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