Lethal Trajectories (61 page)
Oil choke points:
With thousands of miles of exposed pipelines, a concentration of oil-processing facilities and ports, and daily shipments comprising about 50 percent of the world’s oil supply via massive tankers, oil-distribution channels are very vulnerable to disruption. The security challenges are compounded by the
choke points
through which most of tankers travel to reach their final destinations. A choke point is a narrow channel of water along a widely used global sea lane. For illustrative purposes, consider just four of the choke points through which roughly 43 percent of all global oil passes daily:
The Strait of Hormuz is the most critical choke point, given the volume of oil flowing through it and the sensitivity of the area. It is an S-shaped waterway leading into the Gulf, only twenty-one miles wide at its narrowest point between Oman and Iran.
Iran and Iraq:
Both countries play a significant role in the Middle East and within OPEC. Iran has become a flashpoint in the area due to its size and aggressive foreign policy. Considered a threat by the UAE and Saudi Arabia, it will become more dangerous if it secures nuclear weapons (as assumed in this book). Iraq has an opportunity to become the number-two oil producer in OPEC. With foreign capital and technological support, its oil production is expected to double or triple in the coming years—perhaps more—if it can remain free from conflict-induced delays in its efforts.
Perfect Storm metaphor:
Please refer to the notes for chapter 50.
Al Jazeera:
Al Jazeera is a worldwide satellite television network launched in 1996. Headquartered in Doha, Qatar, it is probably the most-watched news channel in the Middle East. It has worldwide range, with English-language versions and websites disseminating additional information. It is well financed and currently has more than sixty news bureaus, with twelve in Africa alone. While accused by some of having strong biases, it is generally considered trustworthy by its news followers.
Israeli nuclear capabilities:
Israel is widely believed to have a formidable nuclear arsenal, although it has not been formally or publicly acknowledged. It maintains a policy known as “nuclear ambiguity.” Israel is believed to possess anywhere from seventy-five to four hundred nuclear warheads with effective delivery systems including the Jericho III ICBM, submarines (five modern German-built
Dolphin-class
submarines with cruise missile—carrying capabilities), and a modern air force, soon to be supplemented by American F-35 fighter-bombers. The Negev Nuclear Research Center in Dimona, in the Negev desert, is believed to be the epicenter of Israel’s nuclear program.
The Samson Option:
This term, inspired by the biblical figure of Samson, was created by Israeli leaders in the 1960s to describe their strategy of massive nuclear retaliation against nations threatening the existence of Israel through a military attack. While it was designed as a strategy of last resort, it gives Israel enormous deterrent leverage against would-be attackers. No nation has attempted a direct attack against Israel since 1973, and one can assume that the Samson Option and Israel’s capability and willingness to carry it out is well known by potential adversaries. Author Seymour M. Hersh provides a fascinating account of the development of Israel’s nuclear power in his book,
The Samson Option: Israel’s Nuclear Arsenal and American Foreign Policy
(Vintage, 1991).
Israeli oil discoveries:
Recent discoveries of huge offshore natural gas fields ninety kilometers west of Haifa may go into production as early as 2013. Other offshore gas and oil sites also look promising: an estimated oil reserve of as much as 1.5 billion barrels may exist in the Rosh HaAyin area east of Tel Aviv. Such finds will reduce Israel’s energy dependence, and some even see Israel as a net energy exporter in the future.
Domestic rationing:
The idea of domestic rationing is not new to the United States. It was used extensively and successfully in World War II and controlled such items as gasoline, fuel oils, tires, cars, sugar, coffee, meats, and other commodities. Rationing stamps were issued according to needs tied to the war effort. Rationing also inspired massive recycling programs to support the war effort. (Recycled aluminum cans meant more ammunition for soldiers.)
Some have suggested that rationing today would be all but impossible, and indeed it would be without a clear political will to set it in motion. However, faced with a crisis of Pearl Harbor proportions, Americans are capable of extraordinary things. From purely a transactional standpoint, newer technologies such as stored value cards would make rationing infinitely less cumbersome than the ration stamps used in WWII. Rationing is indeed doable and likely to occur in some form as world demand for oil and other resources exceeds the supply available. De facto rationing exists now in the form of higher prices at the pump for gasoline.
Co-operative models:
Almost thirty thousand cooperatives now exist in the United States. Owned and operated by their members, cooperatives provide goods and services that meet the specialized needs of its members, often items not readily available elsewhere at the price, place, time, or quantity desired. In most areas they are locally owned and highly responsive to the member/owners they serve.
The utility of oil:
In addition to being superb energy sources, oil and natural gas are critical components in the manufacture of goods and services. Among other things, they are used for lubricants, fertilizers, herbicides, plastics, paints, solvents, antihistamines, and literally thousands of other products and services. Any price increases or shortages in the supply of oil and natural gas will have a significant across-the-board multiplier effect on the prices of goods and services in which they are a basic component.
The perfect storm metaphor and the lethal trajectories of that storm’s components are highlighted in this chapter. Because of the metaphor’s critical importance, I will explain further some of its highlights in this section:
The perfect storm and its lethal trajectories:
The perfect storm is now an active work in progress, and the forces driving it are on a collision course. As the forces collide to produce a critical mass, they could trigger a chain reaction of devastating proportions—similar to atoms colliding in a nuclear explosion. Key components and trajectories are as follows:
1) Energy shortages:
The modern industrialized world was built on cheap energy and the mobility and movement of people, goods, and services. In this milieu, King Oil, the dominant fuel for planes, trains, cars, trucks, and ships, has no appreciable rivals—at least not on a scale that matches its utility, portability, and power punch.
The days of cheap oil and energy are over, and their loss brings a paradigm shift the world has yet to acknowledge, much less make. As future oil shortages intensify, the access and affordability of oil will become increasingly problematic. Without alternative fuels and an energy infrastructure of sufficient scale to replace oil, productivity will sputter and along with it the economic engines of growth. As the effects are increasingly felt throughout the economic food chain, the global economy will worsen and geopolitical stability shaken. Poorer nations will be first to feel the pinch, but the ultimate relative impact on oil-dependent OECD nations will be worse. The GDPs of most countries will stagnate, and unemployment will remain chronically high as a greater percentage of discretionary income is directed toward food, energy, and heat rather than the more economically stimulating consumer goods and services.
2)
Environment and ecology:
Climate-change trajectories and greenhouse gas build-ups, though quantifiable, have been ignored or denied. Droughts, desertification of arable land, and extremes in weather patterns will increasingly hinder agricultural production, and global food prices will increase as the cost of fossil fuel-based fertilizers, herbicides, and pesticides skyrocket. Freshwater shortages will reach critical points as aquifers worldwide are depleted. Oceanic acidity levels will threaten coral reefs and other underwater ecosystems, and the ocean’s food production capacity will falter. Erratic weather patterns will intensify, and a variety of land-based ecosystems will be put at extreme risk.
The toll on mankind will be taken in the form of famines, mass migrations, and regional wars fought over freshwater and other national resources. Poorer nations and areas located close to the polar regions will be early sufferers of climate-change. As the world population grows, the competition for scarce resources will intensify.
3)
Economic and geopolitical forces:
The high debt-to-GDP ratios of a growing number of nations and their ability to meet entitlement obligations and service their debt in a zero-growth economy will be problematic. Revenue-starved governments will increasingly resort to the printing press to monetize debt and meet their financial obligations. With currencies devalued, the price of precious metals and commodities will skyrocket. The devaluation of the dollar will adversely affect almost everyone through a loss in buying power—particularly anyone on a fixed income.
The powerhouse economic status of the United States will be increasingly contested by China and others as the dollar’s fiat currency reserve status is challenged. The petrodollar transactional system might also be morphed into a basket-of-currencies system. The United States’ financial independence and options will be increasingly threatened by the foreign debt taken on to finance its deficits. With the continued devaluation of the dollar, the threat of foreign capital disintermediation from U.S. institutions cannot be taken lightly. The cost of capital and pressures on long-term rates needed to retain foreign investments will crimp economic growth. As the percentage of GDP allocated to debt financing, entitlement payments, and the military increase, little will be left for infrastructure development and growth. Clearly, America’s long-term debt position has become a major political issue in the 2011 budgeting debates in Congress.
The geopolitical balance of power will shift as OECD economic growth stagnates and developing nations such as China, India, and Brazil grow. The balance will also shift toward OPEC and oil-exporting countries at the expense of oil-importing nations. Among OPEC producers, Saudi Arabia will remain the powerhouse with its large proven reserves and daily production capacity. The economic cold war between China and the United States over scarce resources will continue. China will gain ground at the United States’ expense as it continues to focus on long-term strategic and infrastructure objectives—such as locking up long-term oil leases, garnering new markets, growing its strategic military capabilities, and becoming a leader in renewable energy systems—while the United States worries about the next quarterly earnings cycle or election.
4) Behaviors and expectations:
Since the end of WWII, the American Dream made possible by cheap and abundant energy has become symbolic of the American way of life. For many, the expectation of unlimited growth and prosperity has translated into a sense of entitlement that every generation ought to live better than the previous one. Indeed, the American Dream has been exported. China and India, for example, are now experiencing a similar sense of upward mobility as their middle classes expand, car ownership increases, new highway systems are constructed, and diets heavy in meat and dairy products become more prevalent. The challenge, of course, will be to find the finite global resources needed to support the growing per capita consumption habits of their collective populations—about seven times the size of the United States.
While the perfect storm will eventually stifle these expectations, disconnects between the new paradigm and past expectations remain. For many, there is a deep uneasiness about the future and where today’s problems will lead. As old-paradigm solutions continue to be unsuccessfully applied to new-paradigm challenges, the level of frustration will grow. This disconnect will continue until we recognize and acknowledge the true nature of the perfect storm and new realities it entails; when we do, we will hone down our expectations and learn to live with less—we will have no other choice.
Triggering mechanisms:
Any of the above threats could destabilize the global community. Combined, they could produce an explosive synergy that overwhelms the system. As conditions worsen, the perfect storm will draw ever nearer. It could come like a chronic disease with a progressive worsening of symptoms, or it could come as a big bang, triggered by a devastating event such as a complete global economic meltdown (which nearly happened in 2008), a nuclear confrontation of some sort, or the sudden and dramatic loss of a significant percentage of the oil supply, to name a few.
In this book, the sudden and dramatic drop in global oil supply was the trigger for the perfect storm that followed. The shocking effect on the United States was likened to the aftershocks from Pearl Harbor, and like Pearl Harbor it energized the nation and created the political leverage needed to impose the draconian measures required to survive.
Pearl Harbor transformed the United States almost overnight from a sleepy, isolationist country to an arsenal of democracy and world power. In quick order, fifteen million people were put in uniform, an entire economy was placed on a wartime footing, an atomic bomb was built, an axis enemy was beaten soundly, and enough was left over to finance the rebuilding of Europe through the Marshall Plan.
An aroused and galvanized America is capable of great things, but it takes a major crisis to reach that point. Absent a crisis, the tendency is to look for quick and painless short-term fixes that do little to resolve the long-term challenge—akin to rearranging the proverbial deck chairs on the
Titanic.
Perhaps a major oil crisis, as suggested in this book, would be a blessing in disguise in the long term, painful as it seems. Paradoxically, the perfect storm poses such a crisis, but we are not responding. We don’t even know it is coming.
Presidential powers:
In addition to the explicit powers of the presidency set out in Article II of the Constitution, the position carries a number of implicit powers granted by Congress and, of course, by the bully pulpit of the presidency. These powers are available to a president hoping to garner support from an engaged constituency. Presidential powers are far-ranging and almost always extended in wars or emergencies. Much can be done without the approval of Congress, including use of executive powers to direct federal agencies; wartime powers as commander-in-chief; executive agreements with foreign countries not requiring a formal and ratified treaty; and emergency powers to meet a myriad of emergencies.
American history abounds with stories of presidents pushing the limits of their power, usually in wartime and emergencies. Given the use of their bully pulpit and a propensity for Americans to support their president in times of crisis, the scales weigh heavily in the president’s favor. But over time, after the crisis subsides, the executive branch seems to fall back into equilibrium with the congressional and judicial branches.
Smart grid systems:
This power-grid infrastructure uses digital technology and a two-way communication system between the power supplier and the end user of the energy. With sensors, measurement and control devices, smart meters, and other “smart” systems, it regulates the production, transmission, distribution, and consumption of electrical power on an as-needed basis. Its full potential could be realized by developing a national, interconnected power grid with high voltage power lines “smartly” connected to local utilities and distantly located power facilities.
A smart grid power structure is a prerequisite to optimizing the long-distance transfer of renewable energy. It would allow for distributing solar power from Arizona to factories in the Midwest, or wind-farm energy from Minnesota to handle midafternoon peak loads in Nevada. The book envisions a national energy grid highway plan reminiscent of President Eisenhower’s initiative to build a national highway system to move automobiles in the 1950s.