, the traditional disarmament community, which hasn't quite got the message yet, and the green community that is downloading it rapidly. As these alliances can only be successful if there is a powerful, objective, real case for energy security, that is what this paper will discuss, focussing on oil and transportation.

The energy security issue as it confronts us today is a very old one. It probably stretches back beyond the eighteenth century, but just as an illustration, Frederick the Great, as part of what led to the destruction of Poland, moved in to occupy Polish Silesia to gain access to its coal. By World War Two, oil had become a strategic issue, not least because Winston Churchill had decided that the Royal Navy should not rely on coal because of the difficulties of maintaining coaling stations and supplying them. Accordingly, in the late nineteenth and early twentieth century, he moved the Royal Navy to oil.

A quick few points to illustrate our vulnerability. The tax on oil is very high in Western Europe - between $50 and $100 a barrel on top of the purchase price, which is currently $25-$30 a barrel. These exact numbers may be wrong, but the scale is not. In addition to this there is the continuing high cost of securing, or that is to say, not securing, the oil in the Gulf right now. Plus or minus, I think that around 150 plus billion dollars a year are spent by the US and the West and the western-orientated Gulf states themselves to try to secure the production of some 6 or 7 billion barrels a year. This gives us a per-barrel price of policing the petrol supply of between 15 and 25 dollars a barrel. On top of this, of course, is the cost in democratic values of deciding to prop up all sorts of extremely unsavoury regimes that we wouldn't otherwise particularly care for. That's a year-on-year cost, and it doesn't actually secure the supply.

Some right-wing commentators, notably Samuel Huntingdon, have long proposed that we are faced with a clash of civilizations between the West and Islam. Personally I don't subscribe to that view but with people like Samuel Huntingdon in charge, we may yet experience such a conflict despite its lack of inevitability. At the other end of the spectrum we have the radical Islamists who have launched some kind of global guerrilla war - probably the first we have seen historically. Their intention is clearly to try to incite a global civil war. They look at Islam's high point in the ninth and tenth centuries, see that it hasn't come much further since the early Middle Ages, and would like to see that go very much further. So there are plenty of people out for a scrap.

Whether or not we are able to contain the situation is an open question. What we do know is that if we get it wrong, we are enormously vulnerable and there are groups with the capability to exploit our vulnerabilities. Look at this nice little Landsat image of the Kuwaiti oil-field fires. One or two nuclear weapons, perhpas from the Pakistani nuclear programme, loosed off in thse fields might make our futre slightly more complicated.

Is this risk small enough to ignore? Well, we're all accustomed to risks of one sort of another and the conventional wisdom plays down the risks both from those that dream of the seventh century and those from Bush and Sharon. But we downplayed other risks in the past and were proved to be quite wrong. So far, the best we can say is that the doom-mongers have not been proved right, yet.

Coming to Iraq, well, the war might be a pushover like the last one in the Gulf, and I think it probably will be, but the political and longer-term ramifications, particularly of an American general managing a US oil cartel on the Basra and Mosul oil fields, may have further knock-on effects beyond that of those who carry out the action.

The risk from the West's perspective is regime change. We have, I think, quite short memories. Remember that in the fifties, sixties, and into the seventies, military coups were very frequent in many parts of the world and certainly in the Arab part. I find it interesting that much of the discussion is in terms of Muslim public opinion, but I would be more concerned about a group of junior officers carrying out a Ghadaffi- or Nasser-ite style coup. And while we look with great complacency at the fall of the Warsaw Pact over the course of not much more than a year at the end of the 1980s, we may face a situation in which from Ankara through to Jakarta we see a similar collapse of western-orientated, police-state-reliant regimes.

Now, I haven't got much time for those regimes, and I haven't got much time for a policy that supports them, but without a more enlightened policy, the risk of such a major change seems to me a bit too real to set aside.I was a journalist at NATO when the NATO Secretary General came out one day, about twelve years ago, in the middle of a defence ministers' meeting and said, 'Well we've got news today, we got a fax from Boris Yeltsin. He just sent us a fax to say the Soviet Union no longer exists.' That would have been quite unthinkable a few years previously. So can anyone guarantee that we are not going to get an email one day from Tehran, Baghdad or Riyadh saying 'Well actually we are going back to the desert, we have a Cambodian Pol Pot approach to the middle class, we don't care about selling the oil to sustain our national economy, what we do care about is completely messing your societies and destroying them.'

Now, I think that's very unlikely. But the point is that our existing response to that risk is simply more investment in the current approach. At various points around the world, where people on the receiving end aren't stupid, they see the signs of our desperation to diversify our oil sources. You only have to open a copy of The Financial Times to find out how we are busily trying to extract more oil from Africa or Central Asia, or some other far-flung place where it's very difficult to get the oil out for technical and strategic reasons. Or ponder this nice little picture of a beefed-up 747 which is a prototype for an American airborne laser system. Well, they are shelling out $1.3 billion just for programme definition on that.

Now think about what that sort of money could achieve if military-style resourcing was applied to developing renewable energy sources in order to remove our strategic oil dependency. Where could that leave us strategically in ten or fifteen years' time? We simply have no Plan B at present, which from the perspective of elementary military strategy is not a good position to be in. If you are having to fight wars in the petrol station you have to be very careful because if things go seriously wrong, then things go wrong at home very quickly too.

Of course there are some strategic petrol reserves but these are all extremely short-term measures. None of them has the prospect of lasting more than a year on the most generous of estimates. And we, I think, need to learn how different our societies are today compared with, let us say, the societies that faced the oil crisis of '73 or indeed that of '56. Seventy-three feels almost moderately recent but remember we've become a just-in-time economy since then. As a result, the tanker-driver dispute in the UK two years ago brought the country close to a very serious national emergency.

The drivers weren't unionised so there was no one to talk to. The managers were in Milan - what do you do? We had no surplus capacity, no infrastructure to enable us to cope. And, as one of my colleagues in government pointed out, there's no point in giving petrol coupons to the doctor to get to the hospital if the boiler man is a forty-minute car drive away. Railway men no longer live in railway cottages now, other people do and commute to some other city while the railway men live somewhere else again. And they're all using cars. The vulnerability is vastly greater even than in the 1970s.

So, while we don't have a Plan B, we do know that there is a risk of unquantifiable size that Plan A will fail because some people have a very great capability to exploit our very great vulnerability at a very high cost to us.

If you open up any car magazine you'll see that a whole range of hybrids and alternative-fuel vehicles are now becoming commercially available because of the environmental concern, the environmental push. What this means is that there is a technology that is in a state to be picked up and brought into service. It isn't a question of the position we were in, in the 1970s. And if we decided to switch our resources from the airborne-laser simulation preparation budget into fuel cells we might see things happen a little bit faster.

The prize for us in Europe is not just to greatly reduce our strategic risk and our dependence on the United States, but also to create greater freedom to choose where to send what troops we have. I'll ask you to start thinking about the role that Ireland might play when, in a year or so, it takes the presidency of the European Union again, and what possibilities might be taken up by a very well-organised internationalised civil society focussed on that presidency, because Ireland's presidencies in the past have achieved a fair amount. We shouldn't think that a rapid transition to renewable energy sources is without precedent. The history of technology is full of very rapid transitions and developments, unfortunately mostly during times of war. To pick some at random - the landing craft used by the Americans to liberate Europe was essentially an obscure oilrig tender from the Gulf of Mexico. Commercial long-range air travel came out of the World War II bomber. The advantages of satellite technology came first of all from a military use and of course in peacetime we have brought about the stagecoach/canal/rail/private car transition.

I would argue that one can take to established politics a very hardcore security argument that in traditional military strategic terms there is an imperative to develop renewable energy for transportation. We could build on that strategic imperative by using the technical resources and lobbying power of the green movement along with those of people in the political/military world who aren't really aware of the technological possibilities. I think it would be a nice idea if Feasta could do it. I jumped at the invitation to this conference because the construction of the alliance I spoke about ealier should perhaps focus on the EU (and Mr Prodi, the President of the European Commission who has just created a hydrogen advisory group, with which we should become rather more closely associated, I think).

The European Union as such does not have an energy policy but nevertheless the development of a presidency agenda could move the security issue forward far more rapidly than it might otherwise happen. After all, there are plenty of people sipping espressos in Europe who have great distaste for the current American administration but can't see a way out of the current strategic dependency. We are offering one, vastly more practical than establishing a European army, of which the least said the better, I think. It is also, I have to say, a more realistic, realpolitik, approach to the security problem, because a European army is not going to make this problem go away, it just adds competition between a European military and an American military to the equation. And draws a hell of a lot more money into the trap that perhaps Mr Bin Laden and his friends are setting for us. The present response is no more a strategy than the bull charging the red rag is a strategy. I think we can offer to produce a good deal more security for an awful lot less money.

I'll close with one final point. It is not about the fact that there isn't enough oil in the ground. There is, and there is going to be enough oil in the ground for quite a long time to come. The price may get higher, we may find more, though we probably won't find very much more, but for twenty, thirty years from now, we will probably have enough oil. Now, planning long term, of course we need to be thinking about the transition to renewables. The point is, the risk of an oil supply disruption makes the need for that transition much more immediate. Of course, if oil was as available as water, then we wouldn't be shelling out all this cash to try and secure it. Clearly, shortage of supply and concentration of supply are already critical issues, and will get worse, particularly with the growth of Chinese demand coming on stream. But, being entirely shameless about it, the security issue provides environmentalists with another powerful argument for getting to where they already want to go.

This is one of almost 50 chapters and articles in the 336-page large format book, Before the Wells Run Dry. Copies of the book are available for £9.95 from Green Books.

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Continue to Panel 2 of section 4: Grim energy security scenario developed for the US

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