The Oil Drum

The Hegelian situation in the Middle East is an outgrowth of our current policy of oil hegemony in the region. In turn, our policy is a direct result of our dependence on oil. As one has fed the other, terrorism, instability, and extremism provided a reason for the US to place forces and exert military influence on a vital energy supply.

This year, geopolitics will face severe political strain that will result in an increased likelihood of broadening conflict. These strains include:

1. An increasingly apparent worldwide energy crisis resulting from the inability of world supplies to meet demand.

2. A growing and increasingly critical world food crisis.

- Increased energy costs are resulting in increased food costs and reduced availability.
- Climate change is beginning to severely impact food production in North America, Australia, Africa, India, Pakistan and China (among others).
- Climate change is resulting in severe water shortages worldwide which also places a constraint on food production.

3. A substantial transference of wealth to extreme and unstable regimes worldwide due to the high cost of oil. This transference of wealth and power enables various extreme elements worldwide to develop militaries and meddle in the economic and political affairs of countries worldwide.

4. China entering a state of emergency with regards to food and fuel. Though subsidies will continue to protect the rapidly growing economy, cracks will begin to appear in the subsidies regime. As limits to growth become apparent, China will be increasingly pressed to secure food and fuel through means outside of the usual economic and diplomatic channels. Furthermore, increased competition between the US and China over less available fuel reserves will result in a second world 'powder keg' of, perhaps, equal importance to the Middle East. If the current combination of fuel, food and climate trouble continue, in 5-15 years, famine becomes a very real possibility in China. Will China accept this fate quietly?

5. U.S. military presence in the Middle East is seen, increasingly, throughout the world as an occupying force whose primary purpose is to control its vast fuel reserves.

6. On the flip side, tightening supplies of oil and the threat of shortages in the US will place pressure on all policy makers in Washington -- both Democrat and Republican -- to flex the US's military muscle in the region and across shipping lanes to further control world oil supply. If tensions erupt in the region or other powers (eg China) make a military play the result will be another increase in US military action in the region. If the past is any oracle, this kind of destabilization will result in reduced supply of oil worldwide.

7. At home, the US presidential race will become increasingly contentious as candidates find a wide variety of firebrand issues to debate. The result is a public increasingly informed of the evolving crises. In this case, information could well result in hoarding and place further strain on food and fuel. As leadership figures clearly realize this, they will walk a tight line between providing information to galvanize public opinion and feeding fear.

8. In the US, overextended financial systems will face reduced flexibility due to the economic constraints of high energy costs. Without a lowering global cost of energy, primarily oil, financial systems will struggle to recover. Any permanent recovery must come with the support of increased supply and/or efficiency.

9. No one clearly knows what's in store with regards to climate change. It seems likely melting in the Arctic and Greenland will continue to some degree. But at what level remains unclear. 2007 exceeded all prior estimates by a terrifying degree. If 2008 was anything like 2007 the results would be very grim indeed. The most likely scenario is a slower increase in melting or even a small build back of arctic sea ice from last year. Greenland glacial melt would likely continue at 2007 rates. Any further substantial reductions in summer sea ice and increases in Greenland glacial melt would be an indication that some tipping point has been crossed and that world climate change is accelerating far more rapidly than previously expected.

FINAL ASSESSMENT

If GREEN = smooth sailing
and YELLOW = increased danger of world conflict and energy crisis with some visible and obvious strains resulting in higher prices and visible economic impact.
and RED = substantial visible world crisis in energy with a high economic impact resulting in a worldwide economic slowdown and potential recession among major economies. In this scenario significant geopolitical conflict is a high likelihood.
and BLACK = critical world energy crisis with severe economic impacts and geopolitical conflict over energy in full swing

Then next year looks to be a RED one. Four inter-related crises -- energy, food, climate, and finance -- are all substantial dangers to world economies and political systems. Though these crises have not yet reached a critical stage, there is considerable danger they will in the future as, without a major change in the world's energy infrastructure, all are likely to stick around or even worsen. The result is an increase in the likelihood of new moderate to severe conflicts worldwide.

It is important to note that, even in GREEN years (2001) the geopolitical tension surrounding oil was enough to result in conflict. By comparison, the past RED and YELLOW years of the 1970's and early 1980's resulted in the Carter Doctrine which has necessitated US forces in the Middle East over the past three decades. During the oil crisis of the Nixon Administration, the primary hold to US use of military force to secure oil was the threat of Soviet nuclear retaliation. In the current age, there is no such constraint.

All years after 9/11 were YELLOW. 2008 is the first RED year this decade.