A Big Reason Europe Is Bombing Libya
What is Europe doing bombing Libya? Why are European smart bombs suddenly raining from the sky to help a bunch of tribesmen known for supporting al Qaeda? Is this a humanitarian mission done out of the goodness of the European heart?
Here is a more likely reason.
America is mired in recession. Europe is in economic turmoil. Japan is recovering from a massive earthquake. Yet, despite the economic slowdown in the world’s advanced economies, the price of oil is relentlessly pushing higher and higher.
In January 2009, Brent crude traded at $70 per barrel. One year later, it cost $86. By January 2011, importers were paying $95 per barrel. Now, with turmoil in Egypt, Bahrain and Libya, crude has shot up over $120 per barrel.
There is a reason, and don’t blame just the speculators. The brutal reality facing the world is that with each year, it is becoming more and more difficult to obtain and secure the energy needed for business as usual.
The war in Libya is just one aspect of the global race to lock up future supplies.
The reality of an oil-limited world is a reality that policymakers are afraid to publicly admit because the implications impact everything from stock markets and food production to the dollar’s status as the world’s reserve currency.
Although the Europeans are taking action, the United States has still not come to grips with peak oil—the theory that global oil production has peaked and is now in decline. But the facts speak for themselves.
No country has spent more money on oil exploration and production than the U.S. Nor has any country drilled as many holes looking for oil. Yet, despite record dollars spent and unlimited access to the best, most advanced technology available, America’s oil production is in relentless decline. It is a decline that has continued for 40 years in spite of discoveries in the Gulf of Mexico, the Rocky Mountains, offshore, in Alaska and recently the Bakken formation.
In 1970, America produced almost 10 million barrels of oil per day. Today it produces about half that, despite an increase in the number of wells.
New oil extraction techniques—which include pumping explosives down holes to blast rock formations apart and then injecting powerful chemicals to make the sticky oil flow—promise to increase production rates temporarily. But these efforts will not permanently reverse the decline.
These are facts grounded in geology.
Here are some other facts grounded in reality. In a 2009 report that got little fanfare, the U.S. Department of Energy revealed that “a chance exists” that the world could experience a decline of liquid fuels production between 2011 and 2015 “if the investment is not there.”
Although the Department of Energy officially dismisses “peak oil” theory, which predicts that new crude oil production will soon be unable to keep up as hundreds of thousands of old wells become depleted, its own data actually backs up the theory.
In April 2009, in a document titled “Meeting the World’s Demand for Liquid Fuels,” the EIA published figures summarizing global liquid fossil fuel production and revealed some startling facts. The EIA expects total world fossil fuel production to steadily increase through 2030, but it has no idea where the extra oil production will come from.
After tabulating all known oil discoveries, the EIA found that the cumulative production from existing and known oil fields and discoveries will enter a slow persistent decline beginning in 2012.
That’s the known data—and it suggests a decline in global oil production starting next year!
According to the EIA data, “unidentified” additional liquid fuel projects will have to fill a 10 million-barrel-per-day gap between supply and demand within five years. Ten million barrels per day is almost the equivalent of the daily oil production of Saudi Arabia—the world’s top oil producer.
The EIA is either living in a dream world—or it fears the implications of an oil famine.
Production from the world’s 500 biggest fields is declining. These fields produce approximately 60 percent of conventional oil. Many of the top 20 fields are over 50 years old and few new giant oil fields have been discovered in recent years. These too are facts.
Earlier this month, the International Monetary Fund released its “World Economic Outlook.” According to analyst Rick Munroe, it was the first time the imf has acknowledged that the peaking of global oil production could be imminent and serious.
Although the report is generally optimistic about the world’s ability to overcome a “gradual and moderate increase in oil scarcity,” the fact that it mentions oil constraints is significant. According to the report, “oil and other energy markets have entered a period of increased scarcity,” and “a return to abundance is unlikely in the near term.”
The risks “should not be underestimated,” it says. “Studies have noted how … catastrophic events [such as oil shortages] can have dramatic effects on human behavior.”
If oil scarcity really is reality, where will America and Europe get the oil they need?
Some Americans believe there are vast underground lakes of oil hidden away in Alaska and elsewhere that could be exploited if only the government allowed drilling. Even if true, it may be a moot point.
Even if drillers were given immediate, unlimited access to America’s eastern seaboard and Alaska, it would take years for any meaningful quantities of oil to make it to market (and that is assuming there are meaningful quantities of oil located there in the first place). If forced to carry out the needed environmental studies, permitting and so on, the time from work boots on the ground to gas in your tank could be close to a decade.
It would take similar herculean effort to tap the new preliminary discoveries off the coast of Brazil. Canada’s tar sands? They might help a bit, but they too are difficult and costly to mine. And now, even pro-oil Alberta shocked oil developers by revoking permits for 20 percent of its oil sands in favor of nature preserves.
But as limited as America is in its choices to obtain future oil supplies, Europe is much worse off.
Europe just doesn’t have much oil. The North Sea oil fields are in rapid decline. Soon, almost all of Europe’s oil will need to be imported. And unless the Continent wants to become even more dependent on Russia’s extortionist-style energy dealings, European eyes will inevitably turn toward Africa and the Middle East.
Only Russia and the Organization of the Petroleum Exporting Countries have the extra oil to supply the world. Since Russia has nuclear weapons, that leaves opec.
Which brings us back to why Europe, with nato backing, is currently bombing Libya.
In 2009, Muammar Qadhafi announced that Libya was studying the best way to nationalize its oil resources. The oil should be owned by the people, he said, so the government could determine how much to charge for the oil. The announcement predictably sent foreign oil companies such as France’s Total, Britain’s British Petroleum, Spain’s Repsol, Italy’s eni and America’s Occidental Petroleum into a tailspin. Hundreds of billions of dollars hung in the balance—not to mention Europe’s economic prospects.
If Europe has its way, Qadhafi won’t ever blackmail Europe again. Perhaps other nations will take the hint too: Europe takes energy issues seriously!
The reality of an oil-constrained world guarantees that European nations become far more actively engaged and aggressive in Middle Eastern affairs. This is a reality made all the more urgent with America exiting Iraq and Iran already filling the power vacuum there.
Yesterday, crude oil hit $121.75 per barrel. Get used to it. Sky-high oil prices may soon be an uncomfortable and permanent fact that America, Europe and the rest of the world will be forced to deal with. With oil shortages escalating, Europe’s moves into the Middle East will only get stronger.
