On June 25th, 2005 a group of former and current government experts gathered to conduct a simulation of national importance. Their mission was to react and control an oil crisis sparked by unrest in Niger and a withdrawl on foreign personnel from Saudi Arabia.
They failed.
Oil Dependence Creates Severe National Security and Economic Risks, Top Officials Find at Crisis Simulation Event. It was called "Oil Shockwave"
Continues...
Television coverage of Oil ShockWave: "Oil ShockWave" featured on Fox News Channel's Special Report with Brit Hume (8MB download)
"Oil ShockWave" also featured on CNN's NewsNight with Aaron Brown (10MB download - Use link on PR)
(Washington, DC - 06/24/05) - The dependence of the U.S. on oil creates serious national security vulnerabilities that, if exploited, could result in widespread economic dislocation and increased global instability, according to former top government officials who gathered today to examine how the nation might manage an oil supply crisis.
The findings of these leading experts comes amid reports of terrorist threats against oil-rich Nigeria, a state-owned Chinese company's bid for a major U.S. oil firm, and as Congress considers energy legislation that does little to curb U.S. oil dependence.
In a scenario confronted by the bipartisan panel of intelligence, military, and energy experts, a series of events over several months unrest in Nigeria, an attack on an Alaskan oil facility, and the emergency evacuation of foreign nationals from Saudi Arabia - drives the price of oil to over $150 per barrel.
These events lower expected employment levels by more than 2 million jobs, embolden countries that are major oil producers and consumers to pressure the U.S. on key foreign policy concerns, and cause a variety of other significant
economic and security challenges.
The scenario removed only 3.5 million barrels of oil from a global market of more than 83 million barrels, resulting in the following consequences:
- Gasoline prices of $5.74 per gallon;
- Global oil price of $161 per barrel;
- Heating oil prices of $5.14 per gallon;
- Fall of gross domestic product for two consecutive quarters;
- Drop in consumer confidence by 30 percent;
- Spike in the consumer price index to 12.6 percent;
- Ballooning of the current accounts deficit to $1.087 trillion;
- Decline of 28 percent in the S&P 500;
- Aggressive pressure on the U.S. from China to end arm sales to Taiwan, and;
- Demands from Saudi Arabia for changes to U.S. policy regarding the Mid-East peace process.
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Other key findings:
Once oil supply disruptions occur, there is little that can be done in the short term to protect the U.S. economy from its impacts, including gasoline above $5/ gallon and a sharp decline in economic growth potentially leading into a recession.
There are a number of supply and demand-side policy options available that would significantly improve U.S. oil security. Benefits from these measures will
take a decade or more to mature, and thus should be enacted as soon as possible.
Supply-side measures include promoting developing of conventional oil reserves in nations currently off limits to private investment through enhanced U.S. diplomacy, increase research and development into environmentally-benign extraction of unconventional oil reserves such as oil shale and tar sands, and enable siting of new liquid natural gas and other energy facilities.
Demand-side measures include promoting energy efficient passenger vehicles with incentives for hybrid electric vehicles , strengthen fuel economy standards, and increase research and development into plug-in hybrids and hydrogen fuel cell vehicles.
Alternative fuel measures include increased research and development that enable ethanol production from plant materials, fischer-tropsch diesel from domestic coal, and hydrogen from coal and eventually from renewable sources.
The findings are the product of Oil Shockwave, an oil supply crisis simulation co-sponsored by Securing America's Future Energy (SAFE) and the National Commission on Energy Policy. The event was designed to simulate a decline in world oil production due to regional instability and terrorism and, then, present a mock cabinet-level meeting with the task of advising the president on a national response.
"This simulation serves as a clear warning that even relatively small reductions in oil supply will result in tremendous national security and economic problems for the country," said SAFE President Robbie Diamond. "This issue deserves immediate attention."
What is Oil Shockwave? From the
Securing America's Future Energy site:
"Oil ShockWave is a scenario exercise developed by Securing America's Future Energy (SAFE)and the National Commission on Energy Policy. In this half-day exercise, top former government officials take part in a series of Principals meetings of the Cabinet over a seven-month period in order to advise the President on how to respond to a series of events that affect world oil supplies. The event starts six months into the future in December 2005 to provide some distance from current events. Situations are presented primarily through pre-produced newscasts shown on video screens as well as "injects" or notes given to Cabinet members throughout the Simulation. The participants are informed of their roles ahead of time, but they are not informed about the events and situations they will encounter. There is a certain amount of useful drama generated when the participants respond in real time to each new situation, and we expect that their debates and discussions will be informative."
"Today's focus on oil is motivated by recent events. Over the last two years, oil markets have moved into uncharted territory. The world experienced one of the steepest increases in oil prices in more than a generation between the spring of 2003 and the fall of 2005, when prices doubled from $25/barrel to more than $50/barrel. Despite much higher prices, growth in world oil demand in 2004 was the highest seen since the 1970s. At the same time, OPEC production capacity has fallen in Iraq, Indonesia and Venezuela. The result today is a global shortage of spare production capacity, which in turn has led to a large risk premium in oil prices. Recent trends suggest that today's high oil prices will continue until the world's spare production capacity is seen to be ncreasing."
[empahsis added]
Outcome Grim at Oil War Game (WashPost)
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. "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. Stepping out of character, he added that "the scenarios portrayed were absolutely not alarmist; they're ealistic."
The Twilight Era of Petroleum (by Michael Klare)
Just how seriously American policymakers view these various energy-related developments is further revealed in another recent event: the first high-profile "war game" featuring an overseas oil crisis. Known as "Oil Shockwave," this extraordinary exercise was chaired by Senators Richard Lugar of Indiana and Joe Lieberman of Connecticut, and featured the participation of such prominent figures as former CIA Director Robert M. Gates, former Marine Corps Commandant General P. X. Kelley, and former National Economic Adviser Gene B. Sperling. According to its sponsors, the game was conducted to determine what steps the United States could take to mitigate the impact of a significant disruption in overseas production and delivery, such as might be produced by a civil war in Nigeria and a terrorist upsurge in Saudi Arabia. The answer: practically nothing. "Once oil supply disruptions occur," the participants concluded, "there is little that can be done in the short term to protect the U.S. economy from its impacts, including gasoline above $5 per gallon and a sharp decline in economic growth potentially leading into a ecession."
Enough said. Put the money where your mouth is our idiot boy king.
Note:
We spend more in one month in Iraq, at $8B per month, than the World spends in ONE YEAR on alternatives to this black plague. At this rate, in 32 months and uncounted lives we will have spent more than the entire planet has spent on alternatives to oil since 1973.
More on that next time.