National Security

Key Points

Risks from oil depletion (see: The Oil Crunch, securing the UK's energy future)

  • Shell expects:
    • Energy demand will increase for decades
    • "Easy oil" supplies cannot meet this demand alone
    • "Increased use of energy means rising greenhouse gas emissions at a time when climate change looms large as a critical issue."
    • Little spare capacity of manpower, drilling rigs
  • IEA 2007 reference scenario expects annual production growth of 1.3%/yr.
    • Production growth over previous 25 years was 1%/yr
    • Non-OPEC growth in that time was 1.1%/yr, OPEC was 0.9%/yr
    • Non-OPEC production expected to be level for next 30 years, hence OPEC growth will need to be 1.8%/yr to make up for demand.

“The oil investments required may be much, much higher than what people assume. This is a dangerous situation.”
….“We are of the opinion that the public isn't aware of the role of the decline rate of existing fields in the energy supply balance, and that this rate will accelerate in the future.”
- Fatih Birol, IEA chief economist

  • Global peaking will create far greater geopolitical side-effects, even in regions with stable or rising oil production (Geopolitical Peak Oil Feedback Loops Revisited (Jeff Vail))
  • 1. Return on Investment: Increased scarcity of energy, as well as increased prices, increase the return on investment for attacks that target energy infrastructure.
  • 2. Mercantilism: To avoid the dawning “bidding cycles” between crude oil price increases and demand destruction, Nation-States are increasingly returning to a mercantilist paradigm on energy. This is the attitude of “there isn’t enough of it to go around, and we can’t afford to pay the market price, so we need to lock up our own supply.”
  • 3. “Export-Land” Model: Jeffrey Brown (westexas on The Oil Drum), has proposed a geopolitical feedback loop that he calls the export-land model (most recently discussed in his Iron Triangle post).
  • 4. Nationalism: Because our Westphalian system is fundamentally broken, the territories of nations and states are rarely contiguous.
  • 5. Privateering: Nationalist insurgencies and economies ruined by the downslide of the “export-land” effect will leave huge populations with no conventional economic prospects. We are seeing exactly this effect in Nigeria.

Are the Government's Energy Statistics Reliable Enough?

  • Long considered "the gold standard" of energy information, the numbers from EIA, which is run by the Department of Energy, are regularly cited by the media and politicians alike.
  • Budget shortfalls, large staff cuts, and neglect under past administrations, observers say, are compromising both the quality and quantity of EIA's data, leaving the agency frustratingly handcuffed as energy markets are moving faster and becoming increasingly complex.
  • In 1981, the EIA's budget was $90 million. Today, in real terms, it's less than half that.
  • Without resources to track foreign oil markets, observers say, EIA underestimated China and India's rising oil use. Then, last year, it initially failed to register how quickly U.S. oil demand was falling, partly because it has limited resources to monitor biofuels.

Will US, China face off in Africa over oil reserves?

  • China, now the world's number two oil consumer, has spent decades currying favor with African nations.
  • In February [2009], Chinese president Hu Jintao made a four-country African tour, during which he signed loan and aid deals worth more than $100 million, according to a South African news Web site, www.iol.co.za.
  • Kwong does not expect these low prices to last more than a few months to a couple of years. In his Hong Kong Economic Times article he stated, "It can be scientifically proven that the world oil reserve is 1,262 billion barrels and the world population is growing steadily…. Based on the present daily consumption of 80 million barrels (per day) and the rising oil demand it is estimated oil supplies will be depleted by 2050."

The Imminent Crash Of The Oil Supply

Exporting countries depend on oil revenues to maintain political stability


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