Secular versions of premillennialism abound in my profession of strategic planning, because they represent the ultimate trump card: “All these issues pale compared with the coming disaster in [X]!” They’re a show-stopping, discussion-ending “last word” that brooks no opposition. If you cannot see the “undeniable logic” of the argument, then you are described as “brainwashed” or “deluded” by conventional wisdom on the subject. As somebody who argues for grand strategy, I am constantly bombarded by readers who want me to alter my entire vision on the basis of the last short-term crisis or the looming “train wreck,” as though my strategy assumed a linear projection with nary a setback! It is very hard to argue with such thinking, because these advocates’ faith in the primacy of whatever element they’ve decided to focus upon is usually unshakable. Often the strongest proponents of such doom-and-gloom are longtime experts in the field who, at the end of their lives, seem transfixed with some profound internal guilt that their careers constituted one big lie. If they worked nuclear weapons all their lives, then they suffer a conversion in their later years, becoming convinced that nuclear weapons constitute the greatest threat facing mankind, and so on. Such conversions are not uncommon in the military realm; some of the biggest “peaceniks” I know are retired flag officers. They’re like lapsed Catholics. You don’t want to start arguing with them unless you’ve got the rest of the day to pursue the conversation.
That such logic is commonplace in America’s foreign policy debates today signals nothing more than our inability to congregate around a grand strategy upon which a strong majority of us can agree. Being in a transitional period of profound rule-set adjustment, where we’re trying to take what was the West’s security/economic order and suddenly spread it across a much larger swath of humanity, the marketplace of ideas concerning grand strategy is both deeply unsettled and highly competitive. Americans are uncomfortable about recognizing today’s globalization as our historical progeny; we expected it to be so much tidier in its expression. In effect, those who believed that dispatching the Soviet threat was enough to achieve a sort of postmillennialist global paradise, a “new world order” marking the “end of history,” are disappointed to sense that our nation’s burden is far from complete. To these souls, an argument for making globalization truly global is often interpreted as “perpetual global war.” They feel like they already gave at the office that was the Cold War, and now they want their peace dividend pronto. In waiting almost two decades now, witnessing the United States’ being drawn militarily into numerous Gap environments, many Americans find their patience simply tapped; thus the shift to premillennialist escapism. “If you, the national security establishment, cannot deliver,” they say, “then we’ll uncover some inescapable truth that makes all this effort meaningless!”
A famous TV commercial from my youth featured a harried housewife who, when confronted with a messy, chaotic home life, cried out, “Calgon, take me away!” With this simple incantation, our housewife found herself magically whisked away to a steaming bubble bath that made everything better—a sort of domestic premillennialism on call. In ancient Greece, playwrights tied off convoluted scripts with a similarly satisfying plot twist known as the deus ex machina, or literally, “god from a machine.” Want a tidy ending? The god lowered from the rafters announced one. Many would-be grand strategists now struggle mightily to provide America with a quick exit from this long war against the global jihadist insurgency. The Cold War taught us that dedicated foes take decades to defeat, and yet Americans just naturally want to come home. If we created this globalization, then apparently it has betrayed us, generating too much complexity, too much conflict, and too many challengers. Given our love of technology, it’s no surprise that science, our modern god-machine, is viewed as our most likely salvation and/or curse: The right new gizmo renders this entire fight unnecessary, or some looming disaster makes it entirely pointless. The desperate search befits modern America: We prefer rapid-fire problem-solving to the long, hard slog of nation-building. This backlash has already begun within the U.S. military: In an almost Orwellian twist, many officers argue we must abandon all pretense of optimizing the force for small wars, because our opponents will trump us with big-war capabilities, even though history clearly proves that if you want to take on the Americans and win, asymmetrical warfare is the way to go. As such, arguments for a rededication to a Leviathan-only force amounts to a “Calgon, take me away!” request in national security terms.
Outside those ranks, other deus ex machina are proposed. A good example is the theory of “peak oil.” This controversial prediction stems from a provable observation: For any known oil field, production naturally peaks, and then it subsequently declines as it nears depletion. Technology seeks to maximize capture, but since any reserve is—in geological terms—nonrenewable, the total yield is both finite and calculable. Some oil analysts employ this observation to extrapolate a global oil peak, declaring we’ve already passed the point of no return. The problem with this theory is twofold: (1) it’s based on existing known reserves when so much of the Gap hasn’t been adequately surveyed, and (2) it discounts unconventional sources of oil, such as tar sands and oil shale, as well as nonoil sources for transportation energy. Cambridge Energy Research Associates, a highly respected industry authority, estimates that if unconventional sources are added into the mix, our planet’s currently known oil reserves are actually three times larger than that predicted by peak oil, suggesting that alleged doomsday is decades off—Asia’s skyrocketing requirements notwithstanding. The logic here is market-derived: Persistently higher prices drive new exploration and boost R&D in both energy extraction and the technology of transportation. That means we’ll go deeper and farther to access new reserves while extracting better yields from both existing and future fields as we upgrade our automotive fleet.
We won’t leave the oil age because we’ve run out of oil, any more than we stopped using whale oil because we ran out of whales. Instead, humanity moves progressively “down” the carbon chain for the sheer reason that each step we take brings us higher efficiency and less environmental damage—a veritable win-win. That market logic unfolds far too slowly for peak oil advocates, who daily decry our global economy’s “looming collapse”—the real target of the theory. Their prescription brings us to the second great deus ex machina of our times: a Manhattan Project-like crash program to “get us off our oil addiction!” This call dovetails nicely with the “Let’s beggar those nasty Muslims” camp that claims we fund both sides of this war. Impatient with the Middle East’s glacial embrace of democracy, this wedge strategy seeks to force local regimes into rapid political change by severing their current, fairly narrow connectivity with the global economy—the Big Bang yields to the slow strangle. Toss in global climate change, today’s deus ex machina without peer, and soon you’re convinced there’s no reason for us to remain in the Middle East whatsoever. Compared with rising sea levels, terrorism just doesn’t rank. Probably the strongest recent such “call to arms” comes in Thomas Friedman’s latest bestseller, Hot, Flat, and Crowded, where he declares, in response to this cluster of challenges, the need for “nation-building in America”—italics and exclamation points included!
Don’t get me wrong. Humanity is destined to move beyond oil and seriously address global warming. I’m just not willing to kneel before any god-machine for an excuse slip from this long war. If all we want is the Core’s access to Persian Gulf oil, Osama bin Laden poses little threat. His goal is civilizational apartheid, not economic isolation per se. And if the region lacked oil or even Islam, the real problem would remain: traditional cultures poorly adapting themselves to globalization’s creeping embrace, primarily because its gender-neutral networks empower women disproportionately to men. That’s not our fault or Israel’s, but rather an inherent weakness of Arab culture, exacerbated by particular interpretations of Islamic faith, which—by the way—imposes no such apparent limitations on emerging Muslim economi
es in Asia. All god-machines aside, it’s tempting to abandon the fight against violent extremism in the Middle East, but a problem shelved is not solved.
The underlying reality on oil is more complex than simply noting global supplies are concentrated in unstable areas, which, of course, is absolutely true. The Core used up most of its oil a long time ago, forcing the global economy’s narrow embrace of several Gap regions—most significantly the Persian Gulf. Because the global economy’s demand was relatively light during the Cold War, it wasn’t until its radical expansion to include those 3 billion new capitalists that we entered into this period of dangerously tight production capacity, meaning no matter how big our global oil reserves are, our current worldwide oil industry infrastructure is dangerously close to being maxed out in its capacity to extract, refine, and deliver oil around the planet.
With oil stuck well above the $100-a-barrel mark for much of last year, there’s little surprise that we’re once again inundated by calls for more regulation of so-called super-major oil companies (e.g., ExxonMobil, BP, Royal Dutch Shell, Chevron) and an end to our military presence in the Persian Gulf, in addition to the usual demand for a Manhattan Project on alternative energy. The assumptions are that America’s energy demand drives prices, the super-majors determine supply, and instability in the Middle East explains recent spikes. So if this is all our doing, then it can all be our undoing as well! Would that Washington were so eminently in control of global energy markets. The big driver on oil prices today is rising Asia’s increasing demand. At the Cold War’s end, Asia accounted for 10 percent of global oil demand. Today it gobbles up double that share. Before 2025, Asia will become the oil market’s global demand center, dislodging North America. So as I’ve noted before, it’s basically our blood and their oil, and not surprisingly, when Americans are confronted with that strategic reality, we want out—and fast!
A second big driver is that many key producers are themselves becoming significant consumers, shriveling their capacity for exports. Indonesia became a net importer years ago, while Mexico, a crucial supplier for the United States, heads down the same path unless it soon opens up its national oil company to foreign direct investment. Meanwhile, strong-man Hugo Chávez diminishes Venezuela’s future export capacity by scaring off investors and—in essence—eating his seed corn: funneling today’s windfall profits into socialist programs designed to buttress his popular standing. His latest scheme involves Venezuela’s national oil company using its logistical networks to import foodstuffs currently in short supply. Fire-breathing Mahmoud Ahmadinejad has pursued a similarly short-sighted course in Iran to predictable outcomes. In general, all the big producers are seeing their oil consumption skyrocket far above global growth, with Saudi Arabia, Russia, and Norway leading the way. So while rising Asia demands a lot more oil, the biggest sources have trouble boosting production.
What can the super-major oil companies do about any of this? Not as much as you think. Increasingly, it’s the home team national oil companies, or NOCs, that control the bulk of reserves. Today, these state-owned firms directly manage 40 percent of the world’s production. Because the NOCs own roughly 90 percent of known reserves, any increase in production naturally favors their increased control over the industry. By 2030, NOCs are expected to control as much as three-quarters of global production, meaning ExxonMobil, BP, and others will be squeezed out of new big projects as national oil companies grow rich enough to finance these on their own. Already, a significant chunk of the super-majors’ current production is locked into sharing agreements that favor the national oil companies as prices rise. As the national oil companies grab more control over future production, the super-majors face more restricted access to existing oil fields, pushing them toward increasingly complex ventures to discover new supplies: tougher geology, deeper seabeds, harsher arctic environments, and thicker oil. Those tougher conditions drive up production costs just as a worldwide shortage of rigs and workers emerges. Toss in years of underinvesting by everybody in refining capacity, and this situation won’t be remedied anytime soon, even as a global recession depresses demand temporarily.
Do continuing violence and threats in the Middle East add a surcharge on top of all this? Sure, although the real problem comes in chronic instability or rogue regimes keeping certain countries essentially off-line from comprehensive exploration, something the national oil companies increasingly accomplish even in stable nations, so stability’s unlikely to improve the situation over the long term. When the NOCs let in Western super-majors and their world-class technology, these outsiders tend to discover significant amounts of new reserves (just watch Iraq today). Plus, the super-majors’ technology for extracting oil from existing fields continues to improve. Historically, for every three barrels of oil found, classic lift technology extracts only one, leaving two in the ground. New technology improves the yield, meaning we get more of those other two barrels out of the ground. When Chevron, for example, applied its high-pressure steam technology to an aging Indonesia field a few years back, the yield went from 65,000 barrels a day to over 200,000. So if oil is priced high enough, the extra effort to boost yields and seek out more isolated sources, like in the increasingly ice-free Arctic Circle, makes more sense—oil production being a function of price and technology.
How about trusting in OPEC’s ability to boost production sufficiently to cover rising global demand? That’s where it gets tricky, because OPEC’s national oil companies are incentivized to discourage outside competition and refuse foreign investments, so more and more of the global economy’s future is being tied to Gap economies that feature low levels of transparency, increasing everyone’s sense of risk further. Beyond that, growing international concern over global warming, combined with Asia’s ballooning car fleet and associated air pollution, casts a long-term shadow over the oil industry. Simply put, it’s hard to imagine Asia quadrupling (or worse) its automobiles over the next two decades and surviving the resulting environmental degradation, even if it could import enough oil.
For the increasingly squeezed super-majors, it doesn’t make sense to stick out their necks on long-term investments to grow supply-side infrastructure. Instead, watch them invariably warm up to new vehicle drive technologies that major automakers pursue in their greed to stay on top. As for national oil companies, expect them to invest in just enough production capacity to keep prices from rising too far above $100 a barrel but not enough to drive them significantly below that mark—if they can help it.
In sum, crude prices will remain relatively high for the long run as everybody involved squeezes out maximum profits across the final decades of oil’s supremacy. As for what comes next, watch Asia, because America’s strictly in the backseat on this tumultuous ride. The world took over a century to field its first billion cars, but the second billion will arrive in roughly three decades’ time—thanks to rising Asia. If just China and India approximate Japan’s current rate of car saturation (roughly one-half that of the United States), then we’re looking at a rough doubling of global oil demand in our lifetimes, something that’s hard to imagine no matter what level of technology and investment is employed, especially since much of that effort will go into replacing the declining output of existing oil fields.
Here’s where we reach a fork in the road of deus ex machina outcomes. Some experts will point to China’s fixation on “equity oil,” meaning Beijing wants to own the barrel in the ground and all the infrastructure between that field and its domestic market, and state that we’re inevitably slated to wage wars with China over dwindling oil supplies. Again, that logic tends to break down when you realize how intertwined our economy is already with China’s. Other experts take a more optimistic tack: Asia’s skyrocketing transportation requirements allow it to skip a generation in car technology and move rapidly toward hydrogen fuel-cell cars, with the migration running like this: gas-electric hybrids to ultralight-chassis gas-electric hybrids to fuel-cell/gas ultralight hybrids to pure fue
l-cell ultralights (got that?). As automotive visionary Amory Lovins puts it, “Once hydrogen is introduced, the complete elimination of oil use is inevitable; the only question is how fast.” Lovins notes that most shifts “down” the carbon chain (e.g., wood to coal) took about fifty years to unfold, with the previous mainstay decreasing dramatically but hardly disappearing altogether. If the world effectively began the oil-to-hydrogen shift in transportation when the first gas-electric cars hit American roads a few years back, then long before 2050, Asia’s rising transportation requirements should be more than enough to complete the transition. Lovins thinks it will happen in roughly half that time, or by 2030. Of course, that will be too slow for the hard-core peak-oil types and far too slow for those who cast global warming as the global crisis of our age, but as I’ve learned long ago with the doom-and-gloom crowd, there’s simply no pleasing them with such market-driven analysis. Instead, only government-sponsored Manhattan Projects will do.
A more plausible fly-in-the-ointment argument posits that China’s stunning economic trajectory, combined with its weak environmental regulation at home, inevitably slates it for a near-term ecological “collapse” in the vein of Jared Diamond’s famous book (which, by the way, has a long chapter on China’s numerous environmental woes). Moreover, to the extent China exports those bad practices to all those Gap resource providers that it progressively integrates into its supply chains, Beijing’s monomaniacal push for global economic power may end up taking a good chunk of the global ecosystem with it when it finally does collapse into complete environmental chaos. But here again, we find ourselves on somewhat familiar ground. As noted Chinese expert Elizabeth Economy argues:
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