Venezuelan Oil Minister Says
OPEC Supply Problem Is 'Structural'
Chevron Urges Global Energy Crisis Debate
As Saudis, PFC, And Morgan Stanley Issue Warnings
www.btinternet.com/~nlpwessex/Documents/EnergyAugust2005.htm

Energy Update, August 2005

Billboard Poster From Chevron's 'Energy Debate' Global Advertising Campaign Launched July 2005 (Those five countries are all in the Persian Gulf - Saudi Arabia, Iran, Iraq, UAE, and Kuwait)

"We do have a vital strategic interest in the oil reserves that are in that [Persian Gulf] area. But what I would like to see is a candid discussion of what our interests in the area are, what our equities are, and what the downside of maintaining a presence in the area is. We haven't seen any of that .... It's policy that has created these issues, and the policy should be openly debated in front of the American public, and not just kind of brushed away and disguised as a 'war against terror'."
Philip Giraldi, former CIA counter-terrorism official
The Weekend Interview Show, July 2005

"The [British] government was warned over a year ago by its most senior Foreign Office official that the Iraq war was fuelling UK Muslim extremism, it has emerged. Foreign Office Permanent Secretary Michael Jay issued the warning in a May 2004 letter leaked to the Observer. The letter to Cabinet Secretary Sir Andrew Turnbull said British foreign policy was a 'key driver' behind recruitment by extremist Muslim groups. The Foreign Office said it did not comment on leaked documents. The letter said a 'recurring theme' among the underlying causes of extremism in the Muslim community was 'the issue of British foreign policy, especially in the context of the middle east peace process and Iraq'. It added: 'British foreign policy and the perception of its negative effect on Muslims globally plays a significant role in creating a feeling of anger and impotence among especially the younger generation of British Muslims.'"
Warning of 'Iraq-extremism link'
BBC Online, 28 August 2005

"I fear we're going to be at war for decades, not years ..... one major component of that war is oil."
James Woolsey, Former Director of The CIA
Report On The Annual Policy Forum Of The American Council On Renewable Energy (ACORE)
Washington, 6-7 December 2004
RenewableEnergyAccess.com, 14 December 2004

"Policymakers in Washington, who used to assume there was a 50:50 chance that the [western friendly oil exporting] Saudi regime would survive the next 10 years, have now cut this to five years."
Oil Heads for $70 a Barrel
The Business, 14 August 2005

"... the mideast will increasingly become the source of the world's oil, and this is a strategic problem for us and for many other countries."
James Woolsey, Former Director of the CIA
Online Interview with the Council on Foreign Relations and the Washington Post: June 7, 2000

"In Ron Suskind’s recent book 'The Price of Loyalty,' former [US] Treasury Secretary Paul O’Neill charges that [Vice President Dick] Cheney agitated for U.S. intervention [in Iraq] well before the terrorist attacks of September 11, 2001. Additional evidence that Cheney played an early planning role is contained in a previously undisclosed National Security Council document, dated February 3, 2001. The top-secret document, written by a high-level N.S.C. official, concerned Cheney’s newly formed Energy Task Force. It directed the N.S.C. staff to coöperate fully with the Energy Task Force as it considered the 'melding' of two seemingly unrelated areas of policy: 'the review of operational policies towards rogue states,' such as Iraq, and 'actions regarding the capture of new and existing oil and gas fields.'”
Contract Sport
New Yorker, 9 February 2004

"It would be an expression of national will to do something about the fact that we have been regarding the Middle East as very heavily our gasoline station for now half a century or more, and it really is time to stop."
James Woolsey, Former Director of The CIA
Profile: Impact of War in Iraq on World Oil Prices
NPR News, 15 October 2002

Energy Update Overview
Energy Debate Gathers Momentum

Double Page Chevron Advertisement As Appeared In 'The Economist' And 'TIME' Magazine July 2005 (To View Text Click Here) "International oil companies have advertising campaigns warning that the world is running out of oil and calling on the public to help the industry do something about it....ExxonMobil, the world's largest energy group, said in a recent advertisement: 'The world faces enormous energy challenges. There are no easy answers.' .... Chevron, the US's second-largest energy group, sends a similar message, but goes two steps further. 'One thing is clear: The era of easy oil is over. We call upon scientists and educators, politicians and policy-makers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy. Inaction is not an option,' was the message in a recent advertising campaign. The company has even set up a website, www.willyoujoinus.com, warning of the pressures of high demand and fewer fields and offering a forum of discussion." Big Oil warns of coming energy crunch Financial Times, 4 August 2005 "The campaign [by Chevron] will launch in print, outdoor, online and with TV teaser ads in global media targeted at influentials who are involved with leading the energy debate. The ads will appear in publications such as the Economist, Wall Street Journal and Financial Times, on U.S. and pan regional TV such as CNN, BBC Africa, Asia, Middle East and Latin America and in airport locations such as Beijing, Moscow and Washington DC." New Chevron advertising targets dialogue about global energy issues Strategiy.com, 7 July 2005

"It is estimated that global oil demand could rise by about 50 per cent by 2020. So, notwithstanding some recent evidence that suggests China's oil demand is actually slowing down at the moment, the prospect over the medium term is for sustained and significant growth in demand. The problem is that there are increasing concerns about supply. Oil is an 83m-84m barrel-a-day distribution business with realisable capacity in the short term of no more than a few hundred thousand barrels. Tight supply-demand conditions, though, are not, per se, unusual. The new concerns arise from some quite contrarian perspectives, summarised as 'peak oil'. Some think the peak in global oil production could be reached some time between now and 2008, others that it will come between 2010 and 2020, but most agree it is within the next decade or so. Concern about the depletion of conventional global reserves seems to have intensified for several reasons, including technological improvements in geological data gathering and analysis, the increasingly sparse reserves discovered by new drilling, and concerns that much of the world's conventional oil, especially in the Middle East, is coming from old and over-exploited mega-fields that are becoming less productive. There is no risk that we are running out of oil but the chances of being able to match the estimated growth in demand over the medium term with a rise in production is being seriously questioned. Higher prices might not herald substantially higher (conventional) supplies......there is no basis for complacency..... what if oil prices were to remain high over the medium-term?.....The overall net transfers from oil consumers to oil producers by 2007 are estimated at about $1,500bn - or nearly 3.5 per cent of world GDP. This would amount to a recycling problem of increasing complexity, from both an economic and a political point of view. It is against this background that the concept of 'peak oil' becomes more worrisome... high prices might be an early indication of a supply-demand imbalance that can only be reconciled by still higher prices (recession or global slowdown notwithstanding). In that case, a more comprehensive oil shock surely awaits and that is with conventional oil production holding steady. Sooner or later, production levels will start to decline..."
The world is heading for a shock over the high price of oil
Financial Times, 16 August 2005

"Sadad al-Husseini.... retired last year after serving as [Saudi] Aramco's top executive for exploration and production..... It can be argued that in a nation devoted to oil, Husseini knows more about it than anyone else ....Until his retirement last year -- said to have been caused by a top-level dispute, the nature of which is the source of many rumors -- Husseini was a member of the company's board and its management committee. He is one of the most respected and accomplished oilmen in the world.... The message he delivered was clear: the world is heading for an oil shortage. His warning is quite different from the calming speeches that .... other Saudis, along with senior American officials, deliver on an almost daily basis."
The Breaking Point
New York Times, 21 August 2005

"Concerns are being voiced by some oil experts that Saudi Arabia and other producers may, in the near future, be unable to meet rising world demand....In the past several years, the gap between demand and supply, once considerable, has steadily narrowed, and today is almost negligible. The consequences of an actual shortfall of supply would be immense.....It is widely believed that most, if not all, OPEC members exaggerated the sizes of their reserves in order to have the largest possible quota.... .... few politicians have spoken of an energy crisis or suggested that major policy changes are necessary to avert one. The energy bill signed earlier this month by President Bush did not even raise fuel-efficiency standards for passenger cars. When a crisis comes -- whether in a year or 2 or 10 -- it will be all the more painful because we will have done little or nothing to prepare for it."
The Breaking Point
New York Times, 21 August 2005

"We have only two modes - complacency and panic."
James R. Schlesinger, former Energy Secretary, Defence Secretary and Director of CIA, on US energy policy
New York Times, 12 July 2005

"In a rational world, President Bush would call for a meeting of all the stakeholders in America's energy future. That doesn't mean the usual convocation of oil companies and environmental groups. It means tapping the political clout of retirees in AARP, of farmers, of big retailers such as Wal-Mart whose customers must travel long distances, and of state and local governments. The president would tell these stakeholders the blunt truth: Sometime in the next 15 years, the world's demand for oil is going to be greater than its supply. So now is the time to begin reducing demand -- and thereby regain control of our destiny. If Bush won't call for such a national commitment, then the Democrats should do it. (I'd like to imagine that both parties could actually agree on such a course, but in a Karl Rove/Howard Dean world, maybe that's impossible.) In assessing the energy squeeze, I am borrowing the ideas of my friend J. Robinson West, chairman of the consulting group PFC Energy. He has floated with administration officials his idea of a sustained national dialogue on energy that includes all stakeholders. And his group has gathered what may be the best statistics available on the seriousness of the supply-demand crunch. West argues that the oil market squeeze will only get worse -- and more vulnerable to political disruptions.....The day of reckoning is less than 15 years away, by West's calculation. Assuming fairly slow growth in demand of about 1.8 percent annually, he reckons that by 2020 demand will total well over 100 million barrels per day, and OPEC will be unable to fill the supply gap. Unless the United States and other consuming countries have taken steps to reduce consumption, the supply-demand imbalance will throw the world into economic chaos -- a fever dream in which every whisper from Tehran or Riyadh will send the markets into panic."
Crude Courage
Washington Post, 29 June 2005

Who Are PFC Energy? - Click Here

Energy Update Analysis

What Is Needed Most Urgently Is Not A Counter-Terrorism Policy;
But An Alternative Energy Policy

In time July 2005 may prove to have been something of a watershed moment in the 'Peak Oil' debate. Last month saw the launch of oil giant Chevron's high profile media campaign inviting a wide-ranging public discussion on what many now anticipate could be a looming international energy crisis of unprecedented proportions.

Chevron doesn't use the term 'peak oil' in its campaign vocabulary, but the company's web home page for the discussion it is inviting has the strap line question: "How can we make oil and gas supplies last longer as the search for other fuels continues?". Clearly America's second largest oil company thinks that on current trend projections we are heading for oil and gas supply deficits.

But if the term 'peak oil' isn't part of Chevron's official language just yet, then the concept of 'peak oil' may still lie behind some of its most important commercial behaviour.

According to one commentator writing in the San Francisco Chronicle 8 April "There's been a lot of ink spilled this week about the risk ChevronTexaco's chief exec, David O'Reilly, has taken in paying about $16.4 billion for rival Unocal and its oil resources.... Well, I'm prepared to say this much: O'Reilly isn't stupid. He knows more than most people about world oil markets. So if the head of San Ramon's ChevronTexaco is prepared to gamble more than 16 billion bucks on oil prices staying at stratospheric levels, I'm ready to give him the benefit of the doubt. And reading between the lines, that means only one thing. Peak oil. We're basically there. Peak oil is a controversial notion that's been floating around the oil industry for decades. It concerns the inevitable moment when world oil production hits its peak and, from that point on, reserves are on an ever-dwindling downward spiral. Peak oil means prices will inexorably push higher and higher in the face of surging demand. This in turn will have a catastrophic impact on oil-addicted economies around the planet and, according to some prognosticators, could lead to wars over remaining supplies. Amos Nur, a professor of geophysics at Stanford University, told me that if we're not at peak oil right now, 'we're in the neighborhood.' ChevronTexaco and the other oil majors know this as well, he said, and this is why they're scrambling to secure as much global reserves as they can. 'There's no question in my mind that they are aware of this and that they are right,' Nur said. 'Oil prices are not coming back down.'"

The reference to war is especially poignant.

Discussion about 'peak oil' has been raging especially fiercely on the internet for several years, particularly so since 9/11 after which many became suspicious of the 'over enthusiastic' foreign policy response to those attacks by the United States. Iraq, after all, had nothing to do with 9/11 or al Qaeda.

But the official 9/11 Commission report confirmed (p.334/5) that "On the afternoon of 9/11, according to contemporaneous notes, Secretary Rumsfeld instructed General Myers to obtain quickly as much information as possible. The notes indicate that he also told Myers that he was not simply interested in striking empty training sites. He thought the U.S. response should consider a wide range of options and possibilities. The secretary said his instinct was to hit Saddam Hussein at the same time..."

As former Foreign Secretary Robin Cook politely put it in his resignation speech from the British government on the eve of the Anglo-American led invasion of Iraq in 2003: "I believe that the prevailing mood of the British people is sound.... they suspect that they are being pushed too quickly into conflict by a US Administration with an agenda of its own."

Cook didn't say what that agenda might have been, but the numerous placards with the words 'No Blood For Oil' which appeared during the giant public protests in the run up to the war provide a reasonable clue as to what he was most likely referring to.

At the end of last year former Director of the CIA James Woolsey was a little more explicit than Cook when he told a meeting of The American Council On Renewable Energy "I fear we're going to be at war for decades, not years ..... one major component of that war is oil."

Woolsey's observations are particularly germane given that he and a republican Senator had previously co-authored a paper drawing attention to the imminence of 'peak oil'. Written for the leading US foreign policy think-tank, the Council On Foreign Relations, the paper was published at the beginning of 1999 in the organisation's house journal 'Foreign Affairs'. The timing of Woosley's paper is also interesting given that we have since learned from primary witnesses interviewed by the BBC that both the war in Afghanistan (2001) and the war in Iraq (2003) were planned by the Bush administration before 9/11.

The Bush Administration's first major policy initiative, launched almost immediately after the inauguration of the President in January 2001, was to set up an Energy Task Force led by Vice President, and former Defense Secretary, Dick Cheney.

Following on from Woolsey's peak oil paper at the beginning of 1999 Cheney had already made some interesting comments of his own on the global oil depletion situation later that same year.

Speaking in his capacity as chief executive of Halliburton, the world's largest oil-and-gas-services company, the soon to be US Vice President told an autumn lunch meeting at the London Institute of Petroleum: "For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously in control of about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow."

According to the New Yorker 9 February 2004 "In Ron Suskind’s recent book 'The Price of Loyalty,' former [US] Treasury Secretary Paul O’Neill charges that Cheney agitated for U.S. intervention [in Iraq] well before the terrorist attacks of September 11, 2001. Additional evidence that Cheney played an early planning role is contained in a previously undisclosed National Security Council document, dated February 3, 2001. The top-secret document, written by a high-level N.S.C. official, concerned Cheney’s newly formed Energy Task Force. It directed the N.S.C. staff to coöperate fully with the Energy Task Force as it considered the 'melding' of two seemingly unrelated areas of policy: 'the review of operational policies towards rogue states,' such as Iraq, and 'actions regarding the capture of new and existing oil and gas fields.'”

Since the start of the Iraq war, for which Cheney is widely regarded as the primary schemer, the growing challenge of the narrowing gap between global oil supply and demand has become increasingly apparent, even though it has remained largely a taboo subject in governmental circles - at least in so far as any public utterances are concerned.

In Britain it would appear that the words 'peak oil' have yet to officially emerge from the lips of any Downing St or departmental spokesman. This is despite the fact that even by December 2003 fifty five Members of Parliament had already signed an Early Day Motion issued on this very subject, and despite the fact that there is no question that this 'peaking' phenomenon has already arrived as far as Britain's own oil and gas resources in the North Sea are concerned.

By July 2005, however, Chevron had become the first major international oil company to formally breaks ranks from this 'conspiracy of silence' by calling for the problem of global oil depletion and related energy issues to be openly considered and addressed by the whole of society.

ExxonMobil had also tacitly acknowledged the problem back in 2003, but only in a publication circulated to its shareholders. At the time the President of ExxonMobil Exploration described the situation as follows:"Our industry can certainly be proud of its past achievements. Yet the challenges we will face in the coming years will be every bit as great as those encountered in the past, due in part to ever-increasing global energy use. For example, we estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That's equal to about 80 percent of today's production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today."

Reading between the lines, this statement effectively translated as "Sorry folks, this is not doable".

Today Chevron is seeking to draw the problem to the attention of a wider public. Doubtless also published elsewhere, the Chevron 'energy debate' adverts have appeared in The New York Times, The Sacramento Bee, The San Francisco Chronicle, and the Wall St Journal; and in The Economist and TIME magazine for a wider international audience. Whilst many would regard the problem as far greater than Chevron is currently presenting, this call for open public discussion represents something of a milestone.

******

Meanwhile indications of a tightening supply-demand situation continue to surface far and wide on a weekly, or even daily, basis. Some of the signs which have surfaced since the last Energy Update in July include the following:

1. By early August the oil price had reached a nominal record of over $60 per barrel (as predicted earlier in the year by Barclays Capital). Towards the end of the month even the $70 mark was breached for the first time as Hurricane Katrina hit the Gulf of Mexico where a quarter of US domestic output, or 2% of world production, is pumped. David Thurtell, strategist at the Commonwealth Bank of Australia told Reuters 29 August: "We can expect two months of lost production, and coming in the peak-demand period this is the worst possible news. The only way we can avoid yet higher prices is if President Bush releases supply from the Strategic Petroleum Reserve."
2. Thailand's unions threatened strike action in July unless their government increased the minimum wage to counter the effect of soaring fuel prices on the cost of food and transport.
3. Dozens were killed in fuel riots in Yemen in July as the government announced it could no longer afford to subsidise the cost of oil.
4. British consumers began demanding reductions in fuel taxation as petrol reached over 90pence per litre in early August.
5. Despite some prior expectations the G8 summit in Edinburgh effectively glossed over the emerging energy crisis in its main communiqué, which limited the focus on energy issues largely to climate change matters. However, the summit tentatively acknowledged the broader economic dimension in a separate communiqué entitled 'Global Economy And Oil', albeit that this was done in evasive fashion by largely avoiding the depletion issue and focusing instead on rising demand for oil and lack of investment. Both communiqués did, however, gingerly refer to concerns about either 'energy security' or 'supply uncertainties'.
6. Whilst also highlighting the problem of lack of investment merchant bank Morgan Stanley warned that on-going oil discoveries are unlikely to be sufficient to compensate for rising demand and depletion of existing stocks. Its Commodities Outlook stated that "Great hopes of new oil finds are not coming in".
7. Serious talk of 'peak oil' even explicitly reached the Wall St Journal with an online discussion between two economists who expressed a considerable degree of agreement on the need to call more public attention to the issue.
8. In a similar approach to Chevron, PFC Energy urged the Bush administration to begin a sustained national debate on America's energy future involving all stakeholders. PFC is a leading global oil and gas consultancy led by J.Robinson West. West was Deputy Assistant Secretary of Defense for International Economic Affairs under Gerald Ford, had responsibility for US off-shore oil policy during the Reagan Administration, and currently sits on the US Energy Secretary's Advisory Board. PFC expect global oil production (including contributions from non-conventional supplies) to peak at around 100m barrels per day sometime between 2015 and 2020. The Washington Post reported that PFC "has gathered what may be the best statistics available on the seriousness of the supply-demand crunch...." and that "Unless the United States and other consuming countries have taken steps to reduce consumption, the supply-demand imbalance will throw the world into economic chaos".
9. For the first time Saudi Arabia officially admitted that it won't be able to deliver what is required of it to meet projected rising global demand for oil beyond the medium term (10-15 yrs).

The Saudi admission was particularly significant and followed hard on the heels of the release of a new book by oil industry consultant Matt Simmons on the kingdom's doubtful oil supply situation and which was featured by 'Energy Update' in July.

A report entitled "Opec can't meet west's oil demand, say Saudis" published by the Financial Times 6 July confirmed that "...the Organization of the Petroleum Exporting Countries will be unable to meet projected western demand in 10 to 15 years, Saudi officials have warned. At today's prices, the world will need the cartel to boost its production from 30m to 50m barrels a day to 50m by 2020 to meet rapidly rising demand, according to the International Energy Agency, the energy watchdog for  consuming countries. But senior Saudi energy officials have privately warned U.S. and European counterparts that OPEC would have an extremely difficult time meeting that demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide.... Saudi Arabia has the world's largest oil reserves and will need to bear up to half OPEC's production growth in the next 10 to 20 years, with the rest mainly coming from Kuwait and the United Arab Emirates. Saudi Arabia pumps 9.5m b/d and has assured consumer countries that it could  reach 12.5m b/d in 2009 and probably 15m b/d eventually. But a senior western energy official said: 'They said it would be extremely difficult to move above that figure.'"

The 15 million barrels per day figure is controversial. This may simply be a headline figure for public consumption in an attempt to calm the horses as the fire in stable starts to take hold. The Saudis are highly secretive about their oil field information and some analysts have suggested that, like other OPEC member countries, they have overstated the country's reserves in order to secure the maximum allocation of production quotas.

Despite the lack of transparency, however, there is one extremely well placed former Saudi insider who has taken it upon himself to start spilling some of the beans concerning the production outlook for the kingdom. Until last year Sadad al-Husseini had been a major figure in Saudi Arabia's state oil company 'Aramco'. Now that he is no longer with the company he is feeling free to speak out. He recently gave a interview to a New York Times columnist published 21 August.

Peter Maass reported on the interview as follows: "Sadad al-Husseini.... retired last year after serving as Aramco's top executive for exploration and production..... It can be argued that in a nation devoted to oil, Husseini knows more about it than anyone else ....Until his retirement last year -- said to have been caused by a top-level dispute, the nature of which is the source of many rumors -- Husseini was a member of the company's board and its management committee. He is one of the most respected and accomplished oilmen in the world.... The message he delivered was clear: the world is heading for an oil shortage. His warning is quite different from the calming speeches that .... other Saudis, along with senior American officials, deliver on an almost daily basis. Husseini explained that the need to produce more oil is coming from two directions. Most obviously, demand is rising; in recent years, global demand has increased by two million barrels a day. (Current daily consumption, remember, is about 84 million barrels a day.) Less obviously, oil producers deplete their reserves every time they pump out a barrel of oil. This means that merely to maintain their reserve base, they have to replace the oil they extract from declining fields. It's the geological equivalent of running to stay in place. Husseini acknowledged that new fields are coming online, like offshore West Africa and the Caspian basin, but he said that their output isn't big enough to offset this growing need. 'You look at the globe and ask, 'Where are the big increments?' and there's hardly anything but Saudi Arabia,' he said. ..... In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day -- at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. 'That's like a whole new Saudi Arabia every couple of years,' Husseini said. 'It can't be done indefinitely. It's not sustainable.' Husseini speaks patiently, like a teacher  who hopes someone is listening. He is in the enviable position of knowing what he talks about while having the freedom to speak openly about it. He did not disclose precise information about Saudi reserves or production -- which remain the equivalent of state secrets -- but he felt free to speak in generalities that were forthright, even when they conflicted with the reassuring statements of current Aramco officials. When I asked why he was willing to be so frank, he said it was because he sees a shortage ahead and wants to do what he can to avert it. ..... Experts like Husseini are very concerned by the prospect of trying to produce 15 million barrels a day. Even if production can be ramped up that high, geology may not be forgiving. Fields that are overproduced can drop off, in terms of output, quite sharply and suddenly, leaving behind large amounts of oil that cannot be coaxed out with existing technology. This is called trapped oil, because the rocks or sediment around it prevent it from escaping to the surface. Unless new technologies are developed, that oil will never be extracted. In other words, the haste to recover oil can lead to less oil being recovered......"

It is not unreasonable to speculate that Husseini may have parted company with Aramco over an internal row as to whether it would be wise to try and push for the 15 million barrels per day figure. He is not alone in considering that this is inviting production to collapse prematurely once that figure is reached. According to Nawaf Obaid, a Saudi oil and security analyst also interviewed by Maass and said to be exceptionally well connected to key Saudi leaders, "You could go to 15, but that's when the questions of depletion rate, reservoir management and damaging the fields come into play. There is an understanding across the board within the kingdom, in the highest spheres, that if you're going to 15, you'll hit 15, but there will be considerable risks . . . of a steep decline curve that Aramco will not be able to do anything about.''

So it seems Saudi Arabia might be able to go for 15 million barrels a day, but if it does this level of production may be short-lived with ultimately less oil being recovered. Unless there is a major new oilfield discovery in Saudi Arabia, or a major breakthrough in technology which allows much improved recovery rates, around 12 million barrels (current production is around 10 million) is therefore probably the best that can be hoped for if optimum long term field management is to prevail.

That would leave the world 10 million barrels per day short of the 126 million barrels of production capacity forecast for 2025 by the US Department of Energy in its 2004 Energy Outlook report, and 5 million short of projected demand (121 million barrels). The New York Times says the DOE has since been forced to row back from this forecast in order to try and narrow the supply gap which critics otherwise consider impossible to bridge. However, the DOE 2004 forecast was based on the assumption of only 1.9% annual growth in demand. Last year global demand growth was 3.4%.

******

Globally there is also much talk of problems associated with lack of investment in refinery capacity. But production statements such as those coming from the Saudis in July indicate that the problems run deeper.

The London Times reported 11 August that "Efforts by the Opec oil cartel to curb price gains by increasing production have had little effect in recent days. Rafael Ramirez, the Venezuelan Oil Minister, said that the cartel had probably done all that it could to boost supplies and predicted that prices were likely to stick at present highs. 'We have said that this is a structural issue, not a short-term factor... ' he said." It would seem that Ramirez was not talking about processing capacity, but rather production capacity.

To quote the Algerian oil minister speaking earlier in the year: “Opec does not have the production capacity to increase its quotas” (OPEC made an official statement 29 August indicating that it has been producing 1.5 million barrels per day more than needed during the third quarter of 2005 according to the Washington Post. However, this is likely to be unwanted 'sour crude' which is less suitable for refining transport fuels than low sulphur 'sweet crude'. A Reuters report of 11 August states that "The IEA reckons the kingdom holds 1 to 1.5 million bpd of mostly medium to heavy sour crude oil in reserve. But world refiners struggling to churn out light transport fuels are shunning those heavier barrels.")

In this context any discussion about the adequacy of ongoing oil supplies which focuses primarily on the provision of refinery capacity risks creating a dangerous diversion from potentially more fundamental problems.

Basic geological constraints to production are said to lie just around the corner. Moreover, such structural limitations are themselves potentially a strong disincentive to invest. Why invest in refinery capacity if you think that falling production may be approaching? With Chevron making efforts to bring the oil debate out into the open the implication may be that at least part of the industry already recognises this possibility.

Annual global consumption of oil has exceeded discovery for more than two decades now. So we are already not finding enough oil to cover future demand. 

The G8 'solution' as presented at the Gleneagles summit appears to be a mix of energy conservation, efficiency, and technology - plus greater investment in exploration, production and infrastructure. An implicit assumption here is that if only we spend enough money on exploration we will find sufficient oil. Unfortunately that's not what many geologists are saying, including former and current geologists at BP.

Even august publications like the Financial Times are beginning to accept questioning as to whether there might be a supply, as well as a demand, problem looming. The FT published an article 16 August under the title "The world is heading for a shock over the high price of oil". Written by George Magnus, senior economic adviser (and formerly Chief Economist) at UBS Investment Bank, it did not hesitate to use the term 'peak oil' and to describe its implications. Magnus states that "Some think the peak in global oil production could be reached some time between now and 2008, others that it will come between 2010 and 2020, but most agree it is within the next decade or so."

At present there appears to be only one major oil consultancy which is heartily insisting that we won't have a near to mid-term oil supply problem (if there are others then they are keeping a remarkably low profile). That consultancy is Cambridge Energy Research Associates of Massachusetts lead by Daniel Yergin, author of the Pulitzer Prize winning book: "The Prize: the Epic Quest for Oil, Money and Power".

However, look a little closer at where Cambridge say future supplies will increasingly be coming from and it is clear that even they recognise that conventional oil is no longer able to do the job: "The share of 'unconventional oil' -- Canadian oil sands, ultra-deep-water developments, 'natural gas liquids' -- will rise from 10 percent of total capacity in 1990 to 30 percent by 2010. The 'unconventional' will cease being frontier and will instead become 'conventional.' " (Washington Post, 31 July 2005).

Whether such alternative supplies (which also include the Orinoco bitumen heavy oils in Venezuela and the oil shales of the US) can deliver on time and in sufficient quantity is open to significant doubt. Just as importantly some of these sources would potentially involve major adverse implications for global warming if they were to be brought on stream. There needs to be much more attention paid to this.

At the moment, however, these resources are getting the wrong kind of attention. Last month US Treasury Secretary John Snow paid a visit to Canada's oil sands belt in Alberta. Next month Vice President Dick Cheney (presumably struggling to develop an energy 'plan B' after his strategic 'miscalculation' over Iraq and the Persian Gulf) is taking a trip there too - about as ominous a sign as it's possible to get.

Assuming that these supplies really can be delivered on time and in sufficient quantities (a very large assumption) then a new nightmare scenario is likely to unfold unless there are substantial breakthroughs in technology. As currently executed the extraction and processing of much of these 'unconventional' oil resources require large energy inputs resulting in heavy CO2 emissions even before the product is burnt by the end user. As presently constituted this represents the perfect recipe for creating the even bigger environmental monster of 'Global Warming Turbo'.

And it is not just a case of considering heavy oil deposits in north and south America. India has also begun talking about potential exploitation of oil shale resources at home. In such circumstances climate change mitigation initiatives like Kyoto are likely to become almost totally futile.

Describing the potential for the exploitation of tar sands Charles Mattenet, strategy director at Total, told The Business, 1 August: "You need technology to do it and it's quite expensive, you need adequate manpower and also the whole production system provides a lot of CO2. Until you can solve that, I don't think it's possible." As a developing country India may be underestimating the nature of such challenges, but the one thing it does have in abundance is 'manpower'.

******

The pressure to find alternatives to conventional oil are intense and multifaceted.

Chevron's new campaign also includes billboard and television advertising. One of its billboard posters simply reads "Over half the world's oil lives in five countries. So where do you live?". Those countries are Saudi Arabia, Iran, Iraq, United Arab Emirates, and Kuwait.

From whichever perspective you look at the situation, even without concerns over 'peak oil', those who think business as usual can carry on need only view the al Qaeda video broadcast on al Jazeera Television following the London bombings in July. Said to be Bin Laden's right hand man, Ayman al Zawahiri could not have been more explicit: "To the people of the crusader coalition ... our blessed Sheikh Osama has offered you a truce so that you leave Muslim land. As he said, you will not dream of security until we live it as a reality in Palestine and until all your infidel armies leave Prophet Mohammad's lands. Our message to you is clear, strong and final: There will be no salvation until you withdraw from our land, stop stealing our oil and resources and end support for infidel, corrupt (Arab) rulers." 

Whether we are faced with peak oil soon or long into the future, one unavoidable aspect of the current reality not spelt out in the Chevron poster is that the overwhelming majority of the world's conventional oil export capacity lies in those lands, not simply half the total reserves. And it is within those lands that the invasion of Iraq has become the final insult for millions of Muslims.

As far as many of them are concerned when Iraq was run by Saddam Husssein, the country was at least governed by a home grown Arab ruler and not one obviously 'parachuted' in from outside by foreign powers. That was the approach which the Pentagon attempted almost literally when airlifting into the south of the country Iraqi exile Ahmed Chalabi as part of its follow-on plan for political 'puppetry' in the country immediately after the invasion in 2003 (whilst his current relationship with the United States remains ambiguous after an apparent falling out, Chalabi currently holds the position of Iraqi Deputy Prime Minister and has responsibilities for setting national oil policy as chairman of the energy council).

Not that any of this is exactly new. Directing the internal affairs of Middle Eastern states is what Britain and America have been persistently trying to do ever since the invention of the internal combustion engine and the fall of the Ottoman Empire (see inset).

According to a BBC report 20 July: "Decades of British and American intervention in the oil-rich Middle East motivated the London bombers, Ken Livingstone has suggested. The London mayor told BBC News he had no sympathy with the bombers and he opposed all violence. But he argued that the attacks would not have happened had Western powers left Arab nations free to decide their own affairs after World War I. Instead, they had often supported unsavoury governments in the region. Mr Livingstone was asked on BBC Radio 4's Today programme what he thought had motivated the bombers. He replied: 'I think you've just had 80 years of western intervention into predominantly Arab lands because of the western need for oil. We've propped up unsavoury governments, we've overthrown ones we didn't consider sympathetic. And I think the particular problem we have at the moment is that in the 1980s... the Americans recruited and trained Osama Bin Laden, taught him how to kill, to make bombs, and set him off to kill the Russians and drive them out of Afghanistan. They didn't give any thought to the fact that once he'd done that he might turn on his creators.' Mr Livingstone said Western governments had been so terrified of losing their fuel supplies that they had kept intervening in the Middle East. He argued: 'If at the end of the First World War we had done what we promised the Arabs, which was to let them be free and have their own governments, and kept out of Arab affairs, and just bought their oil, rather than feeling we had to control the flow of oil, I suspect this wouldn't have arisen."

Anyone who doubts Mr Livingstone's conclusions should inspect the dirty linen hanging out to dry on the New York Times internet document archive, or that of the US National Security Archive at George Washington University. There you will find details of the 1953 MI6-CIA organised toppling of Iran's first democratically elected government, one which London and Washington proceeded to replace with the dictatorship of the Shah.

The repression that followed for more than two decades eventually precipitated the 1979 Islamic revolution of Ayatollah Khomeini, the ensuing Iran-Iraq war (during which time the US provided support to Saddam Hussein in the hope that he would keep the Mullahs in Tehran from overrunning the rest of the Gulf's oil resources, with America and Britain amongst others both providing supplies for Iraqi WMD programmes) and ultimately the mess we are in now.

And the reason for this Anglo-Saxon run coup d'etat of 1953 code named 'Operation Ajax'? Iran had decided to nationalise its oil sector which until then was largely controlled by the Anglo-Iranian oil company, otherwise now know as British Petroleum. Yes, that's why we crushed democracy in Iran just as it was sprouting over half a century ago.

What kind of society would there have been in Iran today if we had left it alone in 1953? And what kind of region in the Middle East? No one can be sure, but there is a reasonable chance that both might have developed into something a great deal friendlier.

Currently the occupation of Iraq would appear to be the pre-eminent inflammatory factor in the Islamic world if the findings from a recent Pew survey of over 17,000 Muslims around the globe is anything to go by. This is despite the fact that the survey also found that most Muslims share western concerns about Islamic extremism.

According to the Washington Post 15 July "Predominantly Muslim populations in a sampling of six North African, Middle Eastern and Asian countries share to a 'considerable degree' Western concerns about Islamic extremism, according to the poll by the Pew Global Attitudes Project, conducted by the Pew Research Center, a nonpartisan and nonprofit organization. 'Most Muslim publics are expressing less support for terrorism than in the past. Confidence in Osama bin Laden has declined markedly in some countries, and fewer believe suicide bombings that target civilians are justified in the defense of Islam,' the poll concluded".

Significantly, however, the Post reports that "The one exception is attitudes toward suicide bombings of U.S and Western targets in Iraq, a subject on which Muslims were divided".

Opinion polls show that two thirds of the British public believe the London suicide bombings were linked to the invasion of Iraq, and this figure rises to 8 out of 10 in the case of British Muslims.

Certainly, there is little doubt that British and American foreign policy is used as a handy recruiting tool by extremists. According to the London Times 20 July "An Islamic scholar who loathes Western values is advocating 'physical jihad' in the Yorkshire home town of one of the London suicide bombers. While Tony Blair and leaders of Britain’s Muslims were condemning extremism at their Downing Street summit, Mufti Zubair Dudha explained why British foreign policy led directly to the 7/7 atrocities." (Oddly, however, the Times doesn't trouble to go on and report what Dudha's explanation was).

A dossier of British Whitehall documents leaked in July (a joint Home Office/Foreign Office report entitled “Young Muslims and Extremism”) reported that events in Iraq were fuelling 'terrorist-related activity' in Britain. According to the Sunday Times 10 July "....The Iraq war is identified by the dossier as a key cause of young Britons turning to terrorism. The analysis says: 'It seems that a particularly strong cause of disillusionment among Muslims, including young Muslims, is a perceived ‘double standard’ in the foreign policy of western governments, in particular Britain and the US.  'The perception is that passive ‘oppression’, as demonstrated in British foreign policy, eg non-action on Kashmir and Chechnya, has given way to ‘active oppression’. The war on terror, and in Iraq and Afghanistan, are all seen by a section of British Muslims as having been acts against Islam.”

By the 28 August the Observer had produced another top-level leak, summarised as follows by the BBC: "The [British] government was warned over a year ago by its most senior Foreign Office official that the Iraq war was fuelling UK Muslim extremism, it has emerged. Foreign Office Permanent Secretary Michael Jay issued the warning in a May 2004 letter leaked to the Observer. The letter to Cabinet Secretary Sir Andrew Turnbull said British foreign policy was a 'key driver' behind recruitment by extremist Muslim groups. The Foreign Office said it did not comment on leaked documents. The letter said a 'recurring theme' among the underlying causes of extremism in the Muslim community was 'the issue of British foreign policy, especially in the context of the middle east peace process and Iraq'. It added: 'British foreign policy and the perception of its negative effect on Muslims globally plays a significant role in creating a feeling of anger and impotence among especially the younger generation of British Muslims.'"

According to the Observer the letter specifically states "This seems to be a key driver behind recruitment by extremist organisations (e.g. recruitment drives by groups such as Hizb-ut-Tahrir and al Muhajiroon)." The newspaper also reports that "Attached to the letter is a strategy document, also obtained by The Observer, which reveals further concerns. It says Britain is now viewed as a 'crusader state', on a par with America as a potential target. 'Muslim resentment towards the West is worse than ever,' the document, 'Building Bridges with Mainstream Islam', says. 'This was previously focused on the US, but the war in Iraq has meant the UK is now seen in similar terms - both are now seen by many Muslims as 'Crusader states'..."

The Observer also reveals that "all mention of the Iraq connection to extremism was removed from 'core scripts' - briefing papers given to ministers to defend the government's position on Iraq and terror.... The Prime Minister has consistently said that the bombers were motivated not by a sense of injustice but by a 'perverted and poisonous misinterpretation of Islam'... But Jay's letter shows that the Foreign Office was convinced that foreign policy played a key role in radicalising young Muslims."

Such public opinion findings and leaked official assessments would strongly suggest that those in the Muslim world who hate us do so foremost not because of what we are (although the most extreme doubtless hate us for that too), but because of what we do. In the process we have played into the hands of the most hostile among them and we are now paying a high price for that.

As things stand at present, there is not much prospect of improvement. According to The Business 14 August "Policymakers in Washington, who used to assume there was a 50:50 chance that the [western friendly oil exporting] Saudi regime would survive the next 10 years, have now cut this to five years."

Then what will we do?

How will we respond if one day we are faced with an Islamic republic in Saudi Arabia that decides it would prefer to supply oil to China (and India), just as President Hugo Chavez is already threatening to do in response to America's alleged ongoing interference in Venezuela's internal affairs? (CNN and other news outlets reported 23 August that the Reverend Pat Robertson, founder of the Christian Coalition of America and a former candidate for the Republican presidential nomination, has since called for the United States to assassinate Chavez. Robertson said "It's a whole lot cheaper than starting a war ... It's a whole lot easier to have some of the covert operatives do the job and then get it over with .... this is a dangerous enemy to our south, controlling a huge pool of oil, that could hurt us very badly").

Who would have the stomach for a serious confrontation not only with Saudi Arabia and its neighbours, but also with a nuclear armed China?

According to United Press International 16 September 2004 "Saudi Arabia, long the largest supplier of oil to the United States, has cut U.S. sales dramatically and may soon no longer be among the top five largest U.S. suppliers. The Saudi kingdom's new largest customer is China... Saudi oil sales to the United States peaked in 2002 at 1.7 million barrels per day but had fallen to 1.1 million barrels per day in May.... Saudi Arabia's turn away from the U.S. market began at the end of 2002 as the United States was preparing to go to war in Iraq."

This may not matter too much right now with some alternative supplies available, but things may be rather different once global oil demand begins to exceed supply. At that point, as Matt Simmons has pointed out, things may well be transformed into a potentially violent game of musical chairs.

******

Put simply the industrialised world's heavy reliance on Middle Eastern oil is a fool's game which ultimately we cannot win.

That at least was the view of James Woolsey, former director of CIA, when producing his energy paper for the Council On Foreign Relations back in 1999. Woolsey observed that "Optimists about world oil reserves, such as the Department of Energy, are getting increasingly lonely. The International Energy Agency now says that world production outside the Middle Eastern Organization of Petroleum Exporting Countries (opec) will peak in 1999 and world production overall will peak between 2010 and 2020. This projection is supported by influential recent articles in Science and Scientific American. Some knowledgeable academic and industry voices put the date that world production will peak even sooner—within the next five or six years. The optimists who project large reserve quantities of over one trillion barrels tend to base their numbers on one of three things: inclusion of heavy oil and tar sands, the exploitation of which will entail huge economic and environmental costs; puffery by opec nations lobbying for higher production quotas within the cartel; or assumptions about new drilling technologies that may accelerate production but are unlikely to expand reserves. Once production peaks, even though exhaustion of world reserves will still be many years away, prices will begin to rise sharply. This trend will be exacerbated by increased demand in the developing world..... The recent report by the President's Committee of Advisers on Science and Technology... concluded  'A plausible argument can be made that the security of the United States is at least as likely to be imperiled in the first half of the next century by the consequences of inadequacies in the energy options available to the world as by inadequacies in the capabilities of U.S. weapons systems.  It is striking that the Federal government spends about 20 times more R&D money on the latter problem than on the former.'... Research is essential to produce the innovations and technical improvements that will lower the production costs of ethanol and other renewable fuels and let them compete directly with gasoline. At present, the United States is not funding a vigorous program in renewable technologies.... The United States cannot afford to wait for the next energy crisis to marshal its intellectual and industrial resources....Our growing dependence on increasingly scarce Middle Eastern oil is a fool's game—there is no way for the rest of the world to win. Our losses may come suddenly through war, steadily through price increases, agonizingly through developing-nation poverty, relentlessly through climate change—or through all of the above."

The global spread of terrorism since the 2003 invasion of Iraq highlighted not only in media reports, but also by the US State Department's own embarrassing statistics whose publication it has tried to suppress (a more than tripling of terrorist incidents in 2004 after excluding attacks on American troops in Iraq), has further accentuated this sense of vulnerability. The July 2005 London suicide bombings have done so particularly acutely, even though only 10% of significant international terrorist incidents during 2004 involved attacks on US interests (why this should be we will see later, but the reason offers little real comfort to those anxious Americans who wonder if their government is leading them down the right path).

Professor Robert Pape of the University of Chicago has published a book on suicide terrorism, entitled "Dying to Win". Pape has found that the most common American perceptions about who the terrorists are and what motivates them are misplaced. In his office is the world's largest database of information about suicide terrorists. His data analysis shows that suicide bombings are not directly related to religious fanaticism but almost universally to the foreign occupation of land.

There are, of course, plenty of places subject to foreign occupation where religious people then take up the cause of suicide bombings as part of a territorial struggle, but they do not have a monopoly on this. It was, after all, the non-Muslim and secular Tamil Tigers of Sri Lanka, infamous for their suicide assassination of Rajiv Ghandi in May 1991, who perfected the suicide belt.

Besides religious groups, the use of suicide bombing by non-religious fighters in Lebanon was also highlighted by former CIA Middle East agent Robert Baer during his two part documentary series on the 'The Cult Of The Suicide Bomber' for Channel 4 TV earlier this month. Again their motivation was in response to foreign occupation, in this instance by Israel.

An interview with Baer by the London Times 2 August also punctures much of the myth as to why many Muslims 'hate us': "In a school run by Hezbollah, he [Baer] asked a class dominated by the daughters of [suicide bomb] 'martyrs' if they watched US television. 'Everybody raised their hand. And what did they watch? Oprah. I said, ‘How can you watch this crap?’ And they said, ‘No, she’s great. We love Oprah.’ So, it’s nothing to do with a hate for the West, or a cultural divide. It may have become that with bin Laden and the Sunnis, but for the Shia, it wasn’t.' He points to Beirut, a surprisingly Western city. 'It’s much more decadent than London. You can go into places in Lebanon where they still serve drugs across the bar. You’ve got all-night dancing, all-night partying. You’ve got very Western art. And it doesn’t seem to bother Hezbollah. So, it wasn’t our values. It wasn’t Western values. It’s Western presence. They want us to get out.'"

As it happens the Independent reported 25 August that "[London] Suicide bomber Hasib Hussain ate a last meal at McDonald's before blowing up the No. 30 bus on 7 July, killing 13 people.... The final minutes of the 18-year-old from Holbeck in Leeds are believed to have been captured by a CCTV camera as he entered the fast food outlet after coming out of King's Cross station."

If this account is true, then it was a surprising final preparation for an alleged religious extremist's imminent meeting with Allah. Hussain doesn't seem to have been so contemptuous of our way of life as to have been unwilling to patronise one of its most globally despised symbols just minutes before what is now widely regarded as a prior-appointment with his own death (at one point the police were querying whether those involved had been duped into the suicide bombings without realising). There are, after all, even plenty of westerners who refuse to enter such establishments on principle because of the valueless way of life many consider they represent.

No. Something else must have been bugging him.

Meanwhile Robert Baer, who was involved in orchestrating a domestic coup against Saddam Hussein in 1995 which was aborted by the Clinton administration at the last moment, doesn't have much doubt about what the core stumbling block is when it comes to trying to extract ourselves from such problems. According to the London Times: "There is, however, a three-letter reason why the US will not impose a peace plan on Israel and leave the region. Baer, the author of Sleeping With The Devil: How Washington Sold Our Soul for Saudi Crude, well knows what it is. 'I don’t think any American politician, however at fault we are in Iraq or anywhere else, can say, ‘All right, let the crazies have the oil fields’, because oil at $200 a barrel would put us into a depression.' So because the American economy is at stake, we can’t get out even to save our skins? 'That, I believe, is your classic paradox.' ”

'It's the economy stupid'. As usual from our side of the fence, things boil down to money - and no mineral resource underpins our financial foundations more than oil.

Until the 2003 invasion of Iraq Camp Bondsteel in Kosovo was the largest 'from scratch' American base that had been built since Vietnam. Anyone who doubts the relationship between the American war machine and the US economy should consider the words of Defense Secretary Donald Rumsfeld, as delivered in a speech to US troops at the camp on 5 June 2001, just three months before 9/11: “How much should we spend on the armed services? ... My view is we don’t spend on you, we invest in you. The men and women in the armed services are not a drain on our economic strength. Indeed you safeguard it. You’re not a burden on our economy, you are the critical foundation for growth.” (Department of Defense press release).

So what does a supposedly humanitarian military mission in the Balkans have to do with the economy? Troops in the Persian Gulf, yes - but the Balkans, there's no oil there is there?

Not everyone may be completely surprised to hear, however, that Camp Bondsteel is strategically located on the edge of one of the new oil transit corridors which came into play following the dissolution of the Soviet Union at the end of 1991. That was the key event which opened up the Caspian Sea region to exploration by American, British and other western oil and gas companies. New pipeline transit corridors in the Balkans are being built to bring Caspian oil into the Mediterranean ready for open-water international shipping, as well as land-line distribution in Europe, after being transported across the Black Sea.

In addition to other routes, both new and existing through Turkey and the Ukraine, the land based pipelines being constructed through former Yugoslavia from the Romanian and Bulgarian Black Sea coasts are crucial. This is because it is no longer possible to increase tanker traffic through the narrow Bossphorous straits at Istanbul. The toppling of Slobodan Milosevic in Serbia was a key facilitator of this oil mission, in part because Croatia refused to agree to the construction of one of the pipelines along the most economic route (which would have reached the Croatian coast only after passing through Serbia) until Milosevic was removed from power in Belgrade.

Just to the south of Camp Bondsteel across the Macedonian boarder lies the route of the '8th corridor' pipeline. As General Michael Jackson, commander of KFOR in Macedonia, told the Italian daily Sole 24 Ore 13 April 1999: "Today, the circumstances which we have created here have changed. Today, it is absolutely necessary to guarantee the stability of Macedonia and its entry into NATO. But we will certainly remain here a long time so that we can also guarantee the security of the energy corridors which traverse this country."

So Baer's observation in relation to military activity and the economy is not unique to the US presence in Iraq and the wider Middle East. The common theme here, however, is 'protecting' access to oil and its transit routes.

This dimension represents a huge government subsidy towards that particular form of energy. It costs many billions of dollars every year, and it is one which some analysts have estimated is equivalent to a whopping $42 for each barrel of oil imported into the United States. At current 'market' prices that would make the real cost of that oil already somewhere around $110 per barrel after taking into account relevant taxpayer contributions to the Pentagon.

At the same time Professor Pape's research, which takes on particular importance following the London suicide bombings, provides further support for some of Baer's other conclusions.

According to Pape "The central fact is that overwhelmingly suicide-terrorist attacks are not driven by religion as much as they are by a clear strategic objective: to compel modern democracies to withdraw military forces from the territory that the terrorists view as their homeland. From Lebanon to Sri Lanka to Chechnya to Kashmir to the West Bank, every major suicide-terrorist campaign-over 95 percent of all the incidents-has had as its central objective to compel a democratic state to withdraw.... Since suicide terrorism is mainly a response to foreign occupation and not Islamic fundamentalism, the use of heavy military force to transform Muslim societies over there, if you would, is only likely to increase the number of suicide terrorists coming at us. Since 1990, the United States has stationed tens of thousands of ground troops on the Arabian Peninsula, and that is the main mobilization appeal of Osama bin Laden and al-Qaeda.... Osama bin Laden's speeches and sermons run 40 and 50 pages long. They begin by calling tremendous attention to the presence of tens of thousands of American combat forces on the Arabian Peninsula....Now, of course, today we have 150,000 troops on the Arabian Peninsula...The evidence shows that the presence of American troops is clearly the pivotal factor driving suicide terrorism....I have the first complete set of data on every al-Qaeda suicide terrorist from 1995 to early 2004, and they are not from some of the largest Islamic fundamentalist countries in the world. Two thirds are from the countries where the United States has stationed heavy combat troops since 1990. Another point in this regard is Iraq itself. Before our invasion, Iraq never had a suicide-terrorist attack in its history. Never. Since our invasion, suicide terrorism has been escalating rapidly with 20 attacks in 2003, 48 in 2004, and over 50 in just the first five months of 2005. Every year that the United States has stationed 150,000 combat troops in Iraq, suicide terrorism has doubled.... I have collected demographic data from around the world on the 462 suicide terrorists since 1980 who completed the mission, actually killed themselves. This information tells us that most are walk-in volunteers. Very few are criminals. Few are actually longtime members of a terrorist group. For most suicide terrorists, their first experience with violence is their very own suicide-terrorist attack. There is no evidence there were any suicide-terrorist organizations lying in wait in Iraq before our invasion. What is happening is that the suicide terrorists have been produced by the invasion."

The Professor also provides an interesting insight into the current operating logic of some of those who oppose America's geopolitical reach into the Islamic world:"Al-Qaeda appears to have made a deliberate decision not to attack the United States in the short term. We know this not only from the pattern of their attacks but because we have an actual al-Qaeda planning document found by Norwegian intelligence. The document says that al-Qaeda should not try to attack the continent of the United States in the short term but instead should focus its energies on hitting America's allies in order to try to split the coalition. What the document then goes on to do is analyze whether they should hit Britain, Poland, or Spain. It concludes that they should hit Spain just before the March 2004 elections because, and I am quoting almost verbatim: Spain could not withstand two, maximum three, blows before withdrawing from the coalition, and then others would fall like dominoes. That is exactly what happened. Six months after the document was produced, al-Qaeda attacked Spain in Madrid. That caused Spain to withdraw from the coalition. Others have followed. So al-Qaeda certainly has demonstrated the capacity to attack and in fact they have done over 15 suicide-terrorist attacks since 2002, more than all the years before 9/11 combined. Al-Qaeda is not weaker now. Al-Qaeda is stronger."

But Pape produces a particularly interesting 'bottom line': "For us, victory means not sacrificing any of our vital interests while also not having Americans vulnerable to suicide-terrorist attacks. In the case of the Persian Gulf, that means we should pursue a strategy that secures our interest in oil but does not encourage the rise of a new generation of suicide terrorists."

In short Pape's analysis reveals a deteriorating situation which is directly related to our interest in Persian Gulf oil.

But do not forget Central Asia and North Africa. Because the awkward reality is broader - and it is this: the very economic life blood (oil) of one civilisation ('the west'), is an asset largely held by another civilisation (the Islamic world, which covers all three of these crucial regions). The former has been very successful at deeply alienating the latter just at the very time when a third major competing player (Asia, particularly China and India) is arriving over the horizon as a potential alternative customer for this basic natural resource.

******

So how did we get into this tangle?

Before he died Alistair Cooke, the BBC's 'letter from America' correspondent, gave this insight (24 June 2002) as to why Britain and America considered there was a need to put combat troops into Saudi Arabia after Saddam Hussein's invasion of Kuwait in 1990: "For just so long Kuwait, a small country at the head of the Persian Gulf, had been set free and independent from its long-time British protector. And during that time Kuwait had developed its oil fields and become immensely rich. Saddam Hussein claimed that Kuwait was part of Iraq. To have and to hold it would put him on the way to achieving something that the Soviets had yearned for right after the Second War and been denied by the intervention of the United Nations, which was to be sovereign of the Gulf - and so, as Churchill foresaw and warned about, soon to be able to conquer Europe without a war by possessing 60% of the oil Western Europe lived by and so be able to dictate to countries like Britain, France, Germany, that they should abandon their precious democratic ways and get themselves governments friendly to Iraq.....[Following Saddam's invasion of Kuwait] President Bush - the first that is - called a dawn meeting of the National Security Council at which the likely commander of any military action, one General Schwarzkopf, expressed the general feeling that the United States might fight for Saudi Arabia but hardly for Kuwait. President Bush told the press there was no thought of American intervention. The United Nations anyway had voted to impose a total embargo on Iraq. Two days after the invasion President Bush took a half day out to keep a promise to the British prime minister who was addressing a conference in Aspen, Colorado, a resort town in the Rockies. He found Mrs Thatcher in finer fighting fettle than all but one of his own advisers. She stressed that fighting for Kuwait now might be a necessary step to saving Saudi Arabia from invasion later on. ..... What so swiftly transformed the views and policy of the United States and the onlooking allies-to-be was the recognition, first pressed on President Bush by Mrs Thatcher and then rather late in the day realised by the King of Saudi Arabia, that once he held Kuwait there was nothing to stop Saddam from seizing the Saudi oil fields."

In short we fell out with Saddam not because he was a ruthless dictator or had WMDs (because after all the west had supplied those to him as exposed, in part, by Republican Congressman Donald Riegle in 1994), but for a rather different reason. Saddam Hussein may have been a 'sonofabitch', but until 1990 he was our 'sonofabitch' who we hoped would keep the Iranians from overrunning the rest of the Gulf's oil reserves. During this time he was kept sweet by none other than US presidential special envoy Donald Rumsfeld (see declassified documentation at National Security Archive, George Washington University).

We only parted company with Saddam once he had changed from being a protector of western oil interests in the Gulf, to becoming his own threat to them.

But by going into Saudi Arabia with combat troops and leaving them there after the first war against Saddam America then fell out with Bin Laden, setting up the conditions for the later conflict with al Qaeda. First published in a London based Arabic newspaper in August 1996 that is what Bin Laden's Fatwa entitled "Declaration of War against the Americans Occupying the Land of the Two Holy Places [Mecca and Medina in Saudi Arabia]" was specifically about.

To this end Bin Laden has been seeking, amongst other goals, to overthrow the House of Saud which in his eyes had been guilty of corrupt collaboration with 'infidels' from the United States - a largely commercial relationship well known to revolve almost entirely around oil and the arms trade. According to the Federation of American Scientists "Saudi Arabia is America’s top [arms] customer. Since 1990, the U.S. government, through the Pentagon’s arms export program, has arranged for the delivery of more than $39.6 billion in foreign military sales to Saudi Arabia, and an additional $394 million worth of arms were delivered to the Saudi regime through the State Department’s direct commercial sales program during that same period [to 1999]."

This inevitably begs the question 'why?'.

In the words of a 1987 State Department publication "The United States and Saudi Arabia have maintained close ties for more than 40 years. These ties have been deepened by the profound threat to regional security caused by the Iran-Iraq war .....; by our common interest--and action--in keeping the gulf open to the flow of oil despite Iranian intimidation; and by our mutual interest in countering Soviet efforts to expand its military presence and diplomatic influence in the gulf. In meeting these and other long-term threats, the Saudis must continue to modernize their modest defense forces. After careful consultation with Congress, the Administration proposes to sell the following: F-15 aircraft to replace losses from the Saudi force of 60; upgraded electronics and avionics for existing Saudi F-15s; modernization of Saudi M-60A1 tanks; and ammunition support vehicles for Saudi artillery. Saudi Arabia's interests coincide with many of our own; in strengthening its ability to defend itself, we assist a country that cooperates with the United States in meeting regional threats, including that from Iran... Saudi Arabia is the world's key oil producer and will remain so well into the future. The Persian Gulf produces 22% of world oil consumption, with Saudi Arabia accounting for 36.5% of gulf exports. A disruption in overall gulf oil production would have an immediate, harmful impact on the world economy, including the United States... The Saudi Government needs a modern military establishment to offset its relative lack of manpower and protect its borders, oilfields, and ability to ship oil."

Significantly the first major geopolitical action that the United States took following the invasion of Iraq in 2003 was to move its combat troops out of Saudi Arabia. The US quietly announced its intention to do so little more than a month after the start of the invasion. Yet hardly any media outlets seemed to notice this.

The Daily Telegraph of 30 April 2003 was one of the few that did notice. It reported that "America began a historic reshaping of its presence in the Middle East yesterday, announcing a halt to active military operations in Saudi Arabia and the removal of almost all of its forces from the kingdom within weeks. The withdrawal ends a contentious 12-year-old presence in Saudi Arabia and marks the most dramatic in a set of sweeping changes in the deployment of American forces after the war in Iraq. Withdrawal of 'infidel' American forces from Saudi Arabia has been one of the demands of Osama bin Laden, although a senior US military official said that this was 'irrelevant'.... Behind the dry talk of rearranging America's military 'footprint' in the Gulf, the great imponderables were bin Laden and Muslim radicals' complaints about the presence of 'infidels' in the birthplace of Islam. That presence was cited as one of the main justifications for the September 11 attacks. Despite American insistence that the withdrawal had not been 'dictated' by al-Qa'eda and that bin Laden was 'irrelevant', there can be little doubt that undercutting a central plank of al-Qa'eda's platform is one of several advantages offered by withdrawal from Saudi Arabia."

In reality, however, wholesale withdrawal of US troops from Saudi Arabia comprised de facto satisfaction of the principal demand of Bin Laden's 1996 Fatwa. But no front page seems to have run the headline "US Concedes To Bin Laden's Main Demand". Was that not newsworthy?

Apparently not, and perhaps it was made deliberately so in some quarters. Because for anyone closely following the alleged logic of the 'war on terror' and its unfolding narrative, such news would certainly not show America and its allies 'winning' that war.

There is, of course, one highly practical reason why the Pentagon might have felt able to dismiss this hugely significant development as "irrelevant". The Pentagon no doubt really did believe it had just acquired for itself, in the form of the previously secular Iraq, a more stable alternative platform from where to police the Gulf and its oil supply lines.

Without any reference to perhaps bringing 'democracy' to the region as a war aim, a week or so earlier the Telegraph had spelt out for its readers a large chunk of that rarely mentioned agenda. It confirmed that "The United States is planning to establish up to four long-term military bases in Iraq. The proposal would transform America's ability to project its power in the Middle East. Future arrangements depend largely on who takes over as leader of Iraq.... One reason senior officials in the Pentagon favour Ahmad Chalabi, of the exile group the Iraqi National Congress, as the new leader is that he would be pro-American and happy to facilitate US bases.... With US troops also stationed in Afghanistan, Iran is now almost surrounded by American forces.... The new bases would also enable America to scale back its presence in Saudi Arabia..... Permanent US bases in Iraq would be just one element of a dramatic change in America's strategic posture since the September 11 attacks."

On 1 May 2003 the President of the United States himself proudly declared victory in Iraq speaking under a giant "Mission Accomplished" banner on the flight deck of the aircraft carrier USS Abraham Lincoln stationed off the coast of California.

But as we all know now, this declaration was premature. Al Qaeda has since adjusted its main demand to the removal of US troops from Iraq and the place has duly become a quagmire of insurgency and terrorism. Apparently this has all come as a surprise to those in Washington who launched the whole regrettable misadventure at the personal expense of the tax-paying public and those who have fallen or been injured on the battlefield.

On 2 August the Christian Science Monitor produced a 'special briefing' entitled "How Radical Islamists See The World". It explained that "The global jihad has long named two types of targets: the 'near enemy' (Israel or secular Arab regimes) and the 'far enemy' - America and its allies.....When Zawahiri merged his Egyptian Islamic Jihad with Al Qaeda in 1998, the two trends were brought together....They want a society that applies the Koran literally and adheres to the social practices that prevailed at the time of the prophet Muhammad......Their views stem from the Salafi movement within Islam's Sunni sect, the religion's largest.... Although the vast majority of Salafis are not involved in violence, almost all attacks linked to Al Qaeda have been carried out by people under the Salafi umbrella.... the Salafi group around bin Laden really took hold after the 1991 Gulf War. Bin Laden was a wealthy Saudi who had helped support Afghans and Arab volunteers in the jihad against the Soviet Union in the 1980s, with financial support from Pakistani intelligence and the CIA. He wanted to lead an Arab and Muslim effort to end Saddam Hussein's occupation of Kuwait. He and his followers were enraged and humiliated that a US-led coalition repelled Hussein and that US troops were then stationed in Saudi Arabia, home to Islam's holiest places. Citing this issue, bin Laden and Zawahiri announced the 'World Islamic Front for Jihad Against Crusaders and Jews' in 1998."

This was followed by the bombing of US embassies in Africa in 1998 (on the anniversary of Saudi Arabia's 1991 invitation for US troops to defend the country from Iraq); the attack on the USS Cole off Yemen in 2000; and then 9/11 itself.

Yet if only a sub-section of the Muslim world subscribes to the wider Islamist goals of the Salafi movement, then certainly most of the remainder are pretty unhappy with the idea of foreign occupation of an Islamic country in the early 21st century. The al Qaeda-type militant cause has clearly gained from the situation in Iraq as a result.

It is necessary to refer to the 'al Qaeda-type' cause, because the organisation (if it can be called that) is not as ubiquitous as many presume.

According to a comment piece in the Observer 21 August "The most significant thing about Islamic terrorism today is that it is a politicosocial phenomenon among apparently self-motivated individuals and small groups. They are volunteers in a loose international movement of religious revival and radicalisation that offers alienated young Muslims an explanation for the unsettling forces at work in their lives and a mission. The argument that terrorism is an organised global menace continues to be put forward in Washington, although with fading conviction. It is necessary as the justification for the Bush administration's war in Iraq. It is essential for Bush and Blair to be able to say that staying the course in Iraq can disable or end the terrorism practised by young Muslims in Europe and elsewhere. The argument ignores or implicitly denies the cultural and social sources of Islamic extremism in the West. Few today would seriously deny that the war in Iraq generates terrorist sympathies among members of Western Europe's Muslim communities, as the Palestinian intifadas did. The war clearly provides a continuing obstacle to the integration of these communities into the larger society, in Britain as elsewhere. Ending the war would remove the obstacle, but today would, quite rightly, be interpreted as defeat for the coalition. Despite the fact that the Iraqi resistance seems predominantly nationalist in motivation, the radical Islamists would claim credit for forcing the coalition's withdrawal. Military withdrawal none the less is perfectly possible, since the evidence is overwhelming that foreign military occupation and the resistance are in symbiotic and symmetrical relationship, each reinforcing the other.... The primary aim of the Islamic extremists is to radicalise Islamic society in order to purify it. Their main concern with the West is to expel it and its influences from the Islamic world. The radical leaders have no imaginable reason to want to conquer and try to rule the infidel West, even if they could. The notion of al-Qaeda as a global force is mainly the result of America's obsession with it. The 11 September attacks gave a conservative American government just the challenge it wanted, having already a malevolent eye on the defiant Saddam Hussein and an ambition to establish new Middle Eastern strategic bases. The attacks were immediately called a new Pearl Harbor, the start of a war more dangerous than the Cold War, waged by militants acting out of 'hatred for freedom' - creating an emergency that required mobilisation of all the democracies under American leadership. You are with us or against us.... Ayman al-Zawahiri, Tony Blair and George W Bush also exist in a symbiotic relationship. All have a vested interest in terrorism as a centrally directed international threat (an Islamic Comintern), at war everywhere with the West."

Certainly all the time the spectre of the Islamic terrorist threat is prevalent (of which of al Qaeda is the most powerful image lodged in the public psyche) intervention in non-co-operative oil rich Muslim countries is easier to justify. To quote the New York Times of 22 January: "Just hours before being sworn in for a second term, Vice President Dick Cheney publicly raised the possibility that Israel 'might well decide to act first' to prevent Iran from obtaining nuclear weapons..... President George W. Bush, in his inaugural speech Thursday, appeared to have Iran, among other countries, in mind when he said he was committed to 'the ultimate goal of ending tyranny in our world.' After defending the administration's decision to invade Iraq, Cheney, who appeared on the show with his wife, Lynne, was asked about the Iranian threat. 'We believe they have a fairly robust new nuclear program,' he said of the Iranians, avoiding the word 'weapons,' though in the U.S. and European intelligence communities there is a widespread belief that the program is intended to build a nuclear arsenal. Cheney called Iran 'a noted sponsor of terror,' particularly in its support for Hezbollah, and said the combination of nuclear technology and terrorism 'is of great concern.'"

In this context the following exchange 28 July at a White House press briefing between a journalist and White House press secretary Scott Mcllenan is 'interesting' (source White House web site):

Q: Scott, an article in the American Conservative by Philip Giraldi, former intelligence operative, indicated the Vice President has revamped strategy towards Iran where there are now 300 to 400 missiles targeted various sites in Iran, including tactical nuclear missiles, especially aimed at the Iranian nuclear capabilities. These are now, according to Giraldi, also under command of the theater commander.

Given our problems with Iran and the fact that now that they have decided to go for the full cycle of their peaceful nuclear program, might we be anxious that if there were a terrorist incident here in the United States in any way connected to Iran, that there might be a knee-jerk reaction of utilizing this hair-trigger against the Iranians?

MR. McCLELLAN: One, I appreciate your question. I'm not going to get into accepting anything that you alleged in your comments. I'm not going to get into discussing matters relating to national security of that nature.

According to Giraldi this is another Cheney 'initiative'. In the American Conservative article referred to Giraldi states "The Pentagon, acting under instructions from Vice President Dick Cheney’s office, has tasked the United States Strategic Command (STRATCOM) with drawing up a contingency plan to be employed in response to another 9/11-type terrorist attack on the United States. The plan includes a large-scale air assault on Iran employing both conventional and tactical nuclear weapons.... As in the case of Iraq, the response is not conditional on Iran actually being involved in the act of terrorism directed against the United States. Several senior Air Force officers involved in the planning are reportedly appalled at the implications of what they are doing—that Iran is being set up for an unprovoked nuclear attack—but no one is prepared to damage his career by posing any objections."

The 'American Conservative' is a magazine co-published by Pat Buchanan, a former aide to Richard Nixon who also served for a time as White House Communications Director during the Reagan administration. He twice unsuccessfully sought the Republican nomination for president.

Giraldi is a former CIA counter-terrorism official who also gave a detailed US radio interview on this subject 26 July (presumed web site, not broadcast, date) in which he referred to the 'war on terror' as "basically a fiction". He points out that "we do have a vital strategic interest in the oil reserves that are in that [Persian Gulf] area. But what I would like to see is a candid discussion of what our interests in the area are, what our equities are, and what the downside of maintaining a presence in the area is. We haven't seen any of that .... It's policy that has created these issues, and the policy should be openly debated in front of the American public, and not just kind of brushed away and disguised as a 'war against terror'".

Giraldi also says in the last few minutes of the interview that he believes two former CIA officers were responsible for the forged documents used by the United States to claim that Iraq had been trying to obtain uranium from Niger as part of an alleged nuclear weapons programme. The documents were revealed by officials at the UN to be 'not authentic' shortly before the invasion of Iraq.

The 'intelligence' origin of the documents was later traced to SISMI, the Italian military intelligence agency, who are reported to have passed the documents to MI6 in 2002 although this is denied by the British government (TIME, 13 July 2003; Sunday Herald, 14 July 2003; Newsweek, 16 July 2003; Fox News, 16 July 2003; London Times, 17 July 2003; Washington Post, 18 July 2003; Guardian, 31 July 2003 ).

Giraldi's claim appears to be backed by Vincent Cannistraro. Cannistraro was Director of National Security Council Intelligence from 1984 to 1987. He went on to serve as chief of operations for the CIA's Counterterrorism Center, and he lead the CIA's investigation into the bombing of Pan Am 103. When asked by a journalist in April if Michael Ledeen was responsible for the Niger forgeries, his response was "You’d be very close".

Giraldi says the former CIA officers are associated with Michael Ledeen, a major figure in the Iran-Contra arms scandal of the 1980s who also lived in Italy for many years. The September 2004 edition of Washington Monthly reports that in December 2001 Leeden and Pentagon officials met in Rome with (amongst others) Nicolo Pollari, the head of SISMI, and Antonio Martino, the Italian Minister of Defense. The Rome station chief of the CIA was not informed of the meeting.

Washington Monthly asks "why were mid-level Pentagon officials organizing meetings with a foreign intelligence agency behind the back of the CIA - a clear breach of U.S. government protocol?". The journal reports that the meeting was "a conduit for intelligence about Iran and Iraq" and that, according to United Press International, Leeden was working as a consultant to Douglas Feith, Under Secretary of Defense for Policy at the Pentagon.

Ledeen has denied that he had any connection to the forged documents. Well, maybe. But what about his associates formerly from the CIA? Although he hasn't publicly named them, Giraldi seems to know who they are.

According to the BBC's Panorama programme 18 May 2003 "Michael Ledeen has been branded an 'ultra neo-conservative' and is seen by his critics as the most sinister and radical of them all.... A former Rome Correspondent for the New Republic newspaper, Ledeen first rose to political prominence as a member of the National Security Council during Ronald Reagan's reign. But it was in 1985, that he became a well-known figure in the US when his Israeli intelligence contacts were used to help broker the illegal Iran/contra rebel affair.... Prof Ledeen is also a student of Machiavelli and has written a book about the Renaissance philosopher whose name has become synonymous with strong and brutal governments... Prof Ledeen is also believed to have the ear of the White House's current Chief of Staff Karl Rove..."

Ledeen wrote in the National Review 6 August 2002 that "One can only hope that we turn the [Middle East] region into a cauldron, and faster, please. If ever there were a region that richly deserved being cauldronized, it is the Middle East today. If we wage the war effectively, we will bring down the terror regimes in Iraq, Iran, and Syria, and either bring down the Saudi monarchy or force it to abandon its global assembly line to indoctrinate young terrorists. That's our mission in the war against terror."

This would seem to fit in neatly with Cheney's reported contingency plan to 'nuke' Iran in the event of another terrorist strike on America, whether Iran is connected to it or not.

However, under the title "War-Gaming the Mullahs" Newsweek magazine reported 27 September 2004 that "Israel, which has long regarded Iran as a more dire threat than Iraq, is making thinly veiled threats of a unilateral pre-emptive attack, like its 1981 airstrike against Iraq's Osirak nuclear reactor.... Iran's facilities (which it insists are for peaceful purposes) are at the far edge of combat range for Israel's aircraft; They're also widely dispersed and, in many cases, deep underground . But America certainly could do it—and has given the idea some serious thought. 'The U.S. capability to make a mess of Iran's nuclear infrastructure is formidable,' says veteran Mideast analyst Geoffrey Kemp. 'The question is, what then?' NEWSWEEK has learned that the CIA and DIA have war-gamed the likely consequences of a U.S. pre-emptive strike on Iran's nuclear facilities. No one liked the outcome. As an Air Force source tells it, 'The war games were unsuccessful at preventing the conflict from escalating.'"

******

Imagine for a moment, even though it might be difficult, that the situation was reversed.

Imagine that there was surplus of exportable oil in Texas and the North Sea, and an oil supply deficit in the Persian Gulf.

Imagine that with the co-operation of the governments in Washington and London thousands of Arab troops had become stationed outside Houston and Aberdeen to ensure that export flows of oil to the Muslim world remained 'secure'. What might be the local reaction, hypothetically speaking, to the presence of those foreign troops? Who might gain popular support, both visibly and invisibly, from such developments in Britain and Amercia?

It would be difficult in such circumstances to expect a decline in the membership of, for example, American 'White Supremacist' groups or the British National Front; or to expect an increase in Sunday sermons from the pulpits of Baptist and Presbyterian churches urging an improved understanding of those who do not share the 'true' faith. Indeed, it would be very easy for the Arabs to play into the hands of 'the other side' in such a theoretical scenario.

And so, back in the real world where the opposite situation prevails, the merciless merry-go-round of venomous 'jihad' against the blundering 'shock and awe crusaders' goes on. It continues to add to the of thousands of 'liberated' Iraqi civilians and coalition foot soldiers who have lost their lives in the process, most of whom might be presumed to be neither venomous nor completely stupid (to date 55% of killed Iraqis are estimated to have been women and children under the age of 12).

Certainly there are many Iraqis who have become insurgents. According to the Guardian 25 August Major General Douglas Lute, director of operations at US central command, claims that 90% of what he calls the 'enemy' in Iraq are domestic with only a 'slither' of foreign fighters 'sponsored from outside'.

But the picture is not entirely pretty within the coalition either.

The former commander of the British Army's 3rd Division in Iraq (from July to December 2003) recently gave a speech to senior infantry officers about the war, part of which was reported by the Sunday Telegraph 21 August. The speech was entitled "Operational Success - Strategic Failure". In the context of fresh allegations about prisoner abuse in Iraq Major General Graeme Lamb claimed that the British Army is being forced to recruit from a "morally corrupt and dysfunctional" society where recruits are "cocky and arrogant and brought up on a diet of football brats and binge drinking. . . who are not educated in and able to recognise self-discipline....".

In the General's opinion "We are in very real danger of losing our place in society as a highly respected British institution.... If we lose this trust - like parts of the medical profession, the political parties, the police and even more recently the Catholic Church - the road back is simply blocked..... Those who failed [in Iraq].... were allowed to embrace and populate a culture that was simply unworthy of us all."

Few doubt that behaviour like this emanating from the 'civilised' world has served to provide an additional recruiting motivator for those seeking to undermine the will of coalition governments supplying troops to Iraq. It may even have influenced those in Britain who went on to carry out the attacks in London in July.

Stating, as the British Prime Minister did after those suicide bombings, that "The politics we represent will win and will triumph over terrorism" may make some feel better. But there is little evidence that evoking such sentiments, and the limited 'patriotic' perspective that they offer, is going to do the job. Since then former Metropolitan Police Commissioner Lord Stevens has warned that "this type of terrorist campaign, which is global, could well last for 10 or 20 years".

Indeed, the oil-hungry globally avaricious politics that "we represent" has been very much part of the problem since at least the end of the first World War, becoming especially acute during the free market 'gold rush' that followed the fall of the Iron Curtain, and led by Wall St, the City and the 'intelligence' services. More of the same is not a promising prospect and even some of these primary players may be beginning to recognise it (see Wall St Journal Online 3 August).

No. It is time to break out of this uninspired, and uninspiring, groove of self-serving manipulation and destruction. Ultimately what we need is a change in our own narrow thinking, because continuing to repeat the deeply engrained patterns of behaviour of the past is no longer sustainable.

What is needed most urgently is not a counter-terrorism policy; but an alternative energy policy, so that Persian Gulf and other oil producing Islamic countries can be left alone to manage their own affairs in the way that they themselves see fit. Without the latter we will always be failing in our pursuit of that most elusive goal - a successful formula for the former. We will continue to be confronted by failure on all fronts - diplomatically, militarily, economically and environmentally. We have now reached a point, both politically and geologically, where the price of failure is likely to be on an altogether greater scale than anything we have ever experienced before.

Chevron's surprise 'energy debate' initiative perhaps represents just a flicker of hope that such a realisation may be finally dawning. As their plea puts it: "....one thing is clear: the era of easy oil is over.... Many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract-physically, technically, economically, and politically. When growing demand meets tighter supplies, the result is more competition for the same resources. We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking the tough questions... We call upon scientists and educators, politicians and policymakers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy."

We can no longer afford to ignore this. The risks associated with inaction are large.

As the online debate provided by the Wall St Journal 3 August makes clear:"The peak in global oil production goes beyond paying a few dollars extra to fill the gas tank... the peak isn't just an economic problem, it is one of the biggest social and political challenges for this century....The totality of impacts may force policy makers to rely heavily on the precautionary principle, which compares the costs of being correct to those of being incorrect. We know that oil production will peak within our lifetime, we think market prices may not anticipate this peak and we know that not having alternatives in place at the time of the peak will have tremendous economic and social consequences. So, if society does too much now, as opposed to later, there will be some loss of efficiency. But if society does too little now, as opposed to later, the effects could be disastrous. Under these conditions, doing too little now in the name of efficiency will appear in hindsight as rearranging deck chairs on the Titanic."

In this respect it is worth concluding with the full text of House of Commons Early Day Motion No 199, 3 December 2003, entitled 'Oil Depletion, Energy Self-Sufficiency, And The Low Carbon Economy': This urges "That this House notes the growing consensus amongst the world's leading petroleum geologists and geophysicists that the peak of global oil production will occur at some point within the next 10 years; recognises that global oil reserves, which were created over several billion years, will have been largely consumed, primarily by a small number of western industrial democracies, within a little over 100 years; further notes that all future discoveries of oilfields are likely to be in the regions where extraction costs are extremely high; believes that the current military occupation of the world's second largest oil reserves is largely related to the impending energy crisis in the United States; and therefore calls on the Government to prepare a major public awareness campaign on the future economic and lifestyle consequences of oil depletion, establish a set of national targets for energy self-sufficiency to the year 2050, and increase the budget allocation to scientific research, energy conservation and other policy measures designed to manage the transition to a low carbon economy as speedily and painlessly as possible."

If we are really serious about 'winning' the so called 'war on terror' then it behoves those remaining Members of Parliament who have yet to endorse this motion to do so. And then they should take a leaf out of Chevron's book, phone their counterparts in the US Congress, and persuade them to do something similar.

Inaction is no longer an option.

NATURAL LAW PARTY WESSEX
nlpwessex@btinternet.com
www.btinternet.com/~nlpwessex

Association For The Study Of Peak Oil And Gas - Click Here

"The world could run out of time to develop cleaner alternatives to oil and other fossil fuels before depletion drives prices through the roof, a leading Dutch energy researcher said on Thursday. Ton Hoff, manager of the Energy Research Centre of the Netherlands, said it could take decades to make alternatives affordable to the point where they can be used widely, although high oil prices were already stimulating such research. 'If we run out of fossil fuels - by the time the oil price hits 100 dollars or plus, people will be screaming for alternatives, but whether they will be available at that moment of time - that's my biggest worry,' Hoff said. 'That's why we need to use fossil fuels in a more efficient way to have some more time to develop these alternatives up to a level where the robustness is guaranteed and their price has come down ... This could take decades for some technologies."
World Running Out of Time for Oil Alternatives
Reuters, 18 August 2005

'News Bites'
Saudis, PFC, Morgan Stanley, And Venezuelan Oil Minister Issue Warnings

"The Organization of the Petroleum Exporting Countries will be unable to meet  projected western demand in 10 to 15 years, Saudi officials have warned. At today's prices, the world will need the cartel to boost its production from 30m to 50m barrels a day to 50m by 2020 to meet rapidly rising demand, according to the International Energy Agency, the energy watchdog for  consuming countries. But senior Saudi energy officials have privately warned U.S. and European counterparts that OPEC would have an extremely difficult time meeting that
demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide....Saudi Arabia has the world's largest oil reserves and will need to bear up to half OPEC's production growth in the next 10 to 20 years, with the rest mainly coming from Kuwait and the United Arab Emirates. Saudi Arabia pumps 9.5m b/d and has assured consumer countries that it could  reach 12.5m b/d in 2009 and probably 15m b/d eventually. But a senior western energy official said: They said it would be extremely difficult to move above that figure."
OPEC CAN'T MEET WEST'S OIL DEMAND, SAY SAUDIS
Financial Times, 6 July 2005

"Speaking at a briefing on global energy markets, organized by The National Interest, a leading authority on international energy issues warned that the United States could face an acute energy crisis......J. Robinson West, founder and chairman of PFC Energy, one of Washington’s most influential international energy consulting firms, is a former Assistant Secretary of the Interior in the Reagan Administration and a member of the advisory council of The National Interest.  Former National Security Advisor, Brent Scowcroft, moderated the discussion at The Nixon Center....Where is the rest of the oil going to come from?   West noted that Saudi Arabia is engaged in a $50 billion investment program, but said this would bring the country’s capacity to 12 million barrels per day and ultimately perhaps 15 million barrels per day, but no more.  At the same time, he argued, the resource base in Central Asia has been 'grossly exaggerated' and capital investment is an order of magnitude less than West Africa, where production is much higher.  There will be ongoing competition for Central Asian supplies, but to call it a 'Great Game' seems a bit much; rather it would better be described as a series of 'knife fights in dark alleys.'....West predicted that 2015 could be the tipping point where global demand for oil exceeds supply and urged all the serious stakeholders in the United States to sit down and assess the situation."
Global Energy Markets: Worse Than You May Think
In The National Interest, 8 July 2005

Who Are PFC Energy? - Click Here

"A Morgan Stanley Commodities Outlook last week predicted that even if demand moderates to 1.5% per annum, as it predicts, because of oil depletion of 5% there is a need for the discovery of 28 million barrels per day of new oil, which it says is unlikely. 'Great hopes of new oil finds are not coming in,' said the report. High prices show no indication of curbing demand, which hit 9.7 million barrels a day last weekend in the US. Demand in the US is currently growing by 2.7% a year. Last year growth for 2005 was predicted to be between 1% and 2%. Supply disruption in the US is a major fear and the hurricane season is well underway.... Morgan Stanley's report points out that the industry may not be well enough equipped to deal with mounting demand. The report said the industry has allowed chronic under- investment to affect infrastructure, and the situation is not improving."
Fossil fuels are not yet extinct, says Shell
Sunday Herald, 11 July 2005

"[Major oil companies'] marketing all of a sudden has taken a downbeat turn. Chevron's latest campaign warns starkly: 'One thing is clear: the era of easy oil is over.' Exxon's is not much more cheery: 'The world faces enormous energy challenges. There are no easy answers.' Some feel they are softening up consumers for difficult choices ahead. The oil industry is increasingly admitting that there are constraints on oil production. Exxon's latest energy outlook predicts that oil supply from outside the Opec cartel will peak as early as 2010. And Opec officials have privately warned that the cartel will struggle to produce the extra 20m barrels a day needed to meet projected demand by 2020. "
Dirty Oil: the West's Saviour, the Greens' Worst Nightmare
Business, 1 August 2005

"The price of crude oil in New York jumped to a record $64 a barrel as a feared terrorist threat to the U.S. embassy in Saudi Arabia heightened concern that supplies from the world's largest exporter, could be affected.....despite all the new fields coming on stream, some experts argue that they won't be enough to compensate for the declining output of existing fields, which are being depleted at a rate of 5% per year. Since 1960 only four super-giant oilfields have been found outside the Middle East -- in China, Russia, Mexico, and Alaska -- and all except China's Daqing field are in steep decline. 'Discovery size is going down,' says J. Robinson West, chairman of consultant PFC Energy. 'Decline rates are a problem.'"
Oil hits new record over $64 on Saudi terrorism fears
Findfacts Business News, 8 August 2005

Who Are PFC Energy? - Click Here

"Suppliers are struggling to meet the rising demand. The world has little ability to pump much more oil than already is coming out of the ground, leading to concerns that significant supply disruptions could cause shortages. Traders are particularly nervous about projections that demand will grow later this year."
Supply Worries Push Oil Near $64
Washington Post, 9 August 2005

"There is currently little slack in the supply system to deal with any disruptions in supply. Yesterday’s debates about the damage a $55 barrel might do to the global economy must now be recast in terms of $70 a barrel..... Policy needs to cover not only price, but uncertainties about supply: energy efficiency and energy security go together, as do conservation and innovation. Not only states, but local authorities and individual households, need to think what actions to take."
Think Global, Act Local
London Times, 10 August 2005

"Efforts by the Opec oil cartel to curb price gains by increasing production have had little effect in recent days. Rafael Ramirez, the Venezuelan Oil Minister, said that the cartel had probably done all that it could to boost supplies and predicted that prices were likely to stick at present highs. 'We have said that this is a structural issue, not a short-term factor, and the price is going to stay the same,' he said."
Growing demand forces oil price to $65 a barrel
London Times, 11 August 2005

"As oil traded for as much as $67.10 a barrel and settled at $66.8 in the New York Mercantile Exchange, Texas oilman T Boone Pickens, who was derided earlier this year when he predicted $60 a barrel oil, now forecasts that crude price will hit $75."
Oil price may go up to $75 per barrel: Expert
Press Trust Of India, 13 August 2005

"Oil exports to the US could stop amid growing tensions between the two countries, Venezuelan President Hugo Chavez has said. He described recent US government actions as 'aggressive' in a speech at a youth festival in Caracas. As a result, Venezuelan oil 'instead of going to the United States, could go elsewhere,' he said. Venezuela exports about 1.3 million barrels a day to the US and is the world's fifth largest oil producer. Tensions between the two countries have escalated since President Chavez accused the US Drug Enforcement Administration (DEA) of spying on his government."
Chavez makes US oil export threat
BBC Online, 15 August 2005

"'Oil is the lifeline of the West, and most of the West's military industries are dependent on it,' the Tehran Times suggested in an editorial last week. Irritated by a recent resolution by the International Atomic Energy Agency (IAEA) that called for a halt to Iran’s uranium conversion program, the newspaper suggested that oil-rich states form a united front and use oil as a tool to confront "western neocolonialist countries.' In Venezuela, Pres. Hugo Chavez has taken the idea a step further, threatening to halt oil exports if alleged attacks on his country continue, according to Agence France Press..... According to the Islamic Republic News Agency, the Iranian newspaper’s editorial described oil as “the most potent economic weapon for settling scores,' and suggested an embargo on oil sales to the United States and European countries that are pressuring Iran to end its nuclear program."
Iran, Venezuela discuss oil embargo
Vermont Guardian, 19 August 2005

"'The excellent discipline in the Chinese Army is one of the most illustrious characteristics of the country,' the commander of the Ground Forces of the Iranian Army, Brigadier General Nasser Mohammadi Far, said here on Wednesday. Mohammadi Far made the remarks in a meeting with a Chinese military delegation that has come to Iran to hold negotiations on developing military relations between Iran and China, deepening bilateral ties between the two countries, and paving the way for military cooperation. He went on to say that the vast country of China has organized a powerful army in the region through relying on efficient military training, perseverance, and discipline. 'Our mutual enemies possess advanced military technology, and undoubtedly they would rely on this technology in any possible future wars. Therefore, it seems necessary that both Iran and China upgrade their defense and military technology,' he noted."
Iran, China discuss defense cooperation
Tehran Times, 18 August 2005

"Financial bookmakers said they would start taking wagers on $100 a barrel oil if the price broke through $70."
Oil eases from record at $68
CNN, 25 August 2005

"China is picking up speed, gaining strength and energy, but it has not abandoned its larger ambition, its vision of great power. Uncertainty about the future creates unease for its partners, notably for the United States. The best response from the Bush administration would be to discuss the most sensitive issues, like Taiwan or oil, dispassionately and in depth."
Shi Yinhong: 'Oil, First Test of Strength'
Le Figaro, 25 August 2005

Chevron Advertising Text

Extract
"Energy will be one of the defining issues of this century, and one thing is clear: the era of easy oil is over... Many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract-physically, technically, economically, and politically. When growing demand meets tighter supplies, the result is more competition for the same resources....We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking the tough questions.....At Chevron, we believe that innovation, collaboration and conservation are the cornerstones on which to build this new world. But we can't do it alone. Corporations, governments and every citizen of this planet must be part of the solution as surely as they are part of the problem....Let this website be the vehicle that helps to close the gaps between our diverse philosophies and opens the minds of us all....We call upon scientists and educators, politicians and policymakers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy. "
http://www.willyoujoinus.com/vision/

With Minor Variations The Text Below From The Chevron Energy Debate Web Site Provided The Content
For The Company's Double Page Adverts Which Appeared In The Economist And TIME Magazine In July

Chevron Billboard Adverts

The strap line for the home page of Chevron's energy debate web site is "How can we make oil and gas supplies last longer as the search for other fuels continues?". Chevron's broadranging associated public advertising campaign covers TV, print media, internet and billboards. Below are images of their billboard advertisments.

(Those Countries Are Saudi Arabia, Iran, Iraq, UAE, and Kuwait)

---

Gleneagles Summit - G 8 Communiqués On Energy And Oil

"Global energy demands are expected to grow by 60% over the next 25 years.... Secure, reliable and affordable energy sources are fundamental to economic stability and development. Rising energy demand poses a challenge to energy security given increased reliance on global energy markets..... Over the next 25 years, an estimated $16 trillion will need to be invested in the world's energy systems.... At Evian, we agreed that energy efficiency is a key area for G8 action... To respond to the scale of the challenges we face, we need to diversify our energy supply mix, including increased use of renewables...."
Africa, Climate Change, Energy and Sustainable Development
Gleneagles Communique, July 2005

"...global growth has boosted energy demand and, together with capacity constraints and supply uncertainties, has led to high and volatile oil prices. We discussed the risks that sustained high energy prices pose for global economic growth. Oil demand is currently projected to continue its strong growth. Significant investments will be needed, in the short-, medium-, and long-terms, in exploration, production, and energy infrastructure to meet the needs of a growing global economy. A number of measures could help to ease the tightness of the oil market. We agreed that secure, reliable and affordable energy sources are fundamental to economic stability and development, and recognised the important role that energy conservation and efficiency, technology and innovation can play. And we have separately published a Plan of Action on these issues in addressing climate change. We encourage oil-producing countries to take all the necessary steps to foster a favourable investment climate sufficient to support strong global economic growth. In particular, oil-producing countries should ensure open markets with transparent business practices and stable regulatory frameworks for investment in the oil sector, including increased opportunity for foreign investment. In this context, we emphasise the important role played by the dialogue between oil producing countries and oil consuming countries in the International Energy Forum (IEF). Furthermore, we agree to consider measures to encourage the expansion of refinery capacity. We emphasise the need for concrete actions to reduce market volatility through more comprehensive, transparent and timely data. A factor exacerbating uncertainty is the lack of transparency in the markets, which could be ameliorated by a universally agreed reporting system for oil supply and demand to be applied by oil producing and consuming countries and oil companies. Reliable and timely data on supply, demand and stocks facilitate timely adjustment to shifts in supply and demand while contributing to more solidly based investment decisions. We therefore welcome and support the Joint Oil Data Initiative (JODI) launched by several international organisations, including the IEA, and now managed by the Secretariat of the International Energy Forum (IEF) and urges all countries to contribute to the success of this initiative, so that market transparency benefits considerably from the establishment of robust world oil market data."
'Global Economy And Oil.'
G8 Gleneagles Communique, July 2005

---

The Easy Discoveries Are Gone - Only Difficult Prospects Remain
Companies Struggle With Major Gas And Oil Projects - $Billions Over Budget And Production Delayed

"Shell has been forced to admit that the cost of Sakhalin Energy, a vast liquefied natural gas project in Eastern Siberia and a pillar of the company’s future expansion, has ballooned from $10 billion to $20 billion (£11.4 billion). The doubling of costs and an anticipated half-year delay to the construction schedule is a blow to Shell’s reputation as a project manager and it will lead to further embarrassment with Shell’s partners, including Gazprom, the Japanese investors Mitsui and Mitsubishi, and the Russian Government......Hailed as Russia’s biggest foreign investment when it was launched in May 2003, Sakhalin Energy will produce gas offshore of a remote island on Russia’s Pacific coast and chill it into liquid form for export. Shell’s customers, notably Tokyo Electric and Korea Gas, may now suffer delays as the first cargoes, targeted for delivery in November 2007, are now expected in the summer of 2008....Jeroen van der Veer, Shell’s chief executive, said yesterday that he became aware of the extent of the cost overruns only this week when a six-month review of the project was completed. A week previously the Shell chief signed a memorandum of understanding with Gazprom over the asset swap and in the presence of Alexei Miller, Gazprom’s chairman, hailed the '$10 billion Sakhalin project'."
Shell forced to admit Russian costs have doubled
London Times, 15 July 2005

"Shell Canada Ltd., Canada's fourth- largest oil and gas company, said the cost to expand output from its oil-sands project in Alberta will almost double to C$7.3 billion ($6 billion). Higher prices for steel, cement and equipment, along with design changes, are boosting the cost, Shell Canada spokeswoman Janet Annesley said today in a telephone interview. The Calgary- based company and project partners said in April the expansion would add 100,000 barrels a day of mining and refining capacity by 2009 at a cost of at least C$4 billion.... Syncrude Canada Ltd., the world's largest oil-sands miner, in July raised the estimated cost of its expansion to C$8.1 billion. It was the third increase in 18 months. Royal Dutch Shell Plc, which controls 78 percent of Shell Canada, said last month that development of its Sakhalin field, the world's largest oil and gas project, may double in cost to $20 billion."
Shell Canada Says Oil Sands Costs Jump to C$7.3 Bln
Bloomberg, 9 August 2005

"Peak oil production from Russia’s giant Sakhalin-2 project will be delayed until 2008 at the earliest, lead shareholder Royal Dutch Shell said yesterday. A spokeswoman for Shell said the previously announced delay to startup of liquefied natural gas production would also mean delays to plans to effectively quadruple oil output. Plans to allow an existing platform to produce during the winter months have now been pushed back from 2006 to 2007, while the planned startup of a second platform has been pushed back from the first quarter of 2007 to 2008. 'We were planning to launch year-round production in 2006. Basically it would mean not to halt production for the winter season in December 2006. Now we target December 2007,' a spokesman for Sakhalin Energy told Reuters.Sakhalin-2 currently produces over 70,000bpd from the Molikpaq offshore platform, for around 180 days a year, the spokeswoman added.
Production stops during the winter when the sea freezes over, but will continue year-round after Shell constructs an undersea pipeline as part of Phase II, which also includes start up of LNG production. Ramp up of The Piltun-Astokhskoye-B platform is expected to take production to between 150,000bpd and 155,000bpd, the spokeswoman said.  Shell did not say when in 2008 Piltun-Astokhskoye-B was now scheduled to commence production. A spokesman for Mitsubishi Corp, a stakeholder in the project off Russia’s eastern coast, said there was a high possibility of delay but added he had no idea how long it might be. Shell announced in mid-July that the second phase of the Sakhalin-2 project would cost twice its $10bn estimate and delay exports of the super-cooled compressed natural gas. Its statement did not mention a delay to winter crude production. The plan to transport oil onshore has faced opposition from environmentalists who fear the pipelines will endanger the survival of the threatened grey whale population....A spokeswoman said the delays to the oil project were not related to the switch to the new, longer pipeline paths. Shell estimates the recoverable base in the Sakhalin-2 project to be 17.3tn cu ft of natural gas and 1bn barrels of oil, making it one of the flagship projects for the world’s third largest oil company by market value. The project has been producing Vityaz crude during the summer since 1999, and it has been selling the grade to Japan and elsewhere in Asia, mostly via tenders. But exports of the grade, popular among Asian refiners because of its lower sulphur content, are suspended during winter because of ice."
Russia’s Sakhalin-2 oil output plans are delayed, says Shell
Reuters, 4 August 2005

---

Shell Says New Oil Shale Technology Won't Be Ready For Years (If Ever)

Extract
"The international oil company that has worked since 1982 on a way to draw oil from the shales of western Colorado is about five years from deciding whether the project can be commercially viable....Shell’s process, which O’Connor said might be the 'most heavily patented' of any oil-production process, involves both heating rock underground to extract a light product, as well as freezing surrounding rock to corral the vaporized material and prevent it from reaching surrounding groundwater, drafting it instead to a production well....Within the wall, heaters dropped down holes drilled by water-well rigs boost the temperature of the oil-bearing rock to 650 to 700 degrees Fahrenheit, freeing lighter products, which O’Connor said could be characterized as a light, sweet crude. The high temperature, however, means that much of the product is released from the rock as vapor that is collected in a production well and which would be pumped into a pipeline. The entire process is one that would take years from boring the first holes for the heaters and freezewalls until actual production, he said....About two-thirds of the product the company expects to recover will be oil and about one-third will be natural gas, which Shell hopes to use for its own generation needs or pump into the existing pipelines. It also is experimenting with the idea of using gas to heat the shale. The key element, however, is time, said Jill Davis, who handles community relations involving unconventional resources for Shell. Rising oil prices aren’t driving the research any faster, Davis said. 'You can’t will this along with oil prices,' she said."

http://www.gjsentinel.com/hp/content/news/stories/2005/07/06/7_6_Shell_and_shale_WWW.html

Shell approaching critical stage in shale oil production
Wednesday, July 06, 2005

By GARY HARMON

The Daily Sentinel

The international oil company that has worked since 1982 on a way to draw oil from the shales of western Colorado is about five years from deciding whether the project can be commercially viable.

“We’ve made some progress, and we’re increasingly optimistic, but we’re not there yet,” said Terry O’Connor of Shell Exploration and Production Co., which began work on an innovative oil shale-extraction process just as the rest of the industry gave up on the resource.

Shell’s process, which O’Connor said might be the “most heavily patented” of any oil-production process, involves both heating rock underground to extract a light product, as well as freezing surrounding rock to corral the vaporized material and prevent it from reaching surrounding groundwater, drafting it instead to a production well.

It’s the latter process that Shell is now beginning the process of perfecting and the phase that could determine the fate of the venture, O’Connor said.

Shell began in 1982 with lab experiments to determine whether it was possible to use heat to break molecular bonds holding lighter products in place on shale. After working out a process in the lab, it has been testing in the field in Rio Blanco County since about 1996, O’Connor said.

The stakes are high, but so are the potential rewards, he said.

Oil shale represents the “most concentrated, undeveloped fossil fuel on Earth,” said O’Connor, the company’s vice president for external and regulatory affairs for unconventional resources.

The company estimates it can produce 1 billion barrels of product from a square mile, he said.

Unlike the familiar retorting process that was being used in western Colorado in the early 1980s, the Shell process involves little earth moving, meaning that restoration costs are minimal once a field has been depleted.

Unlike traditional drilling, which is said to recover about 30 percent of deeply buried hydrocarbons, the Shell process can recover about 60 percent, he said.

The next critical step is testing the company’s freezewall technology, in which wells are drilled around the intended recovery area. Just as a refrigerator acts to remove heat from the surrounding rock, the freezewall will be constructed as water molecules trapped underground are frozen, forming a wall thousands of feet deep.

The freezewall won’t use water from outside, O’Connor said.

The company still is studying the amount of water it would need for its process, he said.

Within the wall, heaters dropped down holes drilled by water-well rigs boost the temperature of the oil-bearing rock to 650 to 700 degrees Fahrenheit, freeing lighter products, which O’Connor said could be characterized as a light, sweet crude.

The high temperature, however, means that much of the product is released from the rock as vapor that is collected in a production well and which would be pumped into a pipeline.

The entire process is one that would take years from boring the first holes for the heaters and freezewalls until actual production, he said.

Shell figures that a field could produce for seven to 10 years, he said, and produce about 3.5 times as much energy as it took to draw it out of the earth, he said.

About two-thirds of the product the company expects to recover will be oil and about one-third will be natural gas, which Shell hopes to use for its own generation needs or pump into the existing pipelines. It also is experimenting with the idea of using gas to heat the shale.

The key element, however, is time, said Jill Davis, who handles community relations involving unconventional resources for Shell.

Rising oil prices aren’t driving the research any faster, Davis said.

“You can’t will this along with oil prices,” she said.

Gary Harmon can be reached via e-mail at gharmon@gjds.com.

---

'Global Warming Turbo'
Why Substituting Tar Sands And Oil Shale For Crude Oil Is A Global Warming Nightmare

Extract
"Last week, the oil majors were celebrating another embarrassment of riches .....Yet their marketing all of a sudden has taken a downbeat turn. Chevron's latest campaign warns starkly: 'One thing is clear: the era of easy oil is over.' Exxon's is not much more cheery: 'The world faces enormous energy challenges. There are no easy answers. 'Some feel they are softening up consumers for difficult choices ahead. The oil industry is increasingly admitting that there are constraints on oil production. Exxon's latest energy outlook predicts that oil supply from outside the Opec cartel will peak as early as 2010. And Opec officials have privately warned that the cartel will struggle to produce the extra 20m barrels a day needed to meet projected demand by 2020. So the companies are turning to so-called 'unconventional' oil - oil sands and oil shales that exist in huge quantities at known sites. The US state of Colorado and Canada's Alberta have enough in oil sands and oil shales to thrust each individually ahead of Saudi Arabia's 263bn barrels reserves. But here is the tough choice: developing these resources is an environmentalist's worst nightmare. Jeremy Leggate, the oil consultant turned Greenpeace activist turned solar entrepreneur, says: 'It's suicidally dysfunctional behaviour. It's like putting your head in a paper bag and walking to the morgue. If they really do develop these things on a massive scale then we've had it.'... Each barrel of synthetic oil from oil sands generates roughly twice as much carbon dioxide during its production as a barrel of conventional oil and uses up the equivalent energy to one barrel of oil for every five produced. GTL [Gas to liquids] is similarly wasteful, with some 45% of the gas fed into a GTL plant lost in the process, making it nearly twice as polluting as burning the original natural gas. ....The environmental impact of developing unconventional oil is not the policy-makers' sole concern. Since the terrorist attacks on New York's twin towers nearly four years ago, another big concern - energy security - has shot up the agenda. Unlike conventional oil, the majority of the world's unconventional oil deposits lie within the United States and Canada. If they were to be developed it would reduce US dependence on volatile Middle Eastern countries....Charles Mattenet, strategy director at Total, argues: 'You need technology to do it and it's quite expensive, you need adequate manpower and also the whole production system provides a lot of CO2. Until you can solve that, I don't think it's possible.' ....Total, Shell and others, are working on ways to develop oil sands and shales using less water and less energy. Shell, through its Mahogony project, is looking at heating the rock underground rather than mining it first, a technology it estimates could allow light oil to be produced for $25-$30 a barrel within five years. Producing oil this way would mean burning the energy equivalent of one in every three barrels of oil produced: even dirtier than oil sands...."

The Business, 1 August 2005 Dirty Oil: the West's Saviour, the Greens' Worst Nightmare WATCH the "incredible, amazing, crazy-sensible" world of Honda's new hydrogen car marketing on television and you'll see weird cartoon rodents taking showers in squeaky clean water that pours from the car's exhaust. It's as if Honda has singlehandedly fulfilled every environmentalist's fantasy for a clean energy future: a car that plugs into your house, feeding off a hydrogen supply that also provides your lights and power. So where can you buy this ecology-preserving wonder? You can't. Despite Honda's triumphant presentation of the first "fuel cell family" - Jon and Sandy Spallino and daughters last month took to the highways of California in their new Pounds 1m hydrogen Honda - the company won't have one for sale until 2020 at the earliest. Hydrogen has been the fuel of choice for US energy futurologists and environmentalists since President Bush announced two years ago that he wanted children born then to be able to put their first car keys in a hydrogen car. Every big carmaker is working on hydrogen technology. All the auto manufacturers have hydrogen prototypes and all the oil companies - Royal Dutch/Shell, Chevron, and even Exxon Mobil - have hydrogen programmes. But even with the best will in the world, the hydrogen age is probably more than half a century away. Bjorn Skulason, managing director of Iceland New Energy, a Shell-sponsored project to turn Iceland into a hydrogen-only economy, says: "It will take at least 40-50 years before you replace everything with hydrogen," he says. That means what powers the car of the future may not be hydrogen, as Honda predicts, nor biofuels, nor electricity generated from unsightly wind turbines, but yet more fossil fuels - and dirtier ones at that. The world's never ending need for energy is about to send the global oil companies in search of a whole new barrel of nastier hydrocarbons. Last week, the oil majors were celebrating another embarrassment of riches - Exxon Mobil, BP, Royal Dutch Shell, Chevron and ConocoPhillips surpassed last year's already exceptional first half profits by xxx%, pulling in xxxxbn between them. In 2005, Exxon looks certain yet again set the record for the largest profit from a Fortune 500 company. Yet their marketing all of a sudden has taken a downbeat turn. Chevron's latest campaign warns starkly: "One thing is clear: the era of easy oil is over." Exxon's is not much more cheery: "The world faces enormous energy challenges. There are no easy answers." Some feel they are softening up consumers for difficult choices ahead. The oil industry is increasingly admitting that there are constraints on oil production. Exxon's latest energy outlook predicts that oil supply from outside the Opec cartel will peak as early as 2010. And Opec officials have privately warned that the cartel will struggle to produce the extra 20m barrels a day needed to meet projected demand by 2020. So the companies are turning to so-called "unconventional" oil - oil sands and oil shales that exist in huge quantities at known sites. The US state of Colorado and Canada's Alberta have enough in oil sands and oil shales to thrust each individually ahead of Saudi Arabia's 263bn barrels reserves. But here is the tough choice: developing these resources is an environmentalist's worst nightmare. Jeremy Leggate, the oil consultant turned Greenpeace activist turned solar entrepreneur, says: "It's suicidally dysfunctional behaviour. It's like putting your head in a paper bag and walking to the morgue. If they really do develop these things on a massive scale then we've had it." But the world's energy needs suggest this will happen. David Greene an oil sands expert at the US government's Oak Ridge National Laboratory, says: "A transition to unconventional fossil resources is the path of least resistance and the way the petroleum market will go unless there are unexpected breakthroughs in other areas or major policy actions to prevent it." What distresses environmentalists about uncoventional oil is the effort needed to extract it. Shell puts the world's largest diggers to work at its vast open pits next to the Athabasca River in Canada, gouging 100 metric tons of oil-soaked sand with every stroke. Each barrel of synthetic oil from oil sands generates roughly twice as much carbon dioxide during its production as a barrel of conventional oil and uses up the equivalent energy to one barrel of oil for every five produced. GTL is similarly wasteful, with some 45% of the gas fed into a GTL plant lost in the process, making it nearly twice as polluting as burning the original natural gas. Shell argues that its company-wide climate change targets mean that it can be relied upon to offset the extra carbon dioxide produced by oil sands with cuts elsewhere in the company and it is committed to return the land to the same state it was before the development began. The environmental impact of developing unconventional oil is not the policy-makers' sole concern. Since the terrorist attacks on New York's twin towers nearly four years ago, another big concern - energy security - has shot up the agenda. Unlike conventional oil, the majority of the world's unconventional oil deposits lie within the United States and Canada. If they were to be developed it would reduce US dependence on volatile Middle Eastern countries. So unconventional oil and gas is where the money's going. Analysts at Deutsche Bank argued last year that, from 2008, almost half the opportunities for oil companies will be in liquefied natural gas (LNG), gas-to-liquids (GTL), and the Venezuelan and Canadian oil sands. Exxon Mobil, Royal Dutch/Shell and Chevron, alongside its partner Sasol of South Africa, have pledged upwards of $20bn to turn natural gas from Qatar's enormous North Field into diesel, and a further $13bn of potential Qatari GTL projects are being considered. Canada has recently seen some $36bn of new investments in its oil sands approved. Oil sands and GTL are at the centre of Shell's plan to recover from its oil reserves crisis. It aims to be the world leader in the oil sands by the end of the next decade and to extend its dominance of the LNG market to GTL, which it pioneered with its Bintulu plant in Malaysia in 1993. It is also at the forefront of developing new technologies to improve the economics of coal-to-liquids and oil shales. Shell plans to expand its Athabasca oil sands project to take it up to 500,000 barrels per day (bpd), and aims to produce 750,000 bpd of unconventional oil by 2014 - more than 15% of its production. This summer, the US made its first moves to reappraise its vast reserves of oil shales, which have lain forgotten since the 1970s oil crash. A bill was introduced in the Senate proposing a "Strategic Fuels Task Force" which would develop a five-year plan to stimulate development of US oil shales through funding from the US energy and defence departments. The chief advantage of synthetic oil, be it from sands, coalfields or gas deposits, is that it can be fed directly into the world's existing crude markets, refined in existing refineries, and sold through existing petrol stations. Compare that with the transition to hydrogen, which would require untold billions spent on infrastructure. Petrol and diesel are among the most concentrated fuels available: running on diesel, a Mercedes can travel more than 1,000 miles on a 80-litre tank. Hydrogen, even when expensively liquefied, takes up about four times as much space for the same energy. Adding in unconventional oil transforms the outlook for the hydrocarbon economy. Drawing on numbers by former Total geologist Colin Campbell, the high priest of oil supply pessimists, Greene argues world production of conventional oil will peak around 2015. But, as conceded by Campbell's colleague Jean Laherrere, adding in reserves estimates for so called "non-conventional" oil and gas of some 900m barrels doubles the amount of world oil left to be produced, potentially extending the peak for decades. The energy minister of Alberta in Canada said earlier this year he was looking into upgrading oil sands reserves to 310bn barrels to reflect $50 oil. This would make the Canadian state the world's largest holder of oil reserves. The state presently estimates its reserves at 174bn barrels. Greene's study of unconventional oil at Oak Ridge, "Running out of and into oil", predicted that, if environmental and labour constraints could be overcome, Canada's oil sands could surpass Saudi Arabia's present production, producing 14m barrels a day of oil from 2030 and maintaining the same level of output for 20 years. The 1.8 trillion barrels of oil in the US's Green River deposit - known locally as "Saudi Arabia in the Rocky Mountains" - could produce 20m barrels a day by 2050, according to the report. Its production could even reach 40m bpd, more than is presently produced by the entire Middle East. The greens pin their hope on doubts about whether oil sands could be developed on the massive scale envisaged in the Oak Ridge report. Charles Mattenet, strategy director at Total, argues: "You need technology to do it and it's quite expensive, you need adequate manpower and also the whole production system provides a lot of CO2. Until you can solve that, I don't think it's possible. The Oak Ridge study admits that even to reach the 5m bpd that Canada is targeting for its oil sands production by 2030 will require overcoming water shortages, attracting and housing enough manpower, and finding enough gas to power the process. Total predicts only some 2m bpd will come from Canada's oil sands by 2015, and dismisses Canada's claims to hold 180bn barrels of oil sands reserves, arguing only 70bn-100bn barrels should count as economic. When Total and Royal/Dutch Shell committed to developing Venezuela's Orinoco heavy oil belt and the Athabasca sands at the end of the 1990s, it was brave move. The production is only profitable at some $25, and at the time the oil price was hovering above $10. Even now, not everyone thinks it is a bet worth making. BP has ignored unconventional oils, arguing it can make more money investing in conventional production elsewhere. Albert Bresson, Shell's head of forward planning, told The Business: "If Saudi Arabia says 'we are open for business, 20m barrels per day is no problem', we will stop developing unconventional oil." With the price of oil hovering around $60 a barrel, developments like these are probably inevitable. Mattenet says: "The beauty of heavy oil projects, like LNG and GTL, is that you have a very long production plateau and don't have a decline like you do in offshore fields." GTL plants don't make much economic sense at less than a $20 oil price, either. But the diesel produced is a ready-made high performance fuel, so pure, advocates argue, that you could drink it without coming to much harm. It can either be sold as a premium ultra-clean fuel, or mixed into standard diesel to bring sulphur levels within legal limits and boost performance. CTL would only really make economic sense at $40 oil, making it far too risky an investment for a private company to pursue without some kind of guarantee from the government. But this could be something governments with huge coal reserves and worries about energy security - namely the US, China and India, are willing to do. Total, Shell and others, are working on ways to develop oil sands and shales using less water and less energy. Shell, through its Mahogony project, is looking at heating the rock underground rather than mining it first, a technology it estimates could allow light oil to be produced for $25-$30 a barrel within five years. Producing oil this way would mean burning the energy equivalent of one in every three barrels of oil produced: even dirtier than oil sands. But Shell's chief executive Jeroen van der Veer told The Business at last week's results: "The world still needs oil and gas," he said. "So it's important that a company like Shell does a serious job." Another company could do it - and I don't have a specific name in mind - but not care about the environment." Exxon Mobil chief executive Lee Raymond argued in a recent interview with Petroleum Intelligence Weekly: "What is unconventional oil today will be conventional 20 years from now. That's the evolution of technology." Honda may have its first hydrogen car on the road, but given the potential for a new hydrocarbon age, the chances are its engineers won't be around long enough to see it sell its last diesel.

Swedish Academic Report Covering Adverse Environmental Implications Of Tar Sands Exploitation - Click Here

---

'Global Warming Turbo' x 2
What Happens To Global Warming If India Starts Going Down This Route In Addition To North And South America?

(India is likely to be underestimating the technological and logistical challenges in developing this resource. However, the implications for global warming should they be overcome are potentially devastating. Oil shale extraction has a similar or worse CO2 generation profile to tar sands. Both require high energy imput in their extraction and processing).

India has oil reserve for next 100 years SWAMINATHAN S ANKLESARIA AIYAR http://economictimes.indiatimes.com/articleshow/msid-1198474,curpg-3.cms TIMES NEWS NETWORK[ FRIDAY, AUGUST 12, 2005 01:36:16 AM] NEW DELHI: India has enough oil trapped in shale and coal deposits in Assam and Arunachal Pradesh to produce 140 million tonnes (mt) of oil per year for 100 years. This is the view of Chudamani Ratnam, former chairman and managing director of Oil India, and other OIL geologists. If so, India could become surplus in oil: its current consumption is around 110mt per year. The catch: extracting oil from shale is expensive. Back in 1990, Mr Ratnam and his fellow geologists estimated that oil from Assam’s oil- shale and coal formations would cost around $30 per barrel. That was above the world price at the time, and therefore uneconomic. But now that oil has crossed $60/barrel, the idea suddenly looks profitable. However, petroleum experts are still divided on this. Experts in the US reckon that extracting oil from oil-shale is profitable today at $40/barrel. Yet, very few companies have entered this field for fear that the price of oil will drop below $35/barrel. Extracting oil from oil-shale and coal is extremely capital-intensive. Hence, multinationals have been reluctant to invest billions of dollars in projects that could collapse if oil prices fall, as they have in past boom-bust cycles. However, petroleum experts reckon that the days of cheap oil are over, and that oil will not drop below $40/barrel in a hurry. A public sector entity like OIL could, with government financial guarantees, undertake a commercial plant. The oil-shale deposits in the North East are encountered at the surface, so mining costs will be very low. Oil-shale contains kerogen, a solid that is half-way between coal and oil. Kerogen, heated to between 400 and 500 degrees Celsius, breaks up into oil and gas. The oil yield from oil-shale is typically just 10%, so huge quantities of rock have to be mined, crushed and baked to extract the oil. Disposing of the spent shale is an environmental problem, and has held up shale-oil projects in the US. One way to bypass this problem would be in-situ extraction. This technology is not yet proven on a commercial scale. What is called coal in Assam is actually a sort of petroleum deposit. Coal is typically the carbonised remains of an ancient forest, whereas oil is formed by the decomposition of marine creatures that died millions of years ago. The “coal” in Assam is actually a marine sediment, originating in ancient algae. This has more hydrogen than normal coal, and can be converted into hydrocarbons like diesel and naphtha more easily. OIL has a tie-up with Hydrocarbon Technologies Inc, a firm currently owned by IFP of France, for converting coal into oil in a single stage.

---

Peak Oil Debate Reaches Wall St Journal

"The peak in global oil production goes beyond paying a few dollars extra to fill the gas tank... the peak isn't just an economic problem, it is one of the biggest social and political challenges for this century....The totality of impacts may force policy makers to rely heavily on the precautionary principle, which compares the costs of being correct to those of being incorrect. We know that oil production will peak within our lifetime, we think market prices may not anticipate this peak and we know that not having alternatives in place at the time of the peak will have tremendous economic and social consequences. So, if society does too much now, as opposed to later, there will be some loss of efficiency. But if society does too little now, as opposed to later, the effects could be disastrous. Under these conditions, doing too little now in the name of efficiency will appear in hindsight as rearranging deck chairs on the Titanic."
Drilling for Broke? Experts Debate 'Peak Oil'
Wall St Journal Online, 3 August 2005

http://online.wsj.com/public/article/0,,SB112298166483102477-6gMLCLIoOfpd7t41Ueb0M3Vxgr4_20060802,00.html Wall St Journal Online. Drilling for Broke? Experts Debate 'Peak Oil' August 3, 2005 Are we nearing a peak in global oil production? Soaring demand for oil in the U.S. and in booming economies like China and India has led to increased watchfulness about inventory levels among traders. At the same time, oil companies are scrambling to find new sources for crude, while investors ask more questions about firms' proven reserves. Amid all this, oil prices have been racing to nominal highs. Benchmark crude soared to a new intraday record of $62.30 a barrel on Monday after the death of Saudi Arabia's King Fahd and settled at a new closing high of $61.89 on the New York Mercantile Exchange Tuesday as gasoline futures prices soared. WSJ.com asked economist blogger James Hamilton of the University of California at San Diego and Robert Kaufmann of Boston University's Center for Energy & Environmental Studies to take a closer look at the notion of "peak oil" and explore the economic ramifications of a drop in oil production. What do you think? Share your comments on our discussion board. MEET THE PARTICIPANTS Robert K. Kaufmann is a full professor in the Center for Energy & Environmental Studies at Boston University. His research focuses on world oil markets, global climate change, the global carbon cycle, and deforestation in the Brazilian Amazon. His research efforts are reported in three books and more than 50 papers in peer-review journals. His model of the world oil market is part of Project LINK, a global econometric model that was founded by the Nobel Laureate Lawrence Klein and now supported by the United Nations. James D. Hamilton is professor of economics at the University of California, San Diego. He has written extensively on oil price shocks and is the author of "Time Series Analysis," the leading graduate text on economic forecasting. His analysis of current economic conditions and policy can be found at www.econbrowser.com. * * * Robert Kaufmann writes: You will never wake to the headline, "Today, the world ran out of oil." Rather, global oil production will rise, reach one or more "peaks," and decline. Forecasts for the peak vary between Thanksgiving of 2005 and 2050. Personally, I think global oil production will peak between 2015 and 2025 and be a greater challenge than the "looming crisis" in Social Security. The peak marks a fundamental change in oil supply. Prior to the peak, production can increase with little or no increase in oil prices. In the lower 48 states, inflation-corrected oil prices, or "real" oil prices, declined slightly between the end of World War II and 1970, but production more than doubled. After the peak, production declines, regardless of price increases. In the lower 48 states, real oil prices tripled, drilling more than doubled, but production declined about 20% between 1970 and 1985. Declining oil supplies will be a watershed in the economic history of the 21st century. Because oil readily comes from the ground and is easily refined, it generates a large energy surplus that powers the non-energy sectors of the economy, such as the transportation networks that support international trade, living patterns, and modern agriculture. After the peak, each barrel of oil will require more energy to extract. This leaves less energy to power the non-energy sectors of the economy. This reduction differentiates the peak in global oil production from previous energy transitions. As society changed from wood to coal and coal to oil, the new energy resource was "better" than its predecessor. It could be used more efficiently and generated a greater surplus. With 20 years until the peak, no fuel now being researched generates a greater surplus or can be used more efficiently than oil. * * * James Hamilton writes: I agree strongly with most of what Robert said. I think this may very well prove to be one of the most important economic transitions that many of us alive today are going to witness. Although it's true that some people are predicting that the peak in oil production will occur before the end of the year, I agree that it is likely to be a bit further down the road, though perhaps much sooner than 20 years from now. The market seems to share our view as well, since it's possible on today's futures market to buy oil for delivery in December 2011 for $60 a barrel, something to which traders would never agree if they thought world production was just about to enter the declining phase. I do think it's quite possible that global oil production in 2006 will be lower than it is now, but if that happens, it will be driven by demand reductions or geopolitical events that disrupt the flow of oil, rather than bumping up against the geological reality of which Robert is speaking. The one aspect of Robert's analysis to which I might add a qualification is the suggestion that oil prices need not rise much until after we're past the peak. While that might be true from an engineering-cost point of view, it ignores the opportunity cost. As I noted here, it makes no sense to sell oil for $60 today if you could get $200 by holding that barrel back in order to sell it a few years later. What I instead expect to see is oil prices rising gradually as we get closer to the peak and starting to rise pretty quickly once it's less than five or 10 years out. Those price rises are in fact critical for making this economic transition. * * * Robert writes: James is certainly correct -- oil prices may not rise until the peak passes, and those price rises are critical for making the economic transition. I am less sanguine than James about the market's ability to anticipate the peak and price oil accordingly. Statistical studies of futures markets indicate that the price of oil in the "outer months" (six months or a year ahead) is not a very good "predictor." In addition to the short-run economic and political complications, the market may not be able to anticipate the geology of the peak. Oil is a geological "accident"; therefore, most of the word's oil is found in a few giant fields in a few geological provinces. For example, the U.S. has more than 14,000 oil fields, but the 100 largest will yield about two-thirds of the oil ultimately produced. Large fields can maintain a steady rate of production for many years and then decline steeply. The markets' ability to anticipate the timing and rate of decline is limited by the lack of transparency. Without SEC rules that define proven oil reserves, OPEC's estimates are mix of geology and politics. This uncertainty is critical because much of the oil produced between now and the peak (and beyond) will come from a few geological provinces inside OPEC nations. Anticipating the peak is complicated further by an important political/economic mismatch. OPEC nations have much of the remaining geological supply, but have relatively little capital or political impetus to increase their ability to produce oil. On the other hand, multinational oil companies have large amounts of capital, but relatively few places where they can increase production significantly -- many OPEC nations forbid foreign investment in production. * * * James writes: Again, that's all very much true. I would perhaps express it not so much as "markets are not a very good predictor" as "nobody's a very good predictor." It's very hard to know for sure exactly when the peak is coming, for precisely the reasons that Robert gives. But any such statement invites us to look at the underlying policy question. How much should we be surrendering right now in the way of current resources, researching and developing alternatives for energy supply and utilization, and forcing consumers to pay more now in order to make sure that we save enough oil for the future? These costs in the here-and-now are most real and tangible, and yet we somehow have to weigh them against something we only see through a veil, darkly. If you ask people today to make huge sacrifices that later turn out to be unnecessary or to be following a dead-end technological alternative, you've created poverty as a deliberate object of policy. I don't see uncertainty about the world as something that would give us a good reason to prefer government intervention over market solutions; if the market is uncertain, then so should you be about what the best government policy would be. In fact, the more uncertainty we have about these matters, the more I am inclined to turn to markets to assimilate that information for us. After watching the sausage-creation of the current energy bill before Congress, I have relatively little faith that Washington is going to figure out for us exactly which technologies are most promising. But the entrepreneur who brings a workable hybrid vehicle to the market will make himself or herself quite rich. The lure of earning such profits is, in my mind, a much more powerful and effective incentive than anything that the world's leaders are likely to dream up and try to lead us to on their own. * * * Robert writes: Policy is needed to help the entrepreneurial spirit anticipate the peak, but we don't need the type embodied in the current energy bill. No serious person can believe that it will help. The current bill demonstrates that Republicans and Democrats have the same view of policy, they just give tax dollars to different groups. Sound policy should establish an economic environment that increases the economic returns and reduces the risk to long-term research and development on alternative energies. Specifically, policy should impose a large energy tax that is phased in over a long period, perhaps 20 years. Furthermore, increases in the energy tax should be "offset" by reducing other taxes, such as payroll or corporate taxes. Economic studies show that such an approach can generate a "win-win" solution -- reduce energy use (and the environmental damages not paid by users), stimulate research and development on alternative energies, and speed economic growth. Phasing in an energy tax would send a signal to entrepreneurs that there will be a market for alternative energies. The tax does not pick technologies -- that will be left to the market, which is smarter than any Democrat, Republican, or even myself! Why is such an approach needed? If the market doesn't anticipate the peak, the price signals needed to stimulate research and development may not arrive until after the peak. By then, it will be too late to avoid major disruptions. Think about the changes needed to replace motor gasoline. Society will have to retool the auto industry, alter every gas station and retrain every auto mechanic. These changes need to start before the peak. If they start after, they will add to the disruptions caused by the peak. * * * James writes: I am also very sympathetic to the idea of using taxes in this way. Usually economists look for a justification for such a policy in terms of externalities, some reason why the true cost to society of using another barrel of oil today is greater than the production-plus-opportunity cost perceived by the owners who sell the oil. I think one such externality is related to the geographic location of the remaining world's reserves. As the U.S. and North Sea reserves get depleted, the world is increasingly reliant on places like Saudi Arabia, Iran and Venezuela, whose governments are actively using the oil revenues they receive from us in ways that are very fundamentally contrary to the interests of most OECD nations. Putting a dollar valuation on this is difficult. How many more Beslan children or London commuters might be alive today if the Saudis had not poured so many billions of dollars into promoting global Wahhabism? How much freer would the people of Lebanon be without Iran's heavy support of Hezbollah? And how much of the U.S. military budget is devoted to protecting Americans from such threats? I'm not sure, but it is clear to me that there is some externality associated with the geographic realities of peak oil. There also is a classic economic externality that may lead to underfunding of basic research. For something like fusion, it is clearly unreasonable to expect the private market to invest adequate resources, because the benefits to society from a successful program exceed the private returns to individual investors. On the other hand, as you get into more specific and near-term technologies, the justification for government involvement becomes less clear. For example, producing ethanol from corn is a mature technology, and indeed, one which some studies suggest uses up more energy than it produces. Congressional enthusiasm for subsidies here may have more to do with farm politics than energy needs. Relying on governments to pick the technological winners is a risky proposition. One of the benefits of Robert's tax plan is that it adds some extra incentive for any workable solution but leaves it to the market to sort out which ones are the real winners. * * * Robert writes: The peak in global oil production goes beyond paying a few dollars extra to fill the gas tank. The 20th century could be called the "Petroleum Age." Inexpensive oil means goods can be imported and exported at little extra cost, people can live far from work and a small fraction of the work force can feed those that produce the goods and services we associate with modernity. All of this may change after the global peak in oil production. As such, the peak isn't just an economic problem, it is one of the biggest social and political challenges for this century. Government policy aimed at the next energy transition must strive for efficiency, which is a good thing, but too much of a good thing isn't good. Efficiency can't and shouldn't be the sole criterion. One can think of important and successful policies that were not guided only by principles of economic efficiency. Analyses indicate that the success of efforts to phase out CFCs (ozone-destroying chemicals) was based on what was thought to be possible, not what was economically efficient. The totality of impacts may force policy makers to rely heavily on the precautionary principle, which compares the costs of being correct to those of being incorrect. We know that oil production will peak within our lifetime, we think market prices may not anticipate this peak and we know that not having alternatives in place at the time of the peak will have tremendous economic and social consequences. So, if society does too much now, as opposed to later, there will be some loss of efficiency. But if society does too little now, as opposed to later, the effects could be disastrous. Under these conditions, doing too little now in the name of efficiency will appear in hindsight as rearranging deck chairs on the Titanic. * * * James writes: To me, "economic inefficiency" refers not to paying a little more at the gas pump, but rather to taking valuable resources and throwing them into the ocean to no one's benefit. We only have so much in the way of resources to cope with these great challenges -- only so much capital to invest, only so many geologists to figure out how to get at the oil that remains, only so many engineers to develop alternatives. It is precisely because I agree with Robert about the importance of this transition that I think it's critical that we put all our resources to their best use. And I honestly believe that the best way to ensure that happens is to count primarily on the same system that has generated the fantastic improvements in global living standards over the last few centuries, namely, individuals choosing to direct the resources they personally control to those activities that yield the highest personal reward. Yes, the risks are great here, but so are the private rewards to those who best figure out how to navigate our way through them. In so saying, let me be clear that I distance myself from those who might say that there is nothing to worry about and markets will solve everything. I think there is plenty to worry about, and markets may or may not solve the problems. But what I am saying is that I see private incentives as our best hope. Notwithstanding, I enthusiastically endorse the kinds of active government assistance for those incentives that we've been discussing. And I also applaud Robert and others who are trying to call more public attention to this issue. Surely we can all agree that greater public awareness of what is in store in the years ahead would unambiguously be a good thing.

---

Major UK Peak Oil Conference

http://www.pressbox.co.uk/detailed/International/Major_UK_Peak_Oil_conference_31769.html Major UK Peak Oil conference Added: (Mon Jul 11 2005) On 11 October 2005, in London, a major conference will look at the peak oil problem and its impact on climate change, the world's food supply and the world economy. Speakers include Michael Meacher MP, Tim Lang and Andrew Simms (of NEF), and the chair will be Dr Ian Gibson MP. The conference is being organised by East Anglia Food Link, CRed, Sustain and PowerSwitch.org.uk. The world’s oil supply is running out. Most analysts agree that once we pass the half-way point in the world’s oil reserves, production will begin to drop off as the remaining reserves are more difficult to extract. Some believe that point will come in the next 12 months, others think we have 10 years or more left. But either way, we need to prepare now by reducing our dependency on this finite resource.Oil and gas supply 85% of the energy used in the UK. By comparison, nuclear supplies 4% and renewables 1%. Can nuclear be expanded by a factor of 20, or renewables by a factor of 85? Will coal fill the gap, and at what cost to global warming? Do we have enough coal left to expand its use 12 times over? We rely on energy to produce, process and transport food. As energy becomes more expensive, will our food system revert to local production and organic methods? Can the world continue to feed itself at all without cheap energy? What steps should we be taking right now to avert future hunger? Does the end of cheap oil herald the end of globalisation? Is the notion of continual economic growth consistent with a shrinking energy supply? Some observers predict a recession of 1930s proportions, but lasting much longer. Others believe the economic system could be reinvented along sustainable lines. For more information on peak oil, see www.peakoil.net or www.odac-info.org. To join a network of individuals concerned about peak oil go to www.powerswitch.org.uk. Good books on the subject include Richard Douthwaite’s When the Wells Run Dry, Matthew Simmons’ Twilight in the Desert, and Colin Campbell’s The Coming Oil Crisis.. One-day Conference, 11 October 2005, London This conference will aim to discuss the problems arising from a peak in oil production, and to begin to plan responses to ameliorate those problems. It is aimed at policy-makers, business people, NGOs and individuals who use energy or eat food. The event will be chaired by Dr Ian Gibson, MP, Chair of the Science and Technology Committee of the House of Commons Speakers include Michael Meacher MP - Former Environment Minister Chris Skrebowski - Editor, Petroleum Review Tim Lang - Professor of Food Policy, City University Andrew Simms - Policy Director, New Economics Foundation Richard Douthwaite - Author of “When the Wells Run Dry” Keith Tovey - Reader in Environmental Sciences, University of East Anglia The conference will take place at The Insurance Hall, London EC2 from 09:30 to 4:00. The fee (including lunch) is * £50 for private-sector and public-sector organisations * £25 for NGOs and individuals Book early to avoid disappointment! For more information and a booking form, visit www.eafl.org.uk/oil

Two Day Peak Oil Seminar In Denver, November 10/11 - Click Here

---

'Peak Oil' News Clippings - Click Here

'Peak Oil' DVD Video - Click Here

'Peak Oil' Audio CD - Click Here

'Energy Updates' (If you wish to receive energy bulletin updates please send us an email with 'energy' in the subject line)

G8 On Edge Of Acknowledging Potential For Global Energy Crisis - July 2005

After Peak Oil Do We Have The Technology? - June 2005

Bush 'Energy Policy' Precipitates New Global Anti-US Alliance - May 2005

Report For US Government Warns World Oil Production Fast Approaching Peak - April 2005

Record Shell Profits Mask More Oil Depletion - March 2005

Hot Leading Energy Consultants Tell US Peak Oil To Arrive As Early As 2014 As Deutsche Bank Report Warns Of Global Conflict Over Oil And Gas - January 2005 Hot

Yukos Reserves Commandeered As UK Diplomats Are Sent Out To Beg For Oil And Gas - December 2004

BP Executive Says World Oil Output To Peak In 5 To 15 Yrs - November 2004

Top Middle East Oil Figure Says Saudis Can't Deliver - October 2004

World Oil Demand Surges As Doubts About Saudi Oil Capacity Grow - August 2004

Why The Oil Crisis Is Different This Time - June 2004

'PEAK OIL'
GLOBAL ENERGY CRISIS LOOMING
Click Here For More Information
www.btinternet.com/~nlpwessex/Documents/energycrisis.htm

No Solution In Sight? Transforming International Chaos Into Global Coherence - Click Here

---

Solar Energy, Agriculture and World Peace - click here

NATURAL LAW PARTY WESSEX
nlpwessex@btinternet.com
www.btinternet.com/~nlpwessex