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Michael Klare, Tomdispatch's energy expert, has long been ahead of the
curve when it came to ways in which our planet was being reshaped at the
most basic level. Today, he offers Tomdispatch readers a peek into some
of the key themes in his staggering new book, Rising Powers, Shrinking
Planet: The New Geopolitics of Energy. If you want to grasp the true
shape of our shaky world, of where exactly we've been and where we might
be going, this is a book not to be missed. It offers the
profile-in-formation of a shape-shifting planet, a planet in transition
and on a road to nowhere pretty.  --Tom

The End of the World as You Know It

... and the Rise of the New Energy World Order

by Michael T Klare


Oil at $110 a barrel. Gasoline at $3.35 (or more) per gallon. Diesel
fuel at $4 per gallon. Independent truckers forced off the road. Home
heating oil rising to unconscionable price levels. Jet fuel so expensive
that three low-cost airlines stopped flying in the past few weeks. This
is just a taste of the latest energy news, signaling a profound change
in how all of us, in this country and around the world, are going to
live - trends that, so far as anyone can predict, will only become more
pronounced as energy supplies dwindle and the global struggle over their
allocation intensifies.

Energy of all sorts was once hugely abundant, making possible the
worldwide economic expansion of the past six decades. This expansion
benefited the United States above all - along with its "First World"
allies in Europe and the Pacific. Recently, however, a select group of
former "Third World" countries - China and India in particular - have
sought to participate in this energy bonanza by industrializing their
economies and selling a wide range of goods to international markets.
This, in turn, has led to an unprecedented spurt in global energy
consumption - a 47% rise in the past twenty years alone, according to
the US Department of Energy (DoE).

An increase of this sort would not be a matter of deep anxiety if the
world's primary energy suppliers were capable of producing the needed
additional fuels. Instead, we face a frightening reality: a marked
slowdown in the expansion of global energy supplies just as demand rises
precipitously. These supplies are not exactly disappearing - though that
will occur sooner or later - but they are not growing fast enough to
satisfy soaring global demand.

The combination of rising demand, the emergence of powerful new energy
consumers, and the contraction of the global energy supply is
demolishing the energy-abundant world we are familiar with and creating
in its place a new world order. Think of it as: rising powers /
shrinking planet.

This new world order will be characterized by fierce international
competition for dwindling stocks of oil, natural gas, coal, and uranium,
as well as by a tidal shift in power and wealth from energy-deficit
states like China, Japan, and the United States to energy-surplus states
like Russia, Saudi Arabia, and Venezuela. In the process, the lives of
everyone will be affected in one way or another - with poor and
middle-class consumers in the energy-deficit states experiencing the
harshest effects. That's most of us and our children, in case you hadn't
quite taken it in.

Here, in a nutshell, are five key forces in this new world order which
will change our planet:

1. Intense competition between older and newer economic powers for
available supplies of energy: Until very recently, the mature industrial
powers of Europe, Asia, and North America consumed the lion's share of
energy and left the dregs for the developing world. As recently as 1990,
the members of the Organization of Economic Cooperation and Development
(OECD), the club of the world's richest nations, consumed approximately
57% of world energy; the Soviet Union/Warsaw Pact bloc, fourteen
percent; and only 29% was left to the developing world. But that ratio
is changing: With strong economic growth in the developing countries, a
greater proportion of the world's energy is being consumed by them. By
2010, the developing world's share of energy use is expected to reach
forty percent and, if current trends persist, 47% by 2030.

China plays a critical role in all this. The Chinese alone are projected
to consume seventeen percent of world energy by 2015, and twenty percent
by 2025 - by which time, if trend lines continue, it will have overtaken
the United States as the world's leading energy consumer. India, which,
in 2004, accounted for 3.4% of world energy use, is projected to reach
4.4% percent by 2025, while consumption in other rapidly industrializing
nations like Brazil, Indonesia, Malaysia, Thailand, and Turkey is
expected to grow as well.

These rising economic dynamos will have to compete with the mature
economic powers for access to remaining untapped reserves of exportable
energy - in many cases, bought up long ago by the private energy firms
of the mature powers like Exxon Mobil, Chevron, BP, Total of France, and
Royal Dutch Shell. Of necessity, the new contenders have developed a
potent strategy for competing with the Western "majors": they've created
state-owned companies of their own and fashioned strategic alliances
with the national oil companies that now control oil and gas reserves in
many of the major energy-producing nations.

China's Sinopec, for example, has established a strategic alliance with
Saudi Aramco, the nationalized giant once owned by Chevron and Exxon
Mobil, to explore for natural gas in Saudi Arabia and market Saudi crude
oil in China. Likewise, the China National Petroleum Corporation (CNPC)
will collaborate with Gazprom, the massive state-controlled Russian
natural gas monopoly, to build pipelines and deliver Russian gas to
China. Several of these state-owned firms, including CNPC and India's
Oil and Natural Gas Corporation, are now set to collaborate with
Petróleos de Venezuela SA in developing the extra-heavy crude of the
Orinoco belt once controlled by Chevron. In this new stage of energy
competition, the advantages long enjoyed by Western energy majors has
been eroded by vigorous, state-backed upstarts from the developing world.


2. The insufficiency of primary energy supplies: The capacity of the
global energy industry to satisfy demand is shrinking. By all accounts,
the global supply of oil will expand for perhaps another half-decade
before reaching a peak and beginning to decline, while supplies of
natural gas, coal, and uranium will probably grow for another decade or
two before peaking and commencing their own inevitable declines. In the
meantime, global supplies of these existing fuels will prove incapable
of reaching the elevated levels demanded.

Take oil. The US Department of Energy claims that world oil demand,
expected to reach 117.6 million barrels per day in 2030, will be matched
by a supply that - miracle of miracles - will hit exactly 117.7 million
barrels (including petroleum liquids derived from allied substances like
natural gas and Canadian tar sands) at the same time. Most energy
professionals, however, consider this estimate highly unrealistic. "One
hundred million barrels is now in my view an optimistic case", the CEO
of Total, Christophe de Margerie, typically told a London oil conference
in October 2007. "It is not my view; it is the industry view, or the
view of those who like to speak clearly, honestly, and [are] not just
trying to please people".

Similarly, the authors of the Medium-Term Oil Market Report, published
in July 2007 by the International Energy Agency, an affiliate of the
OECD, concluded that world oil output might hit 96 million barrels per
day by 2012, but was unlikely to go much beyond that as a dearth of new
discoveries made future growth impossible.

Daily business-page headlines point to a vortex of clashing trends:
worldwide demand will continue to grow as hundred of millions of
newly-affluent Chinese and Indian consumers line up to purchase their
first automobile (some selling for as little as $2,500); key older
"elephant" oil fields like Ghawar in Saudi Arabia and Canterell in
Mexico are already in decline or expected to be so soon; and the rate of
new oil-field discoveries plunges year after year. So expect global
energy shortages and high prices to be a constant source of hardship.


3. The painfully slow development of energy alternatives: It has long
been evident to policymakers that new sources of energy are desperately
needed to compensate for the eventual disappearance of existing fuels as
well as to slow the buildup of climate-changing "greenhouse gases" in
the atmosphere. In fact, wind and solar power have gained significant
footholds in some parts of the world. A number of other innovative
energy solutions have already been developed and even tested out in
university and corporate laboratories. But these alternatives, which now
contribute only a tiny percentage of the world's net fuel supply, are
simply not being developed fast enough to avert the multifaceted global
energy catastrophe that lies ahead.

According to the US Department of Energy, renewable fuels, including
wind, solar, and hydropower (along with "traditional" fuels like
firewood and dung), supplied but 7.4% of global energy in 2004; biofuels
added another 0.3%. Meanwhile, fossil fuels - oil, coal, and natural gas
- supplied 86% percent of world energy, nuclear power another six
percent. Based on current rates of development and investment, the DoE
offers the following dismal projection: In 2030, fossil fuels will still
account for exactly the same share of world energy as in 2004. The
expected increase in renewables and biofuels is so slight - a mere 8.1%
- as to be virtually meaningless.

In global warming terms, the implications are nothing short of
catastrophic: Rising reliance on coal (especially in China, India, and
the United States) means that global emissions of carbon dioxide are
projected to rise by 59% over the next quarter-century, from 26.9
billion metric tons to 42.9 billion tons. The meaning of this is simple.
If these figures hold, there is no hope of averting the worst effects of
climate change.

When it comes to global energy supplies, the implications are nearly as
dire. To meet soaring energy demand, we would need a massive influx of
alternative fuels, which would mean equally massive investment - in the
trillions of dollars - to ensure that the newest possibilities move
rapidly from laboratory to full-scale commercial production; but that,
sad to say, is not in the cards. Instead, the major energy firms (backed
by lavish US government subsidies and tax breaks) are putting their
mega-windfall profits from rising energy prices into vastly expensive
(and environmentally questionable) schemes to extract oil and gas from
Alaska and the Arctic, or to drill in the deep and difficult waters of
the Gulf of Mexico and the Atlantic Ocean. The result? A few more
barrels of oil or cubic feet of natural gas at exorbitant prices (with
accompanying ecological damage), while non-petroleum alternatives limp
along pitifully.


4. A steady migration of power and wealth from energy-deficit to
energy-surplus nations: There are few countries - perhaps a dozen
altogether - with enough oil, gas, coal, and uranium (or some
combination thereof) to meet their own energy needs and provide
significant surpluses for export. Not surprisingly, such states will be
able to extract increasingly beneficial terms from the much wider pool
of energy-deficit nations dependent on them for vital supplies of
energy. These terms, primarily of a financial nature, will result in
growing mountains of petrodollars being accumulated by the leading oil
producers, but will also include political and military concessions.

In the case of oil and natural gas, the major energy-surplus states can
be counted on two hands. Ten oil-rich states possess 82.2% of the
world's proven reserves. In order of importance, they are: Saudi Arabia,
Iran, Iraq, Kuwait, the United Arab Emirates, Venezuela, Russia, Libya,
Kazakhstan, and Nigeria. The possession of natural gas is even more
concentrated. Three countries - Russia, Iran, and Qatar - harbor an
astonishing 55.8% of the world supply. All of these countries are in an
enviable position to cash in on the dramatic rise in global energy
prices and to extract from potential customers whatever political
concessions they deem important.

The transfer of wealth alone is already mind-boggling. The oil-exporting
countries collected an estimated $970 billion from the importing
countries in 2006, and the take for 2007, when finally calculated, is
expected to be far higher. A substantial fraction of these dollars, yen,
and euros have been deposited in "sovereign-wealth funds" (SWFs), giant
investment accounts owned by the oil states and deployed for the
acquisition of valuable assets around the world. In recent months, the
Persian Gulf SWFs have been taking advantage of the financial crisis in
the United States to purchase large stakes in strategic sectors of its
economy. In November 2007, for example, the Abu Dhabi Investment
Authority (ADIA) acquired a $7.5 billion stake in Citigroup, America's
largest bank holding company; in January, Citigroup sold an even larger
share, worth $12.5 billion, to the Kuwait Investment Authority (KIA) and
several other Middle Eastern investors, including Prince Walid bin Talal
of Saudi Arabia. The managers of ADIA and KIA insist that they do not
intend to use their newly-acquired stakes in Citigroup and other US
banks and corporations to influence US economic or foreign policy, but
it is hard to imagine that a financial shift of this magnitude, which
can only gain momentum in the decades ahead, will not translate into
some form of political leverage.

In the case of Russia, which has risen from the ashes of the Soviet
Union as the world's first energy superpower, it already has. Russia is
now the world's leading supplier of natural gas, the second largest
supplier of oil, and a major producer of coal and uranium. Though many
of these assets were briefly privatized during the reign of Boris
Yeltsin, President Vladimir Putin has brought most of them back under
state control - in some cases, by exceedingly questionable legal means.
He then used these assets in campaigns to bribe or coerce former Soviet
republics on Russia's periphery reliant on it for the bulk of their oil
and gas supplies. European Union countries have sometimes expressed
dismay at Putin's tactics, but they, too, are dependent on Russian
energy supplies, and so have learned to mute their protests to
accommodate growing Russian power in Eurasia. Consider Russia a model
for the new energy world order.


5. A growing risk of conflict: Throughout history, major shifts in power
have normally been accompanied by violence - in some cases, protracted
violent upheavals. Either states at the pinnacle of power have struggled
to prevent the loss of their privileged status, or challengers have
fought to topple those at the top of the heap. Will that happen now?
Will energy-deficit states launch campaigns to wrest the oil and gas
reserves of surplus states from their control - the Bush
administration's war in Iraq might already be thought of as one such
attempt - or to eliminate competitors among their deficit-state rivals?

The high costs and risks of modern warfare are well known and there is a
widespread perception that energy problems can best be solved through
economic means, not military ones. Nevertheless, the major powers are
employing military means in their efforts to gain advantage in the
global struggle for energy, and no one should be deluded on the subject.
These endeavors could easily enough lead to unintended escalation and
conflict.

One conspicuous use of military means in the pursuit of energy is
obviously the regular transfer of arms and military-support services by
the major energy-importing states to their principal suppliers. Both the
United States and China, for example, have stepped up their deliveries
of arms and equipment to oil-producing states like Angola, Nigeria, and
Sudan in Africa and, in the Caspian Sea basin, Azerbaijan, Kazakhstan,
and Kyrgyzstan. The United States has placed particular emphasis on
suppressing the armed insurgency in the vital Niger Delta region of
Nigeria, where most of the country's oil is produced; Beijing has
emphasized arms aid to Sudan, where Chinese-led oil operations are
threatened by insurgencies in both the South and Darfur.

Russia is also using arms transfers as an instrument in its efforts to
gain influence in the major oil- and gas-producing regions of the
Caspian Sea basin and the Persian Gulf. Its urge is not to procure
energy for its own use, but to dominate the flow of energy to others. In
particular, Moscow seeks a monopoly on the transportation of Central
Asian gas to Europe via Gazprom's vast pipeline network; it also wants
to tap into Iran's mammoth gas fields, further cementing Russia's
control over the trade in natural gas.

The danger, of course, is that such endeavors, multiplied over time,
will provoke regional arms races, exacerbate regional tensions, and
increase the danger of great-power involvement in any local conflicts
that erupt. History has all too many examples of such miscalculations
leading to wars that spiral out of control. Think of the years leading
up to World War One. In fact, Central Asia and the Caspian today, with
their multiple ethnic disorders and great-power rivalries, bear more
than a glancing resemblance to the Balkans in the years leading up to 1914.


What this adds up to is simple and sobering: the end of the world as
you've known it. In the new, energy-centric world we have all now
entered, the price of oil will dominate our lives and power will reside
in the hands of those who control its global distribution.

In this new world order, energy will govern our lives in new ways and on
a daily basis. It will determine when, and for what purposes, we use our
cars; how high (or low) we turn our thermostats; when, where, or even
if, we travel; increasingly, what foods we eat (given that the price of
producing and distributing many meats and vegetables is profoundly
affected by the cost of oil or the allure of growing corn for ethanol);
for some of us, where to live; for others, what businesses we engage in;
for all of us, when and under what circumstances we go to war or avoid
foreign entanglements that could end in war.

This leads to a final observation: The most pressing decision facing the
next president and Congress may be how best to accelerate the transition
from a fossil-fuel-based energy system to a system based on
climate-friendly energy alternatives.
_____

Michael T Klare is a professor of peace and world security studies at
Hampshire College and the author of Resource Wars (2002) and Blood and
Oil (2005). Consider this essay a preview of his newest book, Rising
Powers, Shrinking Planet: The New Geopolitics of Energy (2008), which
has just been published by Metropolitan Books. A brief video of Klare
discussing key subjects in his new book can be viewed by clicking here:
http://www.tomdispatch.com/p/tdvideo/klare04152008

Copyright 2008 Michael T Klare

http://www.tomdispatch.com/post/174919

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