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War is a Disaster - An Oil Shortage is Not

By Nathan Allonby

03/06/07 "ICH" -- - Stock prices crashed last week in a panic sparked by a combination of factors including the weakness of the US economy and fears about a possible war with Iran (1).

Although war was far from the only factor in the crash, the markets are regarding the prospect of war very negatively and with extreme nervousness. It is clear the markets do not want war - they anticipate a very negative effect upon the economy. They don’t want anyone to rock the boat when it is already half-full of water.

By contrast, record oil prices last year did not prevent stock prices surging to record highs also. The markets saw rising oil prices as much as an opportunity as a problem. Sure, rising oil prices could cause an adjustment, but not a crash.

There has been a lot of speculation about the effects of “peak oil” - the idea that oil production is about to peak, or has already done so, and that from now on oil production will fall continuously, leading to rising energy prices. Many commentators have worried whether this would make our current lifestyles unsustainable, with dramatic social and economic readjustments. This belief is based upon the myth that energy consumption directly supports economic activity and that a fall in energy consumption must lead to a fall in economic activity. In fact, that is not strictly true because there are several intervening factors between energy consumption and output, not least of which being efficiency. Yes, there is a simple relationship between the level of economic activity and the level of oil consumption (for a fixed price, with more money, you can buy more oil) but not the other way around.

There are precedents to show us what may really happen as a result of “peak oil”. Britain hit “peak coal” in 1913. As a result, between 1907 and 1937, Britain’s energy consumption was held almost static. Despite this, Britain’s economic output doubled. Quoting E.F. Schumacher, Chief Economist of Britain‘s National Coal Board in the 1950s and 60s and author of “Small is Beautiful”: -

“had there been no replacement of coal by oil, total internal coal consumption in 1937 might have been 3% higher than it was and thus 3% higher than in 1907. No, it was not oil and it was not any other source of fuel that made it possible to double total output without increasing coal consumption; it was the increase in the efficiency of coal consumption, an improvement largely enforced by the fact that coal was becoming steadily and remorselessly dearer. I think we should remember this when we come to consider the future.” (2)

Just think about this - the markets dealt with a situation similar to peak oil and made a successful adjustment.

A contraction in oil and energy supplies might merely mean a change in technology, not an economic disaster. There are those who believe that this new technology may spark an economic boom. Barclays investment bank recently calculated that new technology to reduce fuel consumption, in response to global warming, would produce an economic bonus of $10 trillion through development of new technology (3).

We have been at this moment in history before. In the mid-1980’s the US had developed a whole raft of new energy technologies in response to soaring oil prices. USA had developed the best wind turbines in the world, following an extended research programme by NASA and the US Department of Agriculture. General Electric and Boeing had each created wind turbines 25 years ahead of their time - larger than anything made until the last 2 years. Westinghouse made a wind turbine that was extremely rugged and cost-efficient. The US had developed a new technology of “passive solar heating” - heating homes purely by means of the sunlight entering the windows, without extra energy input. A government programme at Los Alamos over a dozen years had perfected the technology.

In the early 80s, USA led the way in new energy technologies. What went wrong?

What happened was the Iran-Iraq war. Contrived by George Bush Snr and Donald Rumsfeld, this war help artificially drive down world oil prices as the two oil states desperately pushed up exports to pay for arms. As the price of oil dropped, corporate America dropped the new technologies like a stone.

Today, faced with the same energy crisis returned, and more serious for the delay, the US is now preparing for another oil war. Having repeatedly intervened in the Middle East over 50 years(4), the US now envisages a broader geo-political struggle redrawing the boundaries of the entire Middle East and central Asia (5).

When we wanted to save jobs, didn’t our governments tell us it was futile to resist the power of the markets? Why is it that the US governments want to resist the markets when the markets tell us to reduce our fuel consumption?

When new technology brought job losses, we were told we had to embrace change or die. However, faced with declining oil production, instead of embracing change and leading the way forward with new technology, it seems US government and corporate industry would rather choose death - or at least, murder. They see the fight for oil as a life or death struggle.

Ultimately, this is a struggle they cannot win. A new factor has entered the equation - global warming.

Supposing the US is successful in obtaining access to ever greater oil resources, and succeeded in obtaining a few more years of artificially cheap oil, what would be the consequences? Global warming could cause massive reduction in agricultural output and soaring food prices. For at least 20% of the world’s population, this would bring food shortages and famine. The would be massive population displacement and war. However, it seems the Bush administration is happier to risk mass starvation rather than reduce oil consumption. Perhaps they calculate a profit in starvation and conflict. Apparently, human suffering is no object. The Iran-Iraq war cost over a million lives. The new oil wars will cost considerably more. And USA will feel this at home.

Why does the US believe that energy conservation is so unacceptable?

The only visible reason for the US oil obsession is the military-industrial-political complex. The US military is the world’s 4th largest consumer of oil - consuming more than many countries (6). The US needs to maintain a strong domestic oil industry to service its military. The history of the oil industry in Iran is that it was originally developed for military reasons - to fuel the British Royal Navy. We seem to be caught in a vicious cycle where the US need the military to secure oil supplies and they need secure oil to maintain the military.

It does not help that US politicians, e.g. Bush and Cheney, have private oil fortunes and are incestuous with the Saudis. It does not help that the Saudis are effectively paid for oil in arms, and hence that a $ multi-billion US arms industry is dependent upon a thriving oil trade. It does not help that Bush and Rumsfeld have extensive investments in the arms industry and have personally profited from the wars they started.

In the West today, we can see a polarisation of competing paradigms. Those nations allied closely with the Bush and the War on Terror tend to be those with higher levels of inequality, poverty and crime with an aggressive social model and a detached political elite - e.g. Britain and Italy - whereas those nations less supportive of the US and its wars tend to be those with greater equality, lower levels of poverty, greater social cohesion, open societies and a transparent political process - e.g. Scandinavia. One seeks to defend the status quo, at any cost, the other is prepared to embrace change.

Consider Denmark. Two weeks ago, my wife went to Copenhagen to play at a folk music festival. While she was there, she saw a demonstration outside the Danish parliament, protesting about the presence of Danish troops in Iraq and Afghanistan (Denmark has subsequently decided to pull out of Iraq and may well withdraw from Afghanistan also). The parliament building was completely open, with no police visible at all. I will repeat that - not a single policeman. The protestors could approach and speak to the MPs as they entered and left the building. They are safe without elaborate security.

Contrast this with Britain, where Parliament is surrounded by concrete anti-vehicle barriers three rows deep, police with machine guns, X-ray scanners and security devices. Ministers are whisked away from the public in armour-plated cars. Demonstrations within a mile of Parliament have been banned under the Serious and Organised Crime Act.

Denmark is not scared of terrorism. It is at peace with its own people. It has a cohesive society. The Health service is excellent and free. Education is free, and a highly educated population contributes to success in high-tech industries. Poverty is at very low levels. Crime is super-low. There is no fear. In a society where there is so little poverty, excessive wealth is unnecessary and considered vulgar and socially corrosive. People are judged more by their personal qualities than their financial wealth. The social ideal is to be “lukkelig and hyggelig” - literally, “happy and cosy“ - cohesive, not dog-eat-dog. It would be impossible to imagine a self-serving, ignorant, oil millionaire, lacking empathy or compassion, being elected in Denmark.

Denmark is ready for a fuel shortage - it has developed new energy technology and is exporting it to the rest of the world. Denmark picked up the new energy technologies that USA dropped. Denmark has the world’s two largest manufacturers of wind turbines and the largest manufacturer of building insulation - Rockwool. Isn’t it funny how a small nation can have more vision than the world’s most powerful nation. Perhaps that is because they have less investment in maintaining the status quo.

Britain is becoming the opposite of Denmark in every respect, The British government worships wealth. Britain has become a tax haven for the rich of every nation - because foreigners don’t pay tax in Britain. But Britain has 5 times more child poverty than Denmark. Following in tow is gun crime and a record prison population. The British universities have recently changed from being free to being fee-paying and the free National Health System is under stress and is gradually being privatised.

Britain has just announced a new energy policy, of more nuclear power - by incredible coincidence at the same time as also announcing an intention to renew its nuclear weapons system.

We can either choose policies based on relatively painless adaptation and change or we can choose policies based on war and death. The right way forward is obvious. It was obvious 20 years ago. Unfortunately, the people who made the wrong choice then are still in power today, and they intend to make the wrong choice again - only this time, on a bigger scale.

The author is a British engineer currently involved in overseas development.

References

1) http://business.guardian.co.uk/story/0,,2022794,00.html

Wall St suffers biggest fall since 9/11

Larry Elliott, economics editor
Wednesday February 28, 2007
The Guardian

2) Geoffrey Kirk (Editor)

“Schumacher on Energy - Speeches and Writings of E.F. Schumacher”

Jonathan Cape, 1982

3) Climate challenge will heat up the global economy, Barclays predicts

by Jane Padgham

Published: 08 February 2007

“The Independent”

Climate change will boost the global economy and dominate financial markets over the next 25 years, a leading investment bank has predicted. In a new report, Barclays Capital challenges the conventional wisdom that global war...

4) http://www.informationclearinghouse.info/article6308.htm

U.S. Intervention in the Middle East

Information Clearing House

5) http://www.informationclearinghouse.info/article14810.htm

US Army Contemplates Redrawing Middle East Map to Stave-off Looming Global Meltdown

by Nafeez Mosaddeq Ahmed

09/02/06

Dissidentvoice

(6) http://www.energybulletin.net/26194.html

US military oil pains

by Sohbet Karbuz

Published on 17 Feb 2007

Energy Bulletin.

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In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. Information Clearing House has no affiliation whatsoever with the originator of this article nor is Information ClearingHouse endorsed or sponsored by the originator.)

 
 
 

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