The Coming Energy Crisis

MEN ON CAMELS

Two Sticks

The new Busch Stadium for the Saint Louis Cardinals may be open by the time you read this book. I can only imagine how much energy it will take to light the ball field. While thousands of fans will fill the stadium night after night to cheer for the Cardinals, few will worry about how much energy powers the hundreds of high wattage, stadium floodlights. Nor will they give much thought to how lucky they are to be able to heat their homes and find gas for their SUVs. In the first decade of the twenty-first century, abundant energy has become a birthright. Some experts will tell you that we will always have as much energy as we need, while others are far less complacent. While we cannot predict our energy future with certainty, our energy past is an open book, from which we can learn a great deal.

The ruins of a once great civilization are only a short drive from this stadium. Moreover, if we could go back in time almost 800 years, we might find ourselves crouching near a small fire, elbow to elbow among a crowd a shivering Indians. If we could speak their language, we might hear an old chief lamenting the past:

"Our people have been in this valley for eight generations. Our ancestors built walls around the city to keep us safe. They grew crops so when the game grew scare we could still eat. We prospered and our numbers grew. We had to keep moving our city walls. At our height, we numbered 100,000. We cut wood in the surrounding forest and transported it to the city by way of rivers and streams. We used the wood to build our houses and for cooking fires. As our numbers grew, the forests around us disappeared. Each year, our wood gatherers would go farther to find wood. Eventually, we could not find wood. Our buildings decayed. In the winter, we built fewer fires. Many of the elderly and less sturdy froze or wandered off."

The Cahokia civilization, the largest in North America at the time, fell victim to America's first energy crisis. Their only source of energy was eventually exhausted. At some point, around the year 1250 A.D., they simply ceased to exist.

Wood has been a primary source of fuel for mankind since humans invented fire 400,000 years ago. But, did you know that woods still plays a major role in our energy needs today? In many parts of the world, electricity is an unknown luxury. Some three billion people build fires to cook their food and heat their homes. Half the world's population are trapped in a limbo we call "energy poverty." The implications for advanced societies are enormous, and we will address them later in the chapter. Now, let us trace the course of energy development by visiting with the "early adopters" who lived in Europe.

In Medieval times, Europe was one of the most densely populated areas of the world. The expanding populace chewed through forests like hungry termites. They cleared lands and planted crops they chopped up logs for firewood to heat their homes they milled the logs into lumber and used it to build towns, ships, and bridges. The glass industry required wood for its furnaces. Iron making was especially fuel-intensive, requiring a ton of firewood to produce twenty pounds of metal. To operate year round, a single iron smelter needed 400 square miles of forest. By 1300, only 32 million acres out of 134 million acres of forest remained. At just about the same time that the Cahokia in America were running out of wood, so were the people in Europe and England. Luckily, the second great energy revolution was about to begin.

Tommy Saves the Day

In the beginning, coal was not popular, and it was slow to gain acceptance. Aside from limited uses in industry, wood was still required for building homes, ships, and bridges. In England, however, the wood shortage became so dire that the king shut down metal forges and proclaimed a ban on further cutting of forests owned by the crown. Firewood became a luxury for the rich. By the time London burned in 1666, the rebuilding of the city required the importation of lumber from abroad. [ii]

The English people disliked coal because it was dirty, and produced black smoke and soot. As a result, brewers and bakers refused to use it. Much of the infrastructure built for burning wood was not well suited to coal. However, coal had too many advantages to ignore. First, coal was more readily available and much cheaper than wood. Second, pound for pound, it produced five times as much energy. Finally, with production localized, tons of coal, and thus energy, could be taken from one single mine and shipped to its final destination. The production of coal was far more efficient and economical than the production of wood, which required more labor dispersed over wider geographical areas.

Not all coal is alike. The early coal mining activity brought up the softer, less efficient coal (called lignite) that was nearer the surface. Not until the miners exhausted those supplies, did they begin to unearth the harder, cleaner-burning bitumen and anthracite. This harder coal gained greater acceptance among the public because it produced less soot and smoke. Equally as important, the harder coal contained more carbon, and correspondingly, more energy. Digging deeper in the earth, however, presented a problem. Without warning, underground water would rush in, flooding the shafts. The only solution at the time was the use of a crude, horse-driven pump that was slow and very inefficient. Thus, in the early eighteenth century, this one technological obstacle stopped the progression of energy growth in its tracks. In 1712, Thomas Newcomen, an Englishman, solved the problem with the invention of what later came to be known as the Newcomen engine. Using coal as a power source, the engine produced steam, which in turn powered the mechanical pump. With the use of the Newcomen engine, hundreds of flooded mines were brought back into production, and, by 1750, England's coal production had doubled. Pumping water from mines was just one use for the new invention, however. In fact, Newcomen had invented the forerunner of the steam engine. With minor adaptations, the steam engine could power anything, anywhere as long you could supply it with enough coal.

The coal-powered steam engine, which converted heat energy to mechanical energy, played an important role in the transition from agriculture to industry, thus launching the Industrial Revolution. While the engine first revolutionized the coal mining industry, it later transformed textile manufacturing, and then transportation. Factories of all kinds sprung up, utilizing the power of the steam engine. By the early 1800's, steam locomotives began carrying cargo, including the much-needed coal. As rail transport expanded, so did the need for iron rails, creating further demand for coal at the iron foundries. Finally, the English navy made the leap from wind power to steam power. In a relatively short period, England created the first modern energy economy and became the leading power in the world. [iii]

The increased demand for coal spawned new coal mining operations in Germany, France, and Belgium. The United States, however, satisfied their energy needs with a wealth of virgin forests. Wood remained the dominant fuel until the end of the Civil War. Once America started mining coal, the industry developed quickly. By 1900, the U.S. surpassed England in coal production. At the same time, total world production had increased ten-fold since 1850. [iv]

In the industrialized nations of the world, energy and progress became inexorably linked the more that was manufactured, the more energy was required the more that was manufactured, the more wealth was created and, the more wealth that was created, the more demand there was for products. Without an abundant energy source (and the technological ability to harness it), progress and development would not have occurred. Nor would the revolution have been possible without capital.

Coal mining was one of the first capital-intensive industries. Start-up costs were expensive, and the coal mining industry needed the financial industry behind them. Moreover, the mining industry needed government as well. It became common practice for the industry to lobby government for favorable laws preventing miner strikes. Interestingly, in light of OPEC, history shows us that coal-mining companies joined in regional monopolies for the purpose of limiting production and keeping prices artificially high. Public outcries were ignored coal companies held too much political power, and few in government wanted to interfere with such an important industry.

The Brothers Hammil

The first official oil well was drilled at Oil Creek, Pennsylvania in 1859. In the latter part of the nineteenth century, oil's use was mostly limited to the production of kerosene for lighting. With the advent of electricity, the future of oil looked dim. Geologists of the day claimed that its production would never be great enough to rival coal. All that was about to change.

The year was 1901 the place: just outside of Beaumont, Texas. There, employing a new type of rotary drill, Al and Curt Hammil drilled deeper than anyone had before. At a depth of 1100 feet, the brothers felt the earth beneath them shake. Seconds later, hot gases exploded from the ground, followed quickly by a plume of oil gushing hundreds of feet in the air, higher than anyone had seen before. The quantity was unimaginable while most wells produced fifty to one hundred barrels a day, this well, called Spindletop, was soon producing 100,000 barrels a day – more than all the wells on earth combined. Skeptics called Spindletop a fluke, claiming the volume would quickly drop. But, just two months later, the brothers drilled a second well that produced just as much, and then a third, a fourth, and a fifth. The age of oil had begun. [v]

Just as the Newcomen engine had been the catalyst for coal viability, so was the rotary drill to oil. As time went on, more fields were discovered in Texas, Oklahoma, Mexico, and Venezuela. As the cost of oil dropped, it became more competitive with coal. Additionally, oil's higher energy content gave it a distinct advantage. Both trains and ships started using oil to power their engines. It was the automobile, however, that truly secured oil's future. Henry Ford introduced the Model A in 1903, powered by a gasoline engine. Just ten years later, a million vehicles were on the road. As automobile usage exploded, so too did the demand for oil. [vi]

The connection between economic progress and energy is a constant: there can be no economic progress without energy the abundance of concentrated energy propels a country forward the lack of it stops a country's growth in its tracks. Moreover, energy use seems to increase through time. For example, from 1895 to 1915, energy consumption per capita in America doubled. During the same time span, the demand for oil worldwide nearly quadrupled. Up until this time, the entire world's production was controlled by a handful of companies, but that was about to change.

Big Brother Takes Charge

Eventually, governments decided that the oil industry was too important to national security to be left entirely in the hands of corporations. The British government may have been the first to act on that belief. In 1908, the British converted their Navy from coal to oil. Of course, Britain had no oil. Unless they could be certain of future supply, their national security would be at risk. In 1914, to assure supply, the Parliament voted to purchase a majority stake in one of Britain's largest oil companies. The Anglo-Persian Oil Company, based in London, had recently discovered a large petroleum field in southwestern Persia. Because of the acquisition, the British government became responsible for protecting the company's oil fields. For the first time in history, the security of overseas petroleum supplies became a major state responsibility. [vii]

With the outbreak of World War I, the dependence of the military on oil became even more pronounced. Both the tank and airplane (two fuel hungry killing machines) came to prominence during the conflict. Over 100,000 motor vehicles, which carried troops and supplies for the Allies, required enormous supplies of gasoline each day. [viii] After the war, other governments followed Britain's lead by creating state-owned oil companies and attempting to secure sources of foreign oil. Britain strengthened its position in what is now Iran France obtained concessions in what is now northern Iraq Germany linked with Romania and Japan laid plans to secure oil rights in the Dutch East Indies. [ix]

The lust for oil intensified during World War II. In fact, in 1941, when the U.S. embargoed oil exports to Japan, the Japanese realized that their only source of oil for the war would be the Dutch East Indies. Fearing that U.S. planes and ships could interrupt that supply, the Japanese launched a preemptive attack on Pearl Harbor. Germany's need for oil prompted the 1941 invasion of Russia, its prime target: the Soviet oil center at Baku. Both efforts failed. U.S. air and submarine attacks on tanker ships disrupted Japanese imports from the East Indies, while stubborn Soviet resistance thwarted the German invasion. With oil supplies practically gone for both countries, Japan and Germany were unable to mount effective resistance to Allied offensives and so were eventually forced to surrender. [x]

Men on Camels

Since the turn of the century, the United States had been the greatest source of oil, but things were about to change. Worldwide demand exploded in the post war years. In Europe, the reconstruction was an energy intensive effort. In America, the number of passenger cars doubled from twenty-five million to forty-eight million in only ten years. [xi] In 1946, for the first time in history, America consumed more oil than it produced. Worldwide, between 1945 and 1960, oil consumption rose from six million barrels a day to twenty-one million. [xii] Meanwhile, although, Mexico and Russia had nationalized their oil, seven companies controlled the majority of world production: Exxon, British Petroleum, Shell, Texaco, Chevron, Gulf, and Mobile. Therefore, while the U.S. was not able to meet its demands strictly from U.S. production, its oil companies still controlled much of the flow of oil from the Middle East. While the oil states had the oil, the major oil companies had the technology to produce it, and controlled worldwide distribution. For decades, the oil companies held the advantage, and could dictate terms to the oil states. Eventually, however, the oil states recognized that the oil companies were making the lion's share of the profits, and became angry over what they considered exploitation of their natural resources.

In 1961, Venezuela, Iran, Iraq, Kuwait, and Saudi Arabia formed the Organization of Petroleum Exporting Countries (OPEC) in order to take pricing power away from the oil companies. Eventually, Algeria, Indonesia, Libya, Nigeria, Qatar, and the United Arab Emirates joined their coalition. One by one, the oil states nationalized their oil, forcing the oil companies to accept reduced royalties. With more than half the world's oil under the control of OPEC, the cartel could control both pricing and supply. [xiii] By 1970, the U.S. reached another energy milestone: production peaked. With each passing year, America would grow even more dependent on foreign oil.

Lack of energy independence became even more evident in the 1970s. In 1971, OPEC unilaterally raised prices by seventy percent. Moderate by today's standards, the price of oil stood at $5.11 a barrel. The price increase was just a taste of what was to come. In 1973, the Arab-Israeli conflict broke out. The U.S. sided with Israel, a move that angered the Arab states. In retaliation, the Arab states cut off all oil shipments to the United States. The United States considered military action but backed off when the Soviets appeared ready to intercede. Shortly thereafter, OPEC announced a four-fold increase in price. Together, the embargo and price increase shocked the global economy, causing severe oil shortages, which, in turn, engendered a global economic recession. From that time on, the world viewed oil not only as an essential military commodity, but also as a prerequisite for global economic stability. [xiv]

The Arab states lifted the embargo the following year, but its effects were not forgotten. More aware than ever of their vulnerability, the U.S. embarked on major oil drilling projects in the North Sea and the North Slope of Alaska. Additionally, it created the Strategic Petroleum Reserve, where hundreds of millions of barrels could be stored and easily accessed if needed. U.S. policymakers began to make plans for military intervention in the Middle East should it one day become necessary. In 1975, then secretary of state, Henry Kissinger, stated in Business Week that the United States was prepared to go to war over oil. Although reluctant to employ force in a dispute over prices alone, he stated, Washington would have no such hesitation "where there's some actual strangulation of the industrialized world." [xv]

Jimmy Carter took the same hard line with OPEC, making it clear that America would use force against any adversary that might impede the flow of oil from the Persian Gulf. After the Soviets invaded Afghanistan in 1980, and fearing that their aggression might spread to the Middle East, President Carter addressed a joint session of Congress.

"Any attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America and will be repelled by any means necessary, including military force." [xvi]

This declaration became known as the "Carter Doctrine," and was later invoked after Iraq invaded Kuwait. President Bush then sent large number of troops to guard Saudi Arabia and more to fight the Iraqis in Kuwait. "Our country now imports nearly half the oil it consumes and could face a major threat to its economic independence," adding that, " the sovereign independence of Saudi Arabia is of vital interest to the United States." [xvii]

Subsequent to the Gulf War, the Saudis showed gratitude for America's protection by overproducing and keeping oil prices relatively low, allowing the United States to pull out of recession. Going forward, the U.S. and Saudis entered into an unspoken alliance where Saudi Arabia would supply the oil that America needed and the U.S. would supply the protection. The U.S. then built a billion dollar command center near Riyadh, as well as a growing network of military bases. [xviii]

After the Gulf War, the oil order operated smoothly for some time. Research had shown that price spikes depressed economic growth, which was not good for anyone. Not only did the U.S. economy suffer, but oil companies and oil states did as well because demand lessened. All parties agreed that a stable oil price would be of the most benefit not high enough to depress economies, but not low enough to reduce profits of oil companies and oil states. Still, squabbles among OPEC members resulted in cheating on quotas and civil unrest in Venezuela and Nigeria caused frequent supply disruptions. When the oil market cannot be certain about supply, oil traders add an "anxiety premium", which can add several dollars to the spot price. By the late 1990s, the policy to keep oil prices stable had failed miserably. In 1997, the Saudis drove prices down to $10 a barrel to punish Venezuela for overproducing. In 1998 and 1999, as a result of drastic production cuts by the Saudis, oil spiked to $30 a barrel, precipitating another global recession.

When America elected George W. Bush for President in 2000, he owed his victory in part to generous campaign contributions from the oil industry. Without a doubt, he listened to their council in areas of energy policy. Even more important to Bush's decision making, however, were the opinions of three neoconservatives, whose bold plans for the Middle East pre-dated Bush's arrival in Washington D.C. Those three, high-ranking officials were: Deputy Defense Secretary, Paul Wolfowitz, Defense Secretary, Donald Rumsfeld, and Richard Perle, Rumsfeld's top advisor. Washington policymakers had proposed taking the Middle East by force as far back as 1975. For years, they lacked adequate justification to carry out their plans. The Iraq invasion of Kuwait gave them their first excuse to establish a beachhead.

In 1998, even before Bush took office, Rumsfeld, Wolfowitz, and Perle were members of the conservative think tank, Project for the New American Century. At that time, they wrote a letter to President Clinton that articulated their intent for Iraq: "It hardly needs to be added that if Saddam does acquire the ability to deliver weapons of mass destruction . . . a significant portion of the world's supply of oil will all be put at hazard . . . The only acceptable strategy is . . . to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy." [xix]

Even before the 9/11 attacks, Vice President Cheney had been making plans about Iraq's oil. Analysts felt that with the help of American oil companies, production would double from 3.5 million to seven million barrels a day. If Iraq could be convinced to leave OPEC, that much oil would be enough to undermine OPEC's ability to control prices. The investment by American oil companies, estimated to cost as much as forty billion dollars, would require assurance of a new regime friendly to America, military security, and a handsome share of the revenues. [xx] In reference to Cheney's vision, Chris Toensing, an analyst who works on the Middle East Research and Information Project, argues that Cheney and Rumsfeld see control of oil as merely part of a much bigger "geostrategic" vision. "By controlling the Gulf and the Middle East, the United States gains leverage over countries that are more dependent on the Gulf for oil, like China and Europe." [xxi]

The Saudis, however, could present the U.S. with more problems. We must remember that loyalty has not been their strong suit. They are likely to seek whatever deals are in their own best interest. Russian and Saudi Arabia are on friendly terms. If Russia and Saudi Arabia combined forces, they would dominate a large portion of the world's energy supply. A China/Saudi marriage is not out of the question either. The Saudis clearly want the burgeoning China market and China clearly wants access to Saudi oil. One thing China has no shortage of is cash, and money talks in the world of oil. Given the potential influence of Russia and China on Saudi Arabia, control of future Saudi oil by the U.S. is hardly a fait accompli. Consequently, we have not heard the end of the men on camels.

RUNNING ON FUMES

Oil is a finite resource once earth's supply is exhausted, humanity will find itself wholly dependent on other sources of energy. Since the 1950s, the question that geologists have been trying to answer is, how much oil remains on the planet and, given estimates of expected usage, when will we reach the peak (the point at which one half of all supplies have been exhausted). Oil wells always produce far more in the early stages of their production, then progressively weaken as the oil becomes more difficult and expensive to extract. Knowing the peak is critical because that is when production will begin to decline.

When we reach the critical halfway point, the cost of energy is likely to skyrocket. Unfortunately, we will not know for sure when world oil production has peaked until after the fact, and by then it will be too late. Estimates range from as early as 2004 to as late as 2018. The uncertainties arise from lack of good data on the reserves in the Middle East and Russia. The mean consensus, however, is that global oil production will peak about 2010.

Hubbert's Peak

In the 1950s, oil production in the United States increased every year. No one ever thought about running out of oil no one, that is, except one geologist who studied the matter in detail and employed sophisticated mathematical models to find the answer. What M. King Hubbert discovered shocked the oil community and the world. Hubbert's models predicted that oil production in the United States would peak sometime in 1970. As we now know, to nearly everyone's surprise, U.S. oil production did peak in 1971.

Years later, one of Hubbert's colleagues, Kenneth S. Deffeyes, employed the same methodology to attempt to determine when worldwide production would peak. Other geologists, employing Hubbert's principals, worked on the problem as well. All obtained similar results. While known reserves are relatively easy to calculate, the unknown reserves in the Middle East pose more of a problem. For that, we must examine the work of one of the world's foremost authorities on Middle East reserves, Dr. Colin Campbell.

Campbell is among the more pessimistic of the oil analyst, and predicts the peak in world oil production will come in 2005. Campbell reminds us that the peak in discovery occurred in the 1960s and that the amount of oil discovered has fallen every year since. He agrees with Hubbert that the big oil fields are always discovered first when they run out, the industry turns to the smaller, more difficult fields. There comes a point when oil discovery peaks, followed some years later by a production peak. [xxii] Campbell's analysis of purported Middle East reserves is what really concerns him.

Campbell claims that estimates of Mid East oil are overstated, and his evidence is compelling. As you may know, OPEC sets quotas among its members to regulate how much oil comes to market. The member countries are limited to how much they can produce and sell based on the amount of their reserves. Through most of the 1980s, reserve estimates remained constant, although a tremendous amount of production occurred. For this to be true, each country supposedly found new oil to replace what it had produced. However, the evidence shows no reported oil discoveries or production increases in the Mid East in the last twenty years. Curiously, in 1988, both Iraq and Iran claimed that its reserves had magically doubled. In 1990, Saudi Arabia restated its reserves by ninety billion barrels. Campbell claims the new reserve estimates are bogus. "It is obviously absurd to imagine that Iraq, for example, has increased its reserves fourfold since 1980 when much of the time it was at war with Iran." [xxiii] Thus, Campbell believes the peak in global oil production is imminent. At least one of Bush's energy advisors agrees. After analyzing more than 100 technical production reports written by Saudi oil engineers, he believes that the Saudis themselves fear that their country has very likely gone over its peak. If that is true, then it follows that world production has peaked as well. [xxiv]

Known reserves in the non-OPEC world have already peaked and are in rapid decline. In the U.S., which has less than two percent of the world's reserves, production peaked in 1971. Clearly, the U.S. must find its oil somewhere else. The politically sensitive Arctic National Wildlife Refuge is one place it is looking, but experts generally agree that output from that region would be inadequate to alter the United State's dependency on OPEC. Sadly, most energy analysts believe that the large fields of oil have already been discovered those that do remain will be harder to get to (lying deep beneath the sea or ice) and more costly to bring to production. As explained by Joseph Riva, former oil analyst with the U.S. Congressional Research Service, "As exploration progresses, the average size of the fields discovered decreases, as does the amount of oil found per unit of exploratory drilling." [xxv] The evidence supports him: Since 1995, the world has used an average of 24 billion barrels of new oil each year, while finding only 9.6 billion barrels.

Undiscovered Reserves

The biggest discovery of the last decade was a massive oil field in the Caspian Sea Basin. This basin encompasses the countries of Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan, along with parts of Russia and Iran. Estimates vary widely as to how much oil exists in this area, but the Department of Energy claims that the field could hold as much as 270 billion barrels (approximately 40% of Mid East reserves). Additionally, it may house some 665 trillion cubic feet of natural gas, representing one-eighth of the world's gas reserves. [xxvi] It should be noted, however, that DOE estimates have generally been overly optimistic. Other sources peg the range from 25 billion to 100 billion barrels, and expect that only ten percent to fifty percent of those reserves are ultimately recoverable. If the more conservative estimates are accurate, the discovery would satisfy world demand for one to two years at most.

Rather than offering a panacea, however, the Caspian region could become a potential powder keg, as the U.S., Russia, China, and Iran compete for what might be the last significant oil and gas outside of OPEC. Since the late 1990s, each country has proposed a different route for a pipeline to control the flow of oil from the Caspian basin. So far, each country has waged a war of diplomacy to secure its share, but as global oil supplies tighten further, that could change.

Another oil bonanza could lie beneath the frigid Arctic ice in Siberian, where geological surveys have shown great promise of undiscovered reserves. A battle is already in place to control that oil. In 2003, China and Japan locked horns to outbid each other for access to the Arctic oil. Japan, which is entirely dependent on imported oil, wants to erect a 2300-mile pipeline from Siberia to coastal Japan. The Chinese want to build a 1400-mile pipeline to access the same oil. Upping the ante, Japan offered to build the pipeline (at a cost of $5 billion), invest another $7 billion to develop the Siberian oil industry, and contribute another $2 billion to Russian social projects. [xxvii]

China, with the greatest need for oil going forward, is not about to allow itself to become dependent on other nations for its lifeblood. To prevent that from occurring, it is aggressively seeking alliances with other oil producing countries. None is more important than one with Saudi Arabia. A deal with the Saudis would marry the world's largest producer (Saudi Arabia produces approximately 25% of world output) with what will soon become the world's largest market. Each side sees the benefits, and seems eager to make the alliance: the Saudis have knowingly offered the Chinese below market pricing for their highest quality crude. As part of the deal, the Saudis hope to buy ballistic missiles and other high-tech weapons the Americans refuse to sell them. [xxviii]

Another possible source for oil is the Alberta tar sands in northern Canada. Tar sands are not technically oil, but a process exists to produce synthetic oil from them. While the potential for synthetic oil recovery is huge, the process of refining the tar sands creates an ecological nightmare: the refining process produces massive emissions of carbon dioxide, the primary cause of global warming. Environmentalists would likely block the development of this industry, and rightly so. In a later chapter, you will learn why global warming is another crisis about to explode on the scene.

Tight Supplies

You may wonder how diminishing oil supplies affect the major oil companies. The fact is that big oil desperately needs new sources of supply. Exxon's production has been flat since 1999 and British Petroleum has complained that it has been hard-pressed to find enough oil in its existing fields. Shell has struggled to meet production estimates as well. In 2000, Shell could only replace three out of every four barrels it used in 2001, it could only replace two. In 2004, it announced that it was reclassifying twenty percent of its proven reserves to unproven – a move that revived concerns over the decline of non-OPEC oil. [xxix]

A company's reserves and its ability to hit its production targets are keys to determining its long-term profit picture and viability. To acquire reserves, some majors have bought smaller companies simply for their reserves. Others, like Shell and British Petroleum, are gambling on big strikes in deep water or the Arctic. Remember, however, oil exploration is very expensive. The International Energy Agency estimates that oil companies will need to invest over two trillion dollars to maintain production and meet the rising demands of Asia. OPEC will need to increase production as well. As early as 2009, OPEC will need to pump an additional 5.1 million barrels a day (about twenty percent more than current output) to meet rising world demand. [xxx] Some analysts predict that OPEC will only be able to bring half that amount on stream by that time.

The risk going forward is that even the combination of non-OPEC and OPEC production will prove inadequate to meet rising world demand. While Saudi Arabia could benefit from allowing the major Western oil companies to modernize and expand their oil infrastructure, political concerns may prevent them from doing so. History has proven that the elite Saudi families' first priority is themselves, not their country. If the Saudis were to allow blatant exploitation in their country by western imperialists, they would risk revolt by more radical, fundamentalists. In fact, intelligence experts portray Saudi Arabia as very unstable and the risk of rebellion by fundamentalists a very real threat. The Saudi elite might not feel that the extra profit would be worth the risk of a coup.

Unless the majors can break back into OPEC, or possibly claim a major stake of the Caspian basin oil, they will simply not have enough production to satisfy customer need. While high oil prices do increase profits, profits are also dependent on the number of barrels produced and sold. Before crying too many tears for big oil, however, remember that they are still the largest and most profitable companies in the world, making billions of dollars of profit every year. With that profit, they are investing heavily in natural gas, heralded as the bridge fuel that will carry us until newer generation energies such as hydrogen fuel cells and solar power can take over. One thing is quite certain: long after oil has gone the way of the dinosaurs, today's majors will play a dominant role in tomorrow's energy future.

In summary, the supply of oil is running out faster than expected. The United States uses 25 percent of the world's oil, but produces only two percent. Non-OPEC oil is in decline, forcing OPEC to produce more. OPEC reserves may be lower than official estimates. New oil exploration and production will be extremely expensive, adding to cost pressures. Competition among countries could very well escalate into military adventures, such as we have already seen in Iraq. Even if we do manage to avert a major war, the cost of energy security will be extraordinarily high. For instance, pipelines are particularly vulnerable to terrorist attacks as are many other parts of oil's infrastructure. Even if world demand remained constant, we would still run out of oil in the near future. However, that scenario is benign compared to reality. The fact is that world demand is rising even faster than analysts predicted just a few years ago. The next section explores the driving forces behind that demand.

MORE KIDS, MORE MONEY, MORE TRIPS TO THE MALL

Two components make up the rising demand for energy: a growing population and the industrialization of developing countries. In just the last fifty years, the planet has added more than three billion inhabitants, doubling the population. Each year 80 million more people join our ranks. For perspective, imagine ten more New York Cities added to the world each year. The world's population will reach 6.8 billion by 2010 and approach 8 billion by 2020. [xxxi] More people require more energy.

The second component, the shift from agriculture to industry, is occurring in many parts of the world, such as China, India, and South America. Industry is extremely energy intensive: factories require energy, as does the transportation needed to ship final product. It is the wealth created by industrialization, however, that creates the upward spiral of energy demand: more wealth leads to more purchases, and that demand then encourages more manufacturing. Increased manufacturing creates more jobs, giving the public more money to purchase goods. Over the next few decades, global per capita income will rise by about two percent per year, nearly twice the rate of population growth. [xxxii]

The industrialization of the third world is increasing the wealth of the planet. Between 1950 and 1999, the gross world product increased from $6 trillion to $41 trillion. During the same period, per capita wealth increased from $2,500 to $6,750. As families make more money, they first demand electricity for their homes. Once they have electricity, they can plug in a stove, refrigerator, radio, TV set, and a computer. Because the production and use of these products require such a great deal of energy, the global requirement for energy has consistently exceeded the rate of population growth. We must face the fact that the world has an insatiable appetite for energy because energy equates to economic progress. One measure of economic progress is automobile ownership during this same time-period, 1950 to 1999, automobile ownership jumped from 53 million to 520 million. [xxxiii]

China Wants Wheels

China is gobbling up energy faster than any country on earth. According to the U.S. Department of Energy, energy consumption in China will rise by about 4.3 percent per year between 1997 and 2020, roughly four times the rate in Europe and the United States. According to their estimates, oil consumption will increase 150 percent, coal consumption will increase 158 percent, and natural gas consumption will increase 1,100 percent. Other industrializing nations will exhibit a similar pattern. In India, energy consumption will increase 3.7 percent per year, in Brazil, 3.4 percent, and in Mexico, 3 percent. Together, these three countries will require three times as much energy by 2020 as they did in 1990. [xxxiv]

The Asian car market deserves special attention. In 2002, China sold a million new cars, an increase of fifty percent over the prior year. Analysts expect the Chinese car market to expand at fifteen to twenty percent per year over the next decade, making it the hottest car market in the world. [xxxv] General Motors predicted that China would account for one-fifth of all new car sales between 2002 and 2012 – nearly twice as many as in the United States. [xxxvi] Hundreds of millions of Chinese see owning a car as a status symbol and a personal goal. Although only eight in every one thousand Chinese own a car today, among urban Chinese, three-quarters plan to buy a car within the next five years. They will probably need one in many large Chinese cities such as Shanghai, home to thirteen million residents, planners are rapidly developing suburbs to ease inner city crowding. By all accounts, the Chinese car market is set to explode. A Nissan executive explained why: "An increasing number of people in China earn salaries equivalent to the price of a new car. As has happened in other markets, this is exactly the point in time when domestic car sales begin to take off." [xxxvii]

In other parts of South East Asia, whose middle class is slightly more developed, the number of cars on the road grows by thirty percent per year. In South Korea, the number of passenger cars quadrupled in only ten years, while gasoline consumption tripled. In Indian, with a middle class of 100 million, the number of cars tripled in the last decade and may triple again by 2020. Another 100 million consumers throughout the rest of Southeast Asia will soon be ready to buy cars as well. [xxxviii] As a result, demand for oil in these countries will triple in the next fifteen years. As you can see, millions of motorists in Asia are devouring gas and oil more voraciously than was previously expected.

Where It Comes From and Where It Goes

Although this topic is about energy demand, we have focused on oil because, in our time, oil is the king. Not only is it the most versatile fuel, but our global energy infrastructure depends on it. While other energy sources such as natural gas, coal, and nuclear power play major roles in other industries, oil alone powers the world's transportation systems. Oil and its refined products account for ninety-five percent of the fuel consumed in cars, trucks and airplanes. As the number of vehicles and airplanes increase, the amount of oil devoted to transportation needs will increase as well.

As oil supplies grow scarcer, as they already have, energy prices will rise dramatically, a trend that will contribute to inflation. The costs of securing oil resources through military means will also increase inflationary pressures. That is why I have focused on oil. However, the world has other energy sources besides oil, and to get the complete picture of energy demand, we need to learn a little about them.

Most experts believe that oil will remain the world's leading energy source during the first few decades of the twenty-first century. According to the U.S. Department of Energy, at present, oil accounts for 39 percent of total world energy consumption coal accounts for 18 percent, natural gas, 22 percent, nuclear energy, 6 percent, and hydropower, wood, and alternative energies account for the rest. Natural gas will eventually overtake oil as the predominant fuel. Even in 2020, however, oil and gas will account for two-thirds of energy use, while coal will account for 22 percent, and all other sources for 12 percent. Natural gas usage will increase by 3.3 percent per year, oil and coal by 1.8 percent and 1.7 percent respectively. Nuclear will decline by .4 percent per year, and all other fuels will gain 2.1 percent per year. [xxxix] Given that hydropower and wood are part of the "all other" category, it seems clear that the Department of Energy is not holding out much hope for solar, wind power, and hydrogen fuel cells over the foreseeable future.

And the Energy Hog Award Goes to . . .

At present, there is no indication that we will reduce our energy consumption in the years ahead. The United States seems oblivious to the cost of carbon-based energy, its contribution to global warming, or even to the fact that oil supplies are running out, with unknown consequences for a future generation. America has had decades to build an energy independent economy, but failed to do so. The 1975 oil embargo, which created long gas lines and led to a recession, should have been a wake up call. The government could have marshaled forces to create cars that are more efficient and other means of non-polluting transportation. Had more funds gone to research, instead of to supplementing the oil industry, the United States (some thirty years later) would not be facing the problems we have today.

America's resourcefulness has never been questioned when put to the test. In World War II, we marshaled the top scientists in the country and developed the atomic bomb in eighteen months. In the 1960's, we created the Apollo Program and landed men on the moon. In 1975, we confronted with another problem: how to make cars more efficient so that our country would be less dependent on oil. Congress passed the Corporate Average Fuel Economy standards, which forced the auto industry to design more fuel-efficient cars. The industry responded because it had no choice. By 1985, new American cars averaged 25 miles per gallon. Given the pace of energy improvements in the engines and car bodies, experts predicted fuel efficiency to reach 40 miles per gallon by the year 2000.

By 1985, however, the price of gas had fallen, and energy conservation was yesterday's news. The auto industry immediately began making bigger, heavier, faster cars with little regard for fuel efficiency. By 2002, while the average car was much more powerful, its fuel efficiency had dropped to 20 miles per gallon. In the 1990s, pickup trucks made a huge comeback, along with a new hybrid, the sport utility vehicle (SUV). Pickup trucks and SUVs now account for half of all vehicle sales. As a result, the average vehicle on the road in America gets less than 21 miles per gallon – the lowest level since 1988, which was the peak year for fuel efficiency. [xl] We also drive more – over 30 percent more each year than we did in 1980.

It is not just our cars that are bigger and cost more to run our houses are bigger and require more energy as well. Although, houses are more energy efficient today on a square foot basis, they are much larger. Today's bathrooms are often the size of the bedrooms we grew up in. New homes today average over 3000 square feet, even though families have fewer children. American houses are much larger than houses in Europe and Japan, and at least twice as energy intensive. [xli]

Just Like the Big Boys

In the developing world, the future of their energy usage is clear. They will emulate the United States, wanting bigger houses, bigger cars, more appliances, and big-screen TVs. They will travel more. Witness the fact that air travel in China is growing at 20 percent per year and the government expects to add 50 passenger jets per year during the next twenty years. [xlii] The inhabitants of the developing world have a long way to go to outdo American energy hogs the average American uses 7,500 gallons of oil per year, while the average Chinese averages only 800 gallons. [xliii] Nevertheless, they are closing the gap. Before 1985, only 7 percent of Chinese homes had refrigerators today that number is 75 percent. Households with TVs have climbed from 17 percent to 86 percent. The number of air conditioners has grown fifty-fold. Examples like these help to explain why power generation is one of the fastest-growing sectors of the developing world. [xliv] In fact, China has claimed that it will need to build sixty electric power plants each year for the next decade simply to keep up with demand.

China's production of power plants will not be good news for environmentalists. While China is low on oil, they do have abundant supplies of coal and they plan to use it. Coal consumption in China is expected to nearly double in from 2005 to 2020. While China is aggressively researching alternative energies, such as nuclear power and fuel cell technology, like all developing countries, their priorities are elsewhere. Their principal goal is to expand their economies as quickly as possible by using any means at their disposal. Developing countries regard a clean environment and energy independence as luxuries they cannot afford, and not worth worrying about until solid economic growth can be established. They want to "grow first and clean up later." [xlv]

It is rather shocking to note that, as a result China's much faster than expected growth, several forecasting agencies have, within only an eighteen month span, increased their estimates for global oil demand by an average of 73 percent per year. It seems clear that conventional estimates, both for the remaining supply of oil and the future demand for oil, have been far too conservative. The truth is we are running out of oil far more quickly than practically anyone would have expected. We are rapidly approaching an impasse where our energy-based global society will soon face an oil shock whose economic repercussions are felt both domestically and globally.

WITH A LITTLE HELP FROM OUR FRIENDS

The future of energy is squarely in the hands of our governments. In the final analysis, the decisions politicians make regarding energy policy will determine our fate. They can choose to battle over the remaining drops of oil and natural gas on the planet or they can choose to implement conservation policies and marshal forces to free us from our dependence on carbon-based fuels. For three decades those choices have been clear and, for three decades, our government has consistently made the wrong choices. Meanwhile, countries almost entirely dependent on other nations for their energy needs--such as Japan, England, Germany, and Denmark--have pressed forward, both in the areas of conservation and in the development of new energy technologies. The Europeans lead the world in wind power technology, while Japan excels in solar power. When it mattered most, the U.S. turned its back on both conservation and the development of renewable energy sources, while catering to the whims of the oil and auto industries. Now faced with energy dependence and soaring oil prices, the U.S. has turned to military aggression to solve America's energy crisis.

U.S. energy policy revolves around influencing other countries to sell us their oil at a reasonable price. When they fail to do so, we seek to instigate regime change in that country, either covertly as in the case of Venezuela, or more overtly as in the case of Iraq. In Africa, parts of which contain large oil deposits, the U.S. is actively building a military presence. Pentagon officials have made plans to deploy small, rapid-reaction teams to certain areas and station troops at camps and airstrips. While attempting to veil their true motives with the cover of terrorism, State Department officials insisted that oil was not the driving force behind military actions, and that their primary aim was to fight terrorism in Africa. [xlvi] Pick a country. If there is oil there, you will find a U.S. diplomatic presence or covert military activity.

Meanwhile, back in the United States, the oil industry uses their influence to keep the government actively in pursuit of oil in foreign lands, either peacefully or by force, so that they can pick up the business. They attempt to buy politicians with campaign contributions and lobby any legislation that could hurt their bottom line. They direct their efforts at anything that would conserve energy or reduce CO 2 emissions. For example, in 1990, the oil companies financed a lobby, called the Global Climate Coalition (GCC). The GCC spent millions of dollars in efforts to confuse the public regarding global warming, including a 13 million dollar ad campaign opposing the Kyoto treaty - an international treaty written to address global warming by reducing carbon dioxide emissions. During the course of the international conference in Kyoto, it was reported that a U.S. representative gave individual coaching to the Saudi and Kuwaiti delegates in how to obstruct and delay the proceedings, going so far as to pass them handwritten notes during negotiating sessions. [xlvii]

The quid pro quo between the U.S. Government and both the oil and auto industries has intensified in recent years. The reason why U.S. lawmakers favor the interests of the oil and auto industries is obvious: they make the largest campaign contributions. In the 2000 Presidential campaign, the oil industry's campaign contributions totaled $30 million. Additionally, the Global Climate Coalition (an oil industry lobby group), spent another $63 million. When Bush was elected in 2000, some say he returned the favor by making the following appointments.

Vice President: Dick Cheney, former oil executive at Halliburton.

National Security Advisor: Condoleeza Rice, former director at Chevron Oil.

Commerce Secretary: Donald Evans, former head of an oil exploration company.

Energy Secretary: Spencer Abraham, a former senator from Michigan, and an opponent of higher fuel efficiency standards.

These top officials echo a common theme: that energy conservation and environmental protection would weaken our country economically and reduce the power of business. This may help to explain why a bill was defeated that would require that renewable energy make up a modest ten percent of the national energy mix by 2020. It may also explain why polluting, coal-fired power plants are exempt from clean air legislation, despite the fact that technology exists to clean the pollution from these plants. The coal lobby is extremely powerful and coal states are critical in presidential elections. Therefore, it is more politically expedient to allow fifty-year old power plants, like Kingston in Tennessee, to emit a hundred thousand tons of sulfur and nearly four million tons of carbon every year.

In Washington, lawmakers continue to dole our subsidies and tax breaks to the oil industry. According to Paul Krugman, from the New York Times, the energy bill passed by the House of Representatives [in 2001] was "notable for its indifference to environmental consequences and its lack of serious conservation measures . . . The most amazing thing was that the bill contains more than $30 billion in subsidies and special tax breaks for energy producers. . . So it seems that many of the administration's principles contain a special clause, making an exception when it comes to oil. The administration tells people that they should place their trust in the free market, and accept the fact that prices will move up or down with changes in supply and demand - unless those people happen to be selling oil. The administration tells people that they should be self-reliant, and should not expect subsidies from the government - unless those people happen to be selling oil." [xlviii]

Some question whether oil companies really need more subsidies to do their job. Unlike airlines, oil companies making billions of dollars every year. Exxon Mobile is the most profitable company in the world. We would hardly expect them to go out of business lacking the government's largesse. It is well known that oil companies have so much money that they invest in coal companies, grocery chains, and shopping malls. However, dollar for dollar, nothing can match the investment returns of campaign contributions. In a study done by the Friends of the Earth in 2000, from 1993 to 1999, major oil companies gave $39 million in campaign donations, in return receiving $7.3 billion in government grants over that same period: a 186:1 return on their investment. [xlix] In addition to receiving outright subsidies, the oil industry also catches a break at tax time. Because of depletion allowances and other deductions for drilling costs, the oil industry is effectively taxed at just 11 percent compared to an average of 18 percent for other industries. Since 1968, that tax break added more than $140 billion to oil company profits. [l]

Coal companies have powerful lobbies in Washington as well. Because of this, coal companies receive some hefty tax breaks also. For example, while book royalties are taxed as ordinary gains, coal companies are allowed to treat their royalties as capital gains. Without a doubt, the coal states—Virginia, West Virginia, Kentucky, Tennessee, and Pennsylvania—are political force to be reckoned with.

The utility companies are the coal companies' "partners in environmental crime." These two industries depend upon each other for their continued profits. While most people tend to think that their electricity comes from hydroelectric, natural gas, or nuclear power plants, they might be surprised to learn that coal-fired plants generate more than half of the electricity in the United States. Some 900 of these power plants consume 900 million tons of coal each year, producing more than half of all the CO 2 emissions in the United States. If you think this old technology is on its way out, you would probably be surprised to learn that forecasts show U.S. coal consumption rising 25 percent by the year 2020. By then, the U.S will still obtain 44 percent of its power from a coal-fired power sector, whose core technology is more than a hundred years old.

A Rock and a Hard Place

Concerning these utility companies, energy policy finds itself in a difficult spot. If we allow the 900 coal-fired plants to continue operating as they do now, we may jeopardize our climate to the extent that no amount of money will ever be able to fix it. On the other hand, these plants produce cheap energy, which economically powers our country. To replace or even upgrade them would be extremely expensive - so expensive that the government would have to subsidize the project to the tune of hundreds of billions of dollars. Either path taken will cause great future expense, eventually born by the middle class.

Given the choice between global warming that could destroy the planet or higher inflation, most of us would opt for higher inflation. However, both the science and economics involved call for further scrutiny. First, the science: The technology for burning coal cleanly already exists. The process, known as Integrated Gasification Combined Cycle, or IGCC, takes the coal through a series of refining processes, whereby the exhaust separates into hydrogen and carbon dioxide. The carbon dioxide is then capture or "sequestered". In theory, the captured carbon from the sequestering process is then stored in abandoned mines or at the bottom of the ocean.

So, why can't we do it? We can, but the process is expensive: an IGCC plant requires twenty percent more coal and the equipment itself is very expensive. Additionally, for every one freight car of coal used at the plant, three freight cars of CO 2 would require disposal, adding an additional expense. In all, these new plants would probably increase the price of electricity by as much as fifty percent.

In the future, IGCC plants could offer a solution that everyone could live with: coal companies would still be able to sell coal, and the government would score points with earth activists. More importantly, such action would mitigate the deleterious effects of the 900 coal-fired plants on the atmosphere. There are other advantages too. The United States has the largest coal deposits in the world, enough to last for 150 years. Coal is also the cheapest of all the energy fuels. If we could just "clean it" so that it did not destroy the atmosphere, there would be no reason not to use it.

Many people see this technology as the one that can keep us going for years, while renewables have a chance to mature and develop. In fact, the U.N.'s Intergovernmental Panel on Climate Change, while predicting that renewables will only account for 12 percent of energy production by the end of the century, sees clean coal producing fifty percent. [lii] On the other hand, skeptics abound. Many in the power industry cite the prohibitive costs as an obstacle, while even environmental advocates worry about the feasibility of transporting and storing such large amounts of carbon dioxide.

Blame Enough to Go Around

Two things are certain: The auto industry wields a great deal of influence in Washington, and that influence always works to the detriment of energy conservation. The price of that influence was a cool $256 million in campaign contributions since 1990. [liii] A major victory for the auto industry was the government's suspension of updated CAFÉ standards, which would require meeting higher fuel efficiency standards. Fuel efficiency has actually declined over the last 15 years, primarily because Detroit is producing so many trucks and SUVs. One reason the industry lobbies so hard against CAFÉ standards is that the profit margin for trucks and SUVs is almost ten times that of small economy cars.

To be fair, the American public must share some of the blame. Americans want trucks and SUVs regardless of mileage considerations. In some communities near where I live, you see more four-mile-per gallon Hummers than economy cars. Miles per gallon does not seem to be a consideration for many people. In fact, the ten most fuel efficient cars in the United States make up just two percent of sales. As Toyota vice president, Donald Esmond, explains, "In addition to addressing environmental concerns, we have to balance what customers want, and many of them want SUVs." [liv]

Grow Up First, Clean Up Later

Even beyond America's borders, politics play a large role in energy decisions. The developing world will soon be the largest user of energy, and their choice of what energy they will use and its deployment will affect all of us. The politics of energy in the developing world are straightforward: short-term economic development trumps longer-term climate considerations. Because developing countries have no viable alternative to using the cheapest energy available (in most cases, coal), they view policies to lower CO 2 pollution as counterproductive to their goals of economic development. Therefore, expect any global initiatives on pollution control to be vetoed or ignored by countries such as China, India, and Russia.

A Shining Example

On the other hand, European countries are in the vanguard with respect to both pollution control and energy conservation. Their energy politics have undoubtedly developed because of their dearth of carbon deposits: most European countries have very little or none at all. Recognizing this, they have designed smaller, more efficient cars and positioned themselves as leaders in wind technology and other renewable energy sources. While one could argue they have little choice but to seek alternatives to carbon-based fuels, I would point out that Europeans, by and large, seem genuinely more concerned with our planet's ecology. So far, they have had little success in getting America to share their concerns. We might draw an interesting historical parallel: Coal energy came into widespread use in England and Europe long before in America simply because the supply of wood ran out. Because America still has access to adequate carbon reserves (including coal, oil, and natural gas), they may once again lag decades behind their European counterparts in the adoption of clean-energy alternative solutions to global warming and the energy crisis.

Energy advocates in Europe have been the first to influence policy at a major oil company. In April of 2000, BP activist shareholders attempted to get BP to stop drilling in the Arctic Wildlife Refuge and, instead, transfer its investment to their solar division. While not a total success, BP did listen, and within a few months significantly expanded its solar development. BP also appears to be responsive to concerns about global warming. They have made investments in soil and forest conservation and have committed to reducing their CO 2 emissions to ten percent below 1990 levels by the year 2010. [lv] In this case, energy advocacy produced results. PetroCanada offers another example of how some energy companies are listening to public outcry. Despite a 29 percent increase in the production of gas and crude oil, they have reduced emissions to within one percent of 1990 levels. Their stated goal is to reduce emissions by one percent each year.

I'm Gonna Take My Case to the United Nations

We have examined how the following players practice politics with energy: the oil industry, the auto industry, the U.S. government, governments of developing countries, European governments, and energy (climate) advocates. Each has his own agenda. But what policies are emerging on a global level? Sadly, I must conclude that some higher order of global benevolence appears lacking. The United Nations, created in 1946 to oversee and promote the international order, relies on the World Bank and International Monetary Fund to effect action. These institutions are largely controlled by the G7 nations, who, in turn, are controlled by multi-nationals. Therefore, it is not surprising that the money doled out to developing nations comes with corporate strings attached. Witness that, since 1992, the World Bank has spent 25 times more money on fossil fuel projects than on renewable energy. For example, the bank spent $540 million to subsidize Exxon's oil fields in Chad and invested $1.3 billion to subsidize four massive coal-fired plants in China. Clearly, they are not climate friendly. Their position on such matters is that the fight against poverty must take precedence over climate change. [lvi]

Who'll Stop the Rain?

The United States is the 800-pound gorilla in the game of energy politics. Internationally, it is the only country with enough financial and political influence to effect change, both in industrialized and developing countries. Europe would be an enthusiastic ally for global energy policy change, as would Japan. At this time, however, all evidence suggests that the current administration has little interest in energy conservation or climate policy. For example, after walking away from the Kyoto Treaty, in which all countries were suppose to agree to CO 2 emission reductions, the United States made no effort to continue negotiations. In 2003, under orders from White House staff, the Environmental Protection Agency (EPA) deleted most references to a 1999 study that global temperatures rose more sharply between 1990 and 2000 than at any time during the previous one thousand years. In its place, it added a reference to a study, financed by the American Petroleum Institute, questioning that conclusion. Outraged at being overridden by White House staff, EPA officials then sent a memo saying that the revised report no longer accurately represented scientific consensus on climate change. Referring to the cover-up, one climate policy analyst stated in the New York Times: "this is like the White House directing the secretary of labor to alter unemployment data to paint a rosy economic picture." [lvii]

U.S. government policies regarding renewable energy show a clear lack of interest. In recent years, only one percent of all tax incentives have gone toward renewables, while sixty-five percent have gone toward gas production. [lviii] In another example, in the fall of 2003, Congress killed the Production Tax Credit for wind farmers. As a result, many wind projects are now on hold, and the fast-growing industry is expected to slow.

In conclusion, without a radical change of policy at the highest levels of government, the focus will remain on the control and exploitation of remaining supplies of global and natural gas. Renewable energy technologies will continue to improve, but without massive government funding and tax credits for research and development, those technologies will not play a significant role in meeting global energy needs for several decades at best. Despite government efforts to control global oil and gas supplies, the energy crisis will worsen higher prices and increased volatility, the product of supply uncertainty, will become the norm. Ironically, the more military muscle that is brought to bear, the higher our energy needs will be (military engagement is extremely energy intensive). In the final analysis, the politics of energy – i.e. those special interests that promote carbon-based technologies, have delayed the inevitable transition to new, cleaner energy sources at the risk of both military conflict and future cataclysmic climate change.

MORE INFORMATION ABOUT THE COMING INFLATION CRISIS AND HOW TO PROFIT FROM IT IS AVAILABLE AT: WWW.CURTISARNOLDREPORT.COM

Te Brake, "Air Pollution and Fuel Crisis," 83.

[ii] Iibid.

[iii] Roberts, The End of Oil, 28.

[iv] Schurr, Energy in the American Economy, 69.

[v] Roberts, T he End of Oil, 32.

[vi] Schurr, Energy in the American Economy, 116.

[vii] Jones, The State and Emergence of the British Oil Industry, 129.

[viii] Yergin, The Prize, 167-83.

[ix] Ibid., 184-206.

[x] Ibid., 308-88

[xi] Schurr, Energy in the American Economy, 119.

[xii] Yergin, The Prize.

[xiii] Mitchell et al., The New Economy of Oil, 136.

[xiv] Yergin, The Prize, 588-632.

[xv] Interview in Business Week, January 13, 1975, 69.

[xvi] Jimmy Carter, State of the Union Address, January 23, 1980, as published in The New York Times, January 24, 1980.

[xvii] Transcript of Bush's speech as published in The New York Times, August 8 th , 1990.

[xviii] Roberts, The End of Oil, 107.

[xix] From PNAC's Letter to President Clinton, as cited on PNAC's website:www.newamericancentury.org/iraqclintonletter.htm.

[xx] Roberts, The End of Oil, 111.

[xxi] Burbach, "Bush Ideologues Trump Big Oil Interests in Iraq," Redress Information & Analysis, www.redress.btinternet.co.uk/rburbch21.htm, September 30, 2003.

[xxii] Dauncey, Stormy Weather, 7.

[xxiii] Campbell, The Coming Oil Crisis, 73.

[xxiv] Roberts, The End of Oil, 64.

[xxv] Riva, World Oil Production After Year 2000: Business as Usual or Crisis?

[xxvi] U.S. Department of Energy, (EIA), "Caspian Sea Region", June 2000.

[xxvii] Russian Information Agency, "Japan Ready to Invest $14 Billion in Russia's Far Eastern Oil and Gas Projects."

[xxviii] Obaid, et al., " The Sino-Saudi Energy Rapprochement." 35.

[xxix] "Shell Faces Lawsuit," Financial Times, January 26, 2004.

[xxx] "Higher Oil Prices Are Here to Stay," Arab Oil & Gas Magazine, August 31, 2003.

[xxxi] World Resources Institute, 141.

[xxxii] Global Trends 2010, 2.

[xxxiii] Brown, et al., Vital Signs. 71.

[xxxiv] International Energy Outlook 2000, 169.

[xxxv] Reuters, "China's Car Sales Hit One Million for First Time," December 16, 2002.

[xxxvi] "China's Boom adds to Global Warming Problem," New York Times, October 22, 2003.

[xxxvii] "Car Makers Prepare Profit Road," South China Morning Post, June 11, 2002.

[xxxviii] Manning, The Asian Energy Factor.

[xxxix] U.S. Department of Energy, International Energy Outlook 1999, Table A2.

[xl] Lave, "A New CAFE, " 2.

[xli] European Wind Energy Association, "Record growth for global wind," press release, March 3, 2003.

[xlii] "China Demand Looks Strong", Aviation Week and Space Technology, March 16, 1998. 13.

[xliii] Mitchell et al., The New Economy of Oil, 9.

[xliv] Manning, The Asian Energy Factor, 70.

[xlv] O'ryan et al., Transportation in Developing Countries, iv.

[xlvi] Burn, "The Hunt for New Oil," Washington Times, September 28, 2003.

[xlvii] Leggett, Carbon War: Global Warming and the End of the Oil Era.

[xlviii] Krugman, Paul, The Great Unraveling: Losing Our Way in the New Century, 334-335.

[xlix] "Paying for Pollution," Friends of the Earth 2000.

[l] Geller, Energy Revolution, 38.

Smil, Energy at the Crossroads.

[lii] Roberts, The End of Oil, 209.

[liii] Ibid., et al, 296.

[liv] Hamkin, "Cloaked in Green."

[lv] BP: www.sanebp.com.

[lvi] Sustainable Energy and Economy Network and International Trade Information Service, The World Bank and the G-7: Still Changing th Earth's Climate for Business.

[lvii] Revkin and Seelye, "Report by the E.P.A. Leaves Out Data."

[lviii] Smil, Energy at the Crossroads, 36.