Stephen James Kerr
09 August, 2003
out of the way. American capitalism has declared war on the laws of
tell the president of the United States that whatever political and
economic system we create, human beings cannot change the 1st law of
thermodynamics. We can't create energy from thin air. Big business may
be able to swindle the American electorate, but it can't repeal the
law of diminishing returns.
Capitalism has developed,
and our population has grown from one to six billion by drawing down
a massive natural gift of energy in the form of cheap crude oil.
It's half gone.
Since the mid 1990s Petroleum geologists have known that global oil
production would peak in the first decade of the 21st century and decline
forever thereafter. There is no adequate substitute for oil energy.
The peaking of production means the further growth of energy demand,
and thus of the global capitalist economy, is physically impossible.
No energy - no economy.
Below is the scenario
for world oil production predicted by Dr. Colin Campbell, in a report
The World Oil Supply 1930 - 2050, written for Petroconsultants in Geneva
in 1995. Petroconsultants, now IHS Energy is the biggest consulting
firm to the oil industry. The report cost $35,000 per copy.
This is also the
graph of our human future. All economies are energy dependent. No exceptions.
Neither capital nor labour can create energy, but rather labour must
harness energy to create and use capital. Exploiting an energy source
has to return more energy than is expended in the process, or else it's
a waste of energy. As we spend more energy, at some point we start to
get back less, despite all our efforts.
The depletion of
our finite oil reserves is bringing more and more people in touch with
this basic reality, and there is a growing movement to bring the meaning
of this crisis to the centre of public debate. The unlikely intellectual
heroes of this movement are a small collection of petroleum scientists,
geologists and dissident economists from the oil industry.
and radical economic thinker M. King Hubbert pioneered the method used
to calculate oil production peaks. The graph of production over time
looks similar for specific wells, for nations, and for the whole earth.
Hubbert discovered that depletion of oil resources over time follows
a bell shaped curve, peaking when half the oil has been extracted. This
is the 'Hubbert curve.'
In 1956 Hubbert
correctly predicted that US oil production would peak in 1970. Since
the first oil shock in 1973, the USA has been transformed from a creditor
into a debtor nation precisely because it has been forced to import
more and more of its energy. Here is the graph of past recorded and
future predicted US oil production. http://www.dieoff.com/42Countries/UnitedStates.htm
How accurate was
the Petroconsultants 1995 prediction? It's too early to tell for sure,
but so far the data suggests that they scored a bull's-eye. The Oil
and Gas Journal and World Oil publish yearly production statistics.
In 2000, world produced just over 67 million barrels of crude oil per
day. According to Kenneth Deffeyes, a retired petroleum geologist from
Shell, "2001 and 2002 didn't produce as much as the year 2000.
2003 is not off to a great start, Venezuela has been off line, Nigeria's
been off line, Iraq is a mess as far as production is concerned and
2003 is not going to make it." In 2002, global crude oil production
declined to 65,946,000 barrels per day, according to the Oil and Gas
Colin Campbell predicted
the impending production peak to the British House of Commons in 1999.
"Discovery (of new oil reserves) peaked in the 1960s. We now find
one barrel for every four we consume
No one can dispute that you
have to find oil before you can produce it. The curve of discovery clearly
has eventually to control the curve of production that follows it after
a time lag."
That time is now.
the political importance of this fact. "By 2002 or so the world
will rely on Middle East nations, particularly five near the Persian
Gulf (Iran, Iraq, Kuwait, Saudi Arabia and the United Arab Emirates),
to fill in the gap between dwindling supply and growing demand. But
once approximately 900 Gbo have been consumed, production must soon
begin to fall."
The Saudi Oil Minister knows it too. "In five or seven years, I
believe this whole question of quotas is going to be academic. Demand
is going to rise and people are going to struggle to get the necessary
investments to provide the necessary supplies," Ali al-Naimi said
at a press conference in April.
Energy analyst Bill
Powers knows it. According to Powers, Saudi Arabia's "largest field,
Ghawar, now produces over 1 million barrels of water a day along with
its nearly 4.5 million barrels of crude. With Ghawar accounting for
60% of the country's 7.5 million barrels per day of crude production,
there is little hope Saudi Arabia can keep production flat if Ghawar
continues to water out."
CEO of Simmons and Co, a global energy investment bank knows it. Simmons
was a member of Dick Cheney's Energy Task Force. "Without volume
energy we have no sustainable water, we have no sustainable food, we
now have no sustainable healthcare. What peaking does mean, in energy
terms, is that once you've peaked, further growth in supply, is over
and the issue then, is the world's biggest serious question," he
declared in April.
Former US Secretary
of Sate James Baker III knows it. Strategic Energy Policy Challenges
for the 21st Century was prepared by The James Baker III Institute for
Public Policy and the Council on Foreign Relations, and presented to
US Vice President Dick Cheney in April 2001. This report recommended
a radical review of US policy towards Iraq. At the time the Baker report
was written, the USA was purchasing on average 800,000 barrels of Iraqi
oil per day, making Iraq America's # 6 supplier.
The Baker report
notes that "a trend towards anti-Americanism could affect regional
(Middle Eastern) leaders' ability to cooperate with the United States
in the energy area," while further down noting Iraq's growing popularity
in the Arab world "for 'standing up to the United States for ten
that "the United States should conduct an immediate policy review
toward Iraq, including military, energy, economic and political diplomatic
assessments," and "sanctions that target the regime's ability
to maintain and acquire weapons of mass destruction." The goal
of this policy review - "to eventually ease Iraqi oil field investment
Bush knows it, but
he won't tell us about the real "mission accomplished" in
Iraq. Presidential Directive 13303 holds American oil companies in Iraq
immune from prosecution for their actions in Iraq, and in effect seizes
Iraqi oil revenue for dispensation as the White House sees fit. Halliburton
and other US oil concerns are now the beneficiaries of un-tendered Iraq
contracts, and their profits are already soaring - and indemnified from
lawsuits .This is about as free from investment restrictions as it gets.
Some super secret
memos of Dick Cheney's Energy Task force were recently revealed by the
US group Judicial Watch, in the midst of a lawsuit against Cheney for
full disclosure. They contained oil maps of Iraq, Saudi Arabia, Iran
and the UAE, and an accounting of oil production contracts.
It's common to say
the Iraq war was 'all about oil,' but the true meaning of that statement
is only revealed in world oil production trends.
Production in North
America is already on the decline, while OPEC and Middle Eastern producers
will be able to maintain their peak levels for several more years before
their wells start to run dry. This will give OPEC, mostly Muslim states,
growing economic and political power - the power to use the price of
oil as a political weapon against the United States.
This is the nightmare scenario for US capitalism. In 1973, OPEC stopped
selling oil to the United States in protest of American support of Israel
in the Yom Kippur or Ramadan War. Without a supply of cheap energy,
the US economy went into deep recession. In the 70's there were other
'swing' oil producers like Venezuela who could step in to fill the supply
gap. Today total global energy supplies are set to decline, and our
economy cannot grow beyond its energy budget. Our civilization will
instead decline with its energy budget, while the president tells Americans
to line their safe rooms with duct tape, and hug the children.
But nobody on earth
is safe from the laws of physics, not even the Bush Cartel. As production
declines, extraction efforts are subject to the law of diminishing returns.
After the easiest to extract oil is gone, wells must be deeper, and
ever more energy expended to maintain existing production levels.
According to Walter
Yongquist, "The most significant trend in the US oil industry has
been the decline in the amount of energy recovered compared to energy
expended. In 1916, the rate was 28 to 1, a very handsome energy return.
Today the rate is 2 to 1, and dropping." By 2005, it will cost
a barrel of oil energy to extract a barrel in the USA, and American
domestic oil production will no longer be profitable.
The quality of the
oil found is also declining. In August 2000 the International Energy
Agency noted "Continuing high prices are not just a matter of refining
capacity. Much of the new crude oil coming on the market is heavier
and higher in sulphur than the light crudes usually used to make gasoline.
It will be difficult and expensive to refine into gasoline, particularly
gasoline meeting the new standards." We've caught the biggest fish,
and we've sucked the sweetest crude.
Though oil may indeed
remain in the ground, at some point it ceases to be a resource, and
becomes an energy "sink," because it takes more energy to
extract the oil than the oil contains. The available energy alternatives,
mostly solar and wind power, offer only diluted energy substitutes (not
as powerful a fuel source as oil) and the US elite is unwilling to make
an organized transition to renewable energy, fearing loss of social
and economic control such transition would entail. The American consumption
boom must end, but who will tell the people?
This is the secret
ticking time bomb under the feet of Dick Cheney and George W Bush. The
US has 3% of world energy resources, but uses 28% of those resources,
and the USA is no longer geographically situated to exploit them. Oil
is capitalism's crack cocaine, and the Bush gang is waging a turf war
to keep it coming.
With this understanding
of oil production trends, the seemingly insane actions of the Bush White
House reveal a consistent, if desperate internal logic - the US ruling
class embarks upon its strategy of global Empire out of desperation
at its incredibly weak underlying position. American capitalists feel
compelled to rule oil producing nations like Iraq, Saudi Arabia and
Iran as direct colonies in order to stave off their own collapse. It's
a strategy adopted by Imperial Rome, the British Empire, and others,
but investments in Empire are also subject to the law of diminishing
In order to conquer
and hold its Empire, American capitalism must increase its investment
in the military, an organization which cannot account for one trillion
dollars of its own spending. Bush's Pentagon budget is the biggest in
history - over $400 billion per year, but so is the $455 billion US
budget deficit. The Washington Post recently noted that "The defense
budget is set to grow over the next few years faster than the forecast
growth in the economy." How long is America going to shut down
schools to build bombs? Ultimately investments in the military must
be accounted for as investments to control and extract resources, the
most important of which is oil energy.
The American created
'Cold War' spent the Soviet Union into the ground. The peak oil crisis
- the so-called 'war on terror' - will do the same for America and the
globalized industrial economy. No campaign of precision bombing can
stop this process of American decline.
Over time, the investment
in Empire - soldiers, bombs, bureaucratic administration, prisons -
required just to maintain the energy flow into the capitalist economy
will exceed the net energy return on that investment, in fact such a
point may come sooner than later. After the American attack on already
devastated Iraqi oil infrastructure "Iraq is planning to export
only 8 million barrels of oil in July a small fraction of its prewar
output," according to the International Herald Tribune.
Factor in the effective
loss of the number six US oil supplier (Iraq) with the staggering stupidity
of a US Congress so in bed with big oil and big auto that it steadfastly
refused to raise fuel efficiency for US cars this week - insisting instead
on the patriotic waste of fuel - and one gets a glimpse into the American
oil economy brain trust.
can also be seen in the latest statement of the US Commerce department.
"The strongest wave of federal defense spending since the Korean
War helped fuel U.S. economic growth at a stronger-than-expected 2.4
percent annual rate in the second quarter
" it informs us.
This is tragedy, though the US government paints it as an indicator
that "The economy truly does look to be on the mend." Apparently
the military state has now supplanted the market as the driver of the
US economy, under a 'free market' administration. This 'growth' will
create few jobs, yet provide the means to kill many more surplus workers
- victory over terrorism surely.
Each passing day
on the 120 degree sands of Iraq reveals America's imperial overstretch.
Iraqi guerilla resisters kill American soldiers daily, while the survivors
demand to know why they can't go home. There are many reports of vicious
abuses conducted by American troops, and hundreds of unreported deaths
and injuries. Over half of the US armed forces are committed overseas,
'bringing democracy' we are told, and there is talk now in Washington
of a bigger US Army to meet the rapacious demands of the new imperial
strategy. That means a draft of surplus male workers, increased repression
As for the battle
of ideas - tens of millions against the war on the streets of the world
and the demonstrations in Iraq today prove that our hearts and minds
were set against the Empire before the first shot was fired. Even the
Democrats are waking up. And so now in Washington there is a great falling
out among thieves as it all unravels.
The aftermath of
the Bush government's refusal to de-classify 28 pages of incriminating
information in the Congressional report on the terrorist attacks of
9-11 must now crack wide open a public debate about the consequences
of American oil dependency. Though Saudi government agents likely had
a hand in the plot, the United States did not dare attack its most important
oil supplier until it was better prepared. Did Karl Rove think it better
to make regime change in Saudi Arabia in 2004, from secure bases in
Iraq and Afghanistan, and right in time for an election draped in khaki
bunting? We shall see.
The Imperial strategy
will fail for America just as it failed for Rome. Joseph Tainter notes
that "As the marginal return on investment in Empire declined,
major stress surges appeared that could scarcely be contained with yearly
imperial budgets. The Roman Empire made itself attractive to barbarian
incursions merely by the fact of its existence."
It truly is "déjà
vu all over again." Today, the US Army describes itself in Iraq
as "a magnet for terrorism," while it is becoming clear to
many that American policies are not making Americans safer, but rather
endangering the entire planet as America's increasing energy dependence
to maintain its obscene consumption levels demands the violent expropriation
of the wealth of other societies; ultimately futile investments in death.
The sack of Rome
ushered in a long era of decline that historians call 'The Dark Ages.'
Faced with the onset of another such age, we must organize against the
American government plan to "bring it on."
Stephen James Kerr
is an investigative reporter and analyst based in Toronto, and the co-host
of Newspeak, a news radio show on CIUT 89.5 FM. www.ciut.fm