October 19, 2007
Losing the war for oil
The prospect of a Turkish attack on Iraq, which has contributed to the rise in oil above $90, has revived the debate over whether the US-led invasion of 2003 was a "war for oil".
Alan Greenspan’s remark in his memoirs that "the Iraq War is largely about oil" was seized on by some commentators. But the conspiracy theorising was overdone: he was hardly revealing the secret masterplan behind the invasion. Mr Greenspan was far from the heart of policy-making, although he did apparently make his views known. It looks more as though he is simply trying to make sense of a strategy that otherwise defies rational explanation. As Thomas Powers put it in the the New York Review of Books last month: "Not knowing why we went in allowed us to go in".
In the London Review of Books, Jim Holt attempts to make the argument that "It’s the oil", but his charges do not really stick. "The draft law that the US has written for the Iraqi congress would cede nearly all the oil to Western companies," he writes, which is true if you believe that those same companies control all the oil in Russia or Venezuela. The draft oil law allows for a range of different investment structures, and ultimate control over the resources always lies with the government. If Iraq needs foreign investment, which it desperately does, then it has to offer investors sufficiently attractive commercial terms.
It is not as if western companies have been rushing to take advantage of the invasion supposedly conducted for their benefit. Decisions on investing in Iraq are very difficult, and while much of the country is in flames, and the country’s politicians are so bitterly divided, none of the oil majors will be prepared to make significant commitments. Iraq’s oil production has hardly vindicated a decision to go to war for oil, either: it is running at about 2m barrels per day, down from 2.5m just before the invasion. Rupert Murdoch’s pre-war assertion that "the greatest thing to come out of this for the world economy, if you could put it that way, would be $20 a barrel for oil" looks more deluded than ever.
Mr Holt writes "In terms of realpolitik, the invasion of Iraq is not a fiasco; it is a resounding success." If only that were true.
Well, the West, indeed, losing the war for oil (and gas), except that war is taking place elsewhere. Former Wall Street Journal reporter Steve Levine, who covered oil and geopolitics for over a decade, writes on his blog that the EU is working hard to make itself more vulnerable instead of reducing risks through diversification:
Posted by: eric | October 29th, 2007 at 1:37 pm | Report this commenthttp://oilandglory.com/2007/10/pipeline-war.html
If we’re losing the international war for oil - then self-sufficiency beckons.
Energy efficiency will surely become a priority. What else? The Economist reports that many think the UK government prefers nuclear to renewables. This is bad news for Scotland, said to be the Saudi Arabia of renewable energy.
Posted by: Slightly Optimistic | October 29th, 2007 at 1:45 pm | Report this commenthttp://www.economist.com/world/britain/displaystory.cfm?story_id=10024594
Steve LeVine’s work is very interesting and well-researched, but as I have suggested before, I am pretty sceptical about both Nord Stream and South Stream. I also think Mr LeVine’s description of “the U.S. failure to match Russia so far in the European pipeline war” is a rather hyperbolic way to describe what is going on. Unfortunately, geology and geography have ensured that until the philosophers’ stone of energy is found, Europe will always have a heavy reliance on Russia for oil and gas. Like any customer, it does not want to be over-dependent on a single supplier, but calling it a “war” does not help anyone.
Posted by: Ed Crooks | October 30th, 2007 at 12:48 am | Report this commentEd, thanks for the reference. Point taken that Russia will always dominate the European supply. But where the subject gets different is on the actual pipelines — Russia is winning what I call the pipeline war because it’s still providing the only conveyance for natural gas from the Caspian to Europe. That cuts off the east Caspian, which the U.S. has declared a strategic objective. And it leaves Europe undiversified in terms of former Soviet natural gas. This is the logic behind Baku-Ceyhan oil line — linking the Caspian directly to the West. When and if the U.S. gets more serious, it will build on the Baku-Ceyhan triumph, and engage more forcefully in the natural gas pipeline contest, meaning support of a trans-Caspian pipeline.
Steve LeVine, author
Posted by: Steve LeVine | November 2nd, 2007 at 5:54 pm | Report this commentThe Oil and the Glory
http://www.oilandglory.com