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A View from David Appell

Oil Chaos

A day after the Chinese government proposed to take over a major U.S. oil company, as Middle Eastern oil entities pump oil as fast as they can, as western refineries are stretched to their limits, and as record oil prices…

  • June 24, 2005

A day after the Chinese government proposed to take over a major U.S. oil company, as Middle Eastern oil entities pump oil as fast as they can, as western refineries are stretched to their limits, and as record oil prices ($60/barrel) cascade through national economies, nothing should stun you more than the conclusions of yesterday’s exercise in Washington: as the Washington Post put it,

The United States would be all but powerless to protect the American economy in the face of a catastrophic disruption of oil markets, high-level participants in a war game concluded yesterday.

Markets–both supply and demand–are already stretched to their limits, and so any slight disruption has the potential to cause a major setback. And you know that it’s only going to get worse, as China and India assert their rights to energy and as the United States Congress twiddles their thumbs by refusing to pass an energy bill with bite (meaning, with conservation a major component). “The American people are going to pay a terrible price for not having had an energy strategy,” said former CIA director Robert M. Gates, who took on the role of national security adviser in yesterday’s exercise, called “Oil Shockwave.” Stepping out of character, he added that “the scenarios portrayed were absolutely not alarmist; they’re realistic.” You can believe the exercise’s scenarios or not: they begin with ethnic unrest in Nigeria, which leads to the collapse of the oil industry there. Then Al Qaeda launches crippling attacks on key energy facilities in Valdez, Alaska, and Saudi Arabia. From there, leading players realize that the U.S. has few options in the short term to prevent a major market collapse, and with it an energy recession in the U.S. that sees gasoline hit over $5/gallon.

Who really believes that the energy bills now draining through the Senate will have much effect on our ability to withstand market challenges to supply? Or even to demand–the entire U.S. government, both legislative and executive branches, have failed to prepare the country for the time, coming soon (if not this year) when oil supplies peak and we are together and forever on the downward side of the bell curve? When both the legislative and executive branch continue to pretend that we don’t need to get more miles out of every gallon of gasoline and more lumens out of every kilowatt-hr.

The participants concluded almost unanimously that they must press the president to invest quickly in promising technologies to reduce dependence on overseas oil, such as hybrid cars powered by gasoline and plug-in electricity; and cars that run on fuels derived from prairie grasses, animal waste and other products. They all agreed these projects would take years to yield any benefit but should not wait for the kind of crisis they were dramatizing.

Yet where–anywhere, anywhere at all–is the politician with the courage to call for 100 mpg automobiles?

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