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Of course, our government has been aware of Peak Oil since the 50's when M. King Hubbert was speaking out about it while the rest of the oil industry tried to portray his stance as Chicken Little. But once the United States peaked in 1970, our government had an economic imperative to pay attention to the ramifications. This CIA study, declassified almost 6 years ago, along with Richard Heinberg's brilliant analysis, illustrates how: August 15, 2003, 1200 PDT, (FTW) -- A recently declassified CIA document casts new light on some of the most significant geopolitical events of the past quarter century. This document, an Intelligence Memorandum titled "The Impending Soviet Oil Crisis (ER 77-10147)," was issued in March 1977 by the Office of Economic Research and classified "Secret" until its public release in January 2001 in response to a Freedom of Information Act (FOIA) request. (1) Until now, the document has prompted little discussion.
The Memorandum predicts an impending peak in Soviet oil production "not later than the early 1980s" (the actual peak occurred in 1987 at 12.6 million barrels per day, following a preliminary peak in 1983 of 12.5 Mb/d). "During the next decade," the unnamed authors of the document conclude, "the USSR may well find itself not only unable to supply oil to Eastern Europe and the West on the present scale, but also having to compete for OPEC oil for its own use." The Memorandum predicts that the oil peak will have important economic impacts: "When oil production stops growing, and perhaps even before, profound repercussions will be felt on the domestic economy of the USSR and on its international economic relations."
The significance of the document requires some unpacking. First, we must understand the historical context in which it appeared.
Oil production in the US had peaked in 1970, just a few years earlier. This was arguably the most important economic event of the past half-century: until then America was the world's foremost oil producer; for much of the twentieth century it was also the world's foremost oil exporter. American oil won both World Wars for the Allies and made the US the world's richest and most powerful nation. Meanwhile, throughout most of this same period the USSR remained the world's second foremost oil-producing nation.
The American oil peak signaled the end of an era: from that point on, the US would become increasingly dependent on imports—and this dependence would entail serious costs, as became apparent with the Arab OPEC oil embargo of 1973, which sent the US economy into a tailspin. (2) Clearly, CIA analysts in 1977 understood the importance of the American oil peak and believed that a peak of petroleum production in the USSR would have similar or even graver consequences for that nation.
This much is clear and undisputable. Less clear is what was done with the information. Soon after assuming office in 1981, the Reagan Administration abandoned the established policy of pursuing détente with the Soviet Union and instead instituted a massive arms buildup; it also fomented proxy wars in areas of Soviet influence, while denying the Soviets desperately needed oil equipment and technology. Then, in the mid-1980s, Washington persuaded Saudi Arabia to flood the world market with cheap oil. Throughout the last decade of its existence, the USSR pumped and sold its oil at the maximum possible rate in order to earn foreign exchange income with which to keep up in the arms race and prosecute its war in Afghanistan. Yet with markets awash with cheap Saudi oil, the Soviets were earning less even as they pumped more. Two years after their oil production peaked, the economy of the USSR crumbled and its government collapsed.
Did the Reagan administration base its Cold War strategy on the CIA study, in the expectation that a Soviet Union economically weakened by oil depletion would collapse if pushed hard on other fronts?
That question is mostly of historical interest. But the Agency's focus on the phenomenon of oil peaks has important implications for the present. For the past decade, oil experts have been debating when global oil production will peak. Pessimists say the global peak may already have occurred in 2000; optimists say it won't come until 2025 or so. A growing consensus of petroleum geologists places this pivotal event in the mid-range period of 2006 to 2015. (3) From a certain perspective, the amount of time in dispute is not of great significance: whether we have a year or two or a decade or two before the supply of oil can no longer meet demand is relatively trivial from a historical, analytical point of view (though of considerable significance for billions of individual humans needing to make plans for the years ahead); the result in either case will be the same—a slow motion global economic and industrial collapse.
The 1977 CIA document shows clear and detailed awareness of oil issues, including depletion, extraction technologies, pipelines, areas of likely new discovery, the quality of existing reserves, and the dynamics of the global oil market. The CIA has obviously been studying oil very carefully for some time and must therefore understand the issue of global oil peak.
This begs the questions: Does the Agency have a strategy for dealing with this impending mega-event? Or is the Agency's job merely to provide information, and allow the current Administration to formulate policy?
Here we must speculate. The developing semi-public row between the neoconservatives of the present Administration and CIA insiders suggests that the Bush team's plan for invading Iraq and subsequently redrawing the map of the Middle East may not exactly coincide with Agency recommendations. We know that the Bush-Cheney team is independently aware of the issue of peak oil because international oil investment banker Matthew Simmons, who has written extensively and forcefully on depletion issues, was an advisor to Vice President Cheney's now-infamous Energy Task Force in 2001. (emphasis added)(4)
If policy makers and their intelligence analysts understand the phenomenon of peak oil, and perhaps even used it strategically during the 1980s to undermine the Soviet Union, and are aware of the upcoming global peak, they must be interested to direct geopolitical events accordingly. What thoughts may be occurring to them in this regard?
The Middle East boasts 70% of global proven reserves of oil. Saudi Arabia has the world's largest reserves (25% of the total), and most of the 9/11 hijackers are alleged to have come from that country. Osama bin Laden is a Saudi native, and his published statements center on the project of ejecting American influence from the nation of Medina and Mecca.
If, as the neoconservatives have repeatedly hinted, Iraq is only the first stage in a larger project of regional regime change, then the real prize must lie just to the south in the giant fields east of Riyadh. One cannot help but wonder if the long-coddled Saudi government is even now being set up for a fall.
As events unfold, it will be of more than passing interest to see whether the CIA and the Bush Administration reconcile their differences, or whether the neoconservatives' hubris and ideological monomania will be their undoing.
Meanwhile, the real motives and long-term strategies of policy makers and intelligence gatherers alike will likely remain opaque to citizens who pay in blood and dollars for their government's military adventures. "The Impending Soviet Oil Crisis" gives us a rare, limited glimpse into the machinery of covert information analysis and decision-making that shape history as we live it.Notes 1. To access the document, go to the web site http://www.foia.cia.gov. In the document search field type <er 77-10147>. http://www.fromthewilderness.com/free/ww3/081503_cia_russ_oil.htmlIn addition to my added boldprint highlighting Cheney's knowledge via Matthew Simmons' advisory capacity on Cheney's Energy Task Force in 2001, Cheney himself indicated his knowledge regarding these issues in public comments on the record from 1999 in a speech to the London Institute of Petroleum. I think Kjell Aleklett's analysis sheds some light on Cheney's motivation: In the April 2004 issue of the magazine the Middle East I found a statement that Vice- President Dick Cheney had made in a speech at the London Institute of Petroleum Autumn lunch in 1999 when he was Chairman of Halliburton. A key passage from his speech was: “That means by 2010 we will need on the order of an additional fifty million barrels a day.”
It suggested that he was fully aware of the issue of peak oil. A full text of the talk had been available on the website of the Institute of Petroleum, but has now been removed (wwww.petroleum.co.uk/speeches.htm). Nevertheless, further research did bring to light a printed version, dated 24.08.00, as follows:
Dick Cheney: “From the standpoint of the oil industry obviously - and I'll talk a little later on about gas - for over a hundred years we as an industry have had to deal with the pesky problem that once you find oil and pump it out of the ground you've got to turn around and find more or go out of business. Producing oil is obviously a self-depleting activity. Every year you've got to find and develop reserves equal to your output just to stand still, just to stay even. This is as true for companies as well in the broader economic sense it is for the world. A new merged company like Exxon-Mobil will have to secure over a billion and a half barrels of new oil equivalent reserves every year just to replace existing production. It's like making one hundred per cent interest; discovering another major field of some five hundred million barrels equivalent every four months or finding two Hibernias a year. 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 greet 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 greeter access there, progress continues to be slow. ( Bold by the auther)”
To understand the magnitude of the problem that Dick Cheney is addressing we can compare “fifty million barrels a day” with the total production coming from the six countries bordering the Persian Gulf (Saudi Arabia, Iran, Iraq, United Arab Emirates,
Kuwait and Qatar), that in 2001 produced 22,4 million barrels per day (Energy Information Administration).snip There is no doubt where Dick Cheney thinks the oil is to be found: “While many regions of the world offer greet oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies”.
At that time Cheney did not put a number to the expectation from the region. He was later appointed as Chairman of the National Energy Policy Development Group, and a first number was given. The report was handed to President Bush in May 2001 and includes the following statement from Dick Cheney: “As you directed us at the outset of your Administration, we have developed a national energy policy designed to help bring together business, government, local communities and citizens to promote dependable, affordable and environmentally sound energy for the future.”snip OIL AND WAR
Dick Cheney in London 1999: “Oil is unique in that it is so strategic in nature. We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world's economy. The Gulf War was a reflection of that reality.”
How about the war in Iraq?
More Statements by Dick Cheney in the IP speech
The speech by Dick Cheney is also very interesting from other aspects. First we can read his own opinion about himself: “I'm often asked why I left politics and went to Halliburton and I explain that I reached the point where I was mean-spirited, short-tempered and intolerant of those who disagreed with me and they said' Hell, you'd make a great CEO'.”
Many are shocked by the fact that Shell has been manipulating its reserve figures, but Cheney saw the pressures Shell was under – “to turn around and find more or go out of
business- you understand how important oil reserves are. From the talk: “From the standpoint of the oil industry - and I'll talk a little later about gas -, but obviously for over a hundred years we as an industry have had to deal with the pesky problem that once you find oil and pump it out of the ground you've got to turn around and find more or go out of business. Producing oil is obviously a self-depleting activity. Every year you've got to find and develop reserves equal to your output just to stand still, just to stay even.”
One year before the presidential elections in US Dick Cheney thinks that the oil industry should have more power in Washington. Today we know the outcome: “Oil is the only large industry whose leverage has not been all that effective in the political arena. Textiles, electronics, agriculture all seem oftentimes to be more influential. Our constituency is not only oilmen from Louisiana and Texas, but software writers in Massachusetts and especially steel producers in Pennsylvania. I am struck that this industry is so strong technically and financially yet not as politically successful or influential as are often smaller industries. We need to earn credibility to have our views heard.”
BP has had a hard time to replace production with new discoveries and instead bought Russian reserves. Cheney also discussed that approach: “Companies that are finding it difficult to create new core areas through exploration are turning to production deals where they can develop reserves that are already known, but where the country doesn't have the capital or the technology to exploit them. In production deals there is less exploration risk but dealing with above ground political risk and commercial and environmental risk are increasing challenges. These include civil strife, transportation routes, labour issues, fiscal terms, sometimes even US-imposed economic sanctions.”
At the end of this paragraph he complains about the fact that there are “US-imposed economical sanctions”. Should we be surprised that the sanctions in Libya have been lifted?
The full text of Dick Cheney's speech at the Institute of Petroleum Autumn lunch, 1999, is a very important document and I hope that the Institute of Petroleum once again makes it available for anyone to read. Meanwhile a copy is available on request, Aleklett@tsl.uu.se.http://www.peakoil.net/Publications/Cheney_PeakOil_FCD.pdfWhen it comes to malfeasance in geopolitics, I follow the dictum from Deep Throat: "Follow the money". Once you understand the ramifications of Peak Oil, along with stratospheric power and wealth accessible from controlling the remaining concentration in the Middle East, you gain a clearer understanding of why Cheney would go to any means necessary to gain that access and control (i.e. wealth and power), including murder, which is what I believe is the greatest crime that Cheney is ultimately guilty of. And yes, I do believe that extends into 9/11 territory, but I would rather not discuss the particulars of that for fear of seeing this great thread sent to the dungeon. :) |
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