Sunday, September 5, 2010

Germany, Oil and Why You Should Love BP

If you've read much about global energy reserves, you've probably come across the term “peak oil”; basically it is the point when half of the world's oil reserves have been pumped from the ground and mankind is in pursuit of an ever-dwindling commodity. Since oil is a non-renewable resource, there will definitely be a peak oil point, when that point occurs though has been a subject of debate since the term peak oil was first coined in the 70s. As it turns out, predicting peak oil is a tricky thing – new technologies will make it possible to access previously unreachable oil reserves; while on the other side, the continued industrial growth of countries like China and India will increase demand.

Discussions of peak oil are usually accompanied by dire predictions of what will happen when mankind finally realizes that the days of oil are in fact numbered; Germany's Der Spiegel magazine is reporting this week about a dramatic new prediction of the chaos that is just around the corner. What makes this projection noteworthy though is that it's not from a “green” energy company, or environmental group, or any of the other usual suspects of peak oil doom, but rather the German military. Der Spiegel has confirmed and published the draft of a strategic outlook document prepared by the Bundeswehr, the German military, about what will follow the peak oil point (which they project will occur on or about 2010), the projections are pretty chilling.

According to the report, the real trouble will begin about 15-20 years from now (assuming they are correct about the 2010 peak oil date), as countries across the globe realize that the era of easily-accessible oil is drawing to a close and that not nearly enough has been done to move the world away from a petroleum-based economy. Oil-producing countries will realize a dramatic increase in their global influence as oil-importing countries become ever-more panicky about securing petroleum supplies. This will likely result in oil-exporting countries dictating terms of international relations, according to the Bundeswehr report; they give German-specific examples of Germany potentially having to move away from relations with Eastern European states to curry favor with oil-supplying Russia or ending their support of Israel to keep the oil from the Arab world flowing. This will also have major impacts on the global economy as well. Beyond the obvious cause-and-effect of dramatically-higher oil prices resulting in higher prices for most other goods as well, the report suggests the oil shortages will become so acute they could force countries to adopt “planned economies” so that the remaining oil reserves can be most efficiently used. Put together, the Bundeswehr report warns, it's a situation that could place the entire free market/democratic system in jeopardy.

It's all pretty doom-and-gloom stuff, which would be easy to dismiss if it wasn't coming from such a sober institution as the German military. It's also a story that dovetails nicely with this recent piece from Foreign Policy: “Why We Need Big Oil.” While it may be comforting to bash big oil, Foreign Policy suggests, huge multinationals like BP are still better than the alternative: national oil companies or other state-run petroleum interests, since for every well-run Norway, there are many more poorly-run petro-states like Equatorial Guinea. These are states that care little about the rights or safety of the workers who labor in the oil patch, or about the ecological damage the petroleum industry can wreak on the land if a strict set of safeguards are not followed and states that are unlikely to share the wealth generated by the petroleum industry with anyone outside the ruling regime and its assorted cronies and hangers-on.

But, Foreign Policy correctly notes, aside from a handful of huge multinational firms, no one besides the petro-states have the resources to explore for new reserves and bring new fields into production, meaning that if multinationals like BP or ConocoPhillips start selling off assets – which both firms have begun doing – the oil industry is going to be run to a larger and larger degree by a collection of heads of state, few of whom will be “Man of the Year” candidates anytime soon. With a larger share of a dwindling reserve under their control, they will be far less likely to respond to complaints about their lack of human rights or concern for the environment. Maybe by comparison BP doesn't look so bad after all.
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