The Party's Over Part 3

If the dollar cost of motoring is burdensome, the energy cost is staggering. The typical North American driver consumes her or his body weight in crude oil each week, and the automobile engines sold this year alone will have more total horsepower than all of the world's electrical power plants combined. Globally, cars outweigh humans four to one and consume about the same ratio more energy each day in the form of fuel than people do in food. A visitor from Mars might conclude that automobiles, not humans, are the dominant life form on planet Earth.

Like the automobile, the airplane began as an unreliable plaything, but one that evoked the promise of the superhuman power of flight. Its potential ability to speed up travel and to skip over geographic obstacles led to its early use in mail service. The first regularly scheduled pa.s.senger service began in the 1920s, though only the wealthy and the adventuresome took advantage of it; everyone else took the train or drove.

In the late 1950s, the first pa.s.senger jets entered service. At that time, most long-distance travelers still relied on cars, trains, buses, and ships; only the elite comprised the "jet set." But gradually, as tickets became affordable, more people began to board jet planes; by the 1970s, flying had become a standard mode of long-distance travel, especially for transoceanic journeys, and airports had taken on the former function of train or bus stations. This was especially true in the geographically far-flung cities of North America, where options for long-distance travel gradually narrowed to two: car or plane.

The growth of air transport vastly expanded the tourist industry, from 25 million tourists in 1950 to nearly half a billion by the year 2000. Hotels, travel agencies, and restaurants benefited enormously; today many cities and some nations are largely supported by jet-transport tourism.

Due to significant improvements in jet engine design in the past decades, the typical airline pa.s.senger experiences a miles-per-gallon efficiency roughly equivalent to - and, in some instances, better than - that of an automobile driver. Today, roughly ten percent of extracted oil is refined into kerosene to fuel jets. Americans now fly a total of 764 million trips per year - 2.85 airplane trips per person, averaging 814 miles per trip.

Aviation is the only transport form not significantly regulated to reduce environmental impact. Airports are typically sites of extreme air pollution, and jet aircraft contribute substantially to the destruction of the atmospheric ozone layer.

Warfare.

At the beginning of the 20th century, wars were being fought with mounted cavalry, foot soldiers, horse-drawn artillery, and coal-fired warships. In the First World War, military strategists began to appreciate the advantages of applying more sophisticated fossil-fueled technology to the project of killing. Warships, and especially submarines, were converted to oil or diesel power, thus giving them a longer range and greater speed; and tanks and motorized troop carriers (of which the first were simply commandeered Parisian taxicabs) began to revolutionize ground warfare. Meanwhile, airplanes offered the possibility of improved reconnaissance and of raining terror from the skies.

The outcome of World War I was largely determined by oil: the Allies blockaded German supply routes, while Germany sought to cut off shipments to Britain with submarine warfare. The US, the world's largest petroleum producer, was a significant help to the Allies. When the Allies succeeded in denying Germany access to Romanian oil fields, German industry began to suffer from a shortage of fuels and lubricants. By 1917, civilian trains were no longer in service, and airplanes were running poorly on subst.i.tute fuels. On November 11, with its army in possession of only days' worth of essential fuels, Germany surrendered.

The lessons of this defeat were not lost on Adolf Hitler, who promised to reverse disastrous economic and social conditions resulting from the humiliating terms of the Versailles peace treaty. Germany could not fight again without adequate fuel stocks, nor could it allow itself to become bogged down in another war of attrition. Thus when n.a.z.i generals began planning for the invasions that would precipitate World War II, they had two objectives in mind: access to oil supplies and swift, decisive victories through the use of surprise motorized attack - blitzkrieg. Among Hitler's princ.i.p.al objectives in Poland and the Soviet Union was control of the oil fields in those regions. When the Allies were eventually able to deny Germany access to those oil fields and to cut off German supply lines, the n.a.z.i war machine simply ran out of gasoline.

In the Pacific, j.a.pan - which had practically no indigenous oil resources - attacked Pearl Harbor after the US cut off oil exports in an effort to thwart j.a.panese imperial ambitions throughout the Far East. A major j.a.panese objective in the war was to secure oil fields in the Dutch East Indies. However, American submarines succeeded in sinking enough tankers carrying oil from the East Indies to j.a.pan that, by 1944, j.a.panese ships and planes were denied adequate fuel. By 1945, j.a.panese air pilots could no longer be given navigational training and j.a.panese aircraft carriers could no longer afford to take evasive action - all for lack of fuel.

Thus, by mid-century, oil had established itself both as an increasingly critical fuel for warfare and as an increasingly frequent geopolitical objective of war. Warfare had also become far more deadly, especially for noncombatants. All three trends would accelerate in the second half of the century.

Oil, Geopolitics, and the Global Economy: 19501980.

At of the turn of the 20th century, Russia had begun the process of industrialization only in a few cities; throughout most of its vast territory, peasants worked their fields much as they had for centuries. Following the Bolshevik Revolution of 1917 and the subsequent period of turmoil and political reorganization, the leaders of the new Union of Soviet Socialist Republics decided to undertake a program of forced industrial development. Subsequently known as Stalinization, the program involved compelling agricultural workers into industry and consolidating peasant land holdings into giant collectives. Between 1927 and 1937, iron output increased by 400 percent, coal extraction by 350 percent, electric power generation by 700 percent, and the production of machine tools by 1,700 percent. However, the human consequences were horrific. Millions of peasants in the countryside died of starvation, and conditions for urban factory workers were abysmal. Political dissent of any kind was brutally crushed.

At the end of World War II, with most of Europe in ruins, the US and USSR emerged as victors. Their alliance against the Axis powers did not persist into peacetime as the two superpowers set about compet.i.tively dividing much of the world between them. Both had huge petroleum and coal reserves, but their histories and economic systems were fundamentally different. While never directly confronting one another militarily, the US and USSR waged proxy battles over resources and influence throughout the ensuing 45 years. The Soviet-dominated world was characterized by centralized, government-planned control and distribution whereas US-dominated nations were subsumed under the increasing power of giant multinational corporations.

The United States was the world's largest consumer of oil, its economy having been the first to widely exploit the use of petroleum through the ma.s.s production of automobiles and the development of a civilian airline industry. Meanwhile, as more Middle Eastern reserves were discovered and tapped, that area became the largest producer of oil. This meant a greater abundance of oil abroad than in the United States. Thus, after World War II, the major oil companies began maintaining two price levels: a domestic price for the United States and an international price. The domestic price was always higher, with the difference maintained by an import embargo on foreign oil. The embargo was repealed in the 1960s as oil reserves in the United States diminished.

There was such an excess of supply over demand in the international market that producers found it difficult to keep prices from dropping. Several of the oil-producing nations, of which most were located in the Middle East, formed a cartel known as the Organization of Petroleum Exporting Countries, or OPEC, in order to restrain compet.i.tion and avoid excessive price drops. Meanwhile, the "Seven Sisters" petroleum companies also maintained strict limits on oil production in order to stabilize prices. But as the oil industry expanded, many independent oil companies were formed in the US and elsewhere - and those "independents" refused to limit production.

In 1959, a further element of instability entered the mix with the discovery in Libya of rich new reserves of high-quality, easily obtainable oil. Since it was located within easy access of the European market and the northeastern United States, both of which were major consuming areas, Libyan oil threatened the ability of the major oil companies to limit production and to prevent falling prices.

This implied threat became explicit when a new leader came to power in Libya in 1969. Colonel Muammar al-Qaddafi was unwilling to abide by the agreements between OPEC and the major oil companies. He soon nationalized most of the oil wells in Libya and took control of pricing. Occidental Petroleum, one of the largest independents, was primarily affected. Occidental sought help from Exxon, the biggest of the majors, believing that Qaddafi could be faced down by the withdrawal of oil experts from the country; however, in order to accomplish that, Occidental would need spare production to offset its Libyan losses. If it could obtain oil from Exxon at cost, it could afford to oppose the Libyan upstart. Exxon refused. Thus Qaddafi had a.s.serted control over his nation's oil reserves while avoiding retaliation by the oil industry. As far as the majors were concerned, this set an unwelcome precedent. Moreover, Qaddafi drew the ire of the US government through his support for national liberation groups, such as the Palestine Liberation Organization (PLO), the Irish Republican Army (IRA), and the African National Congress (ANC).

By the 1960s, the United States was unable to produce as much oil as it was consuming, and began importing large quant.i.ties from other nations. This in itself provoked little concern. But in 1970 something truly extraordinary happened: America's rate of oil production peaked and began a long decline that has continued to the present. From this point onward, the US would become increasingly dependent on imported oil and would no longer be in a position unilaterally to stabilize world petroleum prices.

The major international oil companies periodically renegotiated the price of crude oil with the representatives of each exporting country. Most OPEC members were Middle-Eastern countries that opposed Israel in the ongoing Palestinian-Israeli conflict, while the US had been a staunch economic and military supporter of Israel since its creation in 1948. When Israel decisively defeated the princ.i.p.al Arab states in the 1967 war, the interim peace settlement left the Sinai peninsula in Israeli control. Egyptian President Sadat proposed a permanent peace if the Israelis returned all the occupied territories, but Israel refused. Since no progress was being made in negotiations, Sadat decided to initiate a war with limited objectives.

In October 1973, after demanding the evacuation of United Nations observers from the Egyptian-Israeli border, Egypt attacked Israeli forces in Sinai. Equipped with Soviet-provided surface-to-air missiles and armored vehicles, the Egyptian army overcame the ensuing Israeli air attack. However, the Israelis immediately requested and received replacement aircraft from the US. As the Israeli army prepared to cross the Suez Ca.n.a.l, a Soviet fleet moved into position in the eastern Mediterranean, raising the possibility that the war might escalate into a confrontation between the two superpowers. To avoid such a catastrophe, Israel and Egypt were pressured to accept a negotiated cease-fire. To the Israelis, this conflict became known as the Yom Kippur War, to the Arabs as the Ramadan War.

The Arab oil countries had been negotiating with the major oil companies when the war occurred. Because the war's outcome hinged on ma.s.sive US military aid to Israel, the Arab states broke off negotiations and imposed an oil embargo against the US. An artificial oil shortage ensued. During the next four months, consumers in the United States were forced to wait in long lines at gas stations. The Arab members of OPEC effectively drove up crude oil prices fourfold. The OPEC cartel succeeded in wresting from the major oil companies the ability to set prices globally; from now on, it would be the producing countries, rather than the majors, that would play the key role in influencing the price of petroleum. However, while the embargo won certain benefits for OPEC members, higher oil prices also worked to the advantage of US oil companies.

A special relationship had existed between the US and Saudi Arabia since 1945, when FDR and Ibn Saud had concluded a pact ensuring secure oil exports in exchange for ongoing support for the Saudi regime. That relationship would become even more significant from 1973 on. As the world's largest oil exporter, Saudi Arabia would be in a position to dominate OPEC and to set prices. Both Washington and Riyadh would further cultivate their mutual interests, which over time would center on Saudi maintenance of global oil sales in US dollars, US arms sales to Saudi Arabia, Saudi investments of its oil revenues in the US, and Saudi control of world oil prices to American advantage.

Given the world's dependence on oil for transportation, industrial production, agriculture, and petroleum by-products, the 1973 price shock shattered the international economy and drove it into a period of inflation that would last until 1982. As the oil shortage reverberated through the global economy, the costs of industrial production and delivery of goods shot up. In 1974, the world experienced its greatest economic crisis since the 1930s. The period of substantial prosperity that had followed World War II came to an end.

Figure 4. US petroleum overview, 1949-2003: US Trade in Petroleum and Petroleum Products (Source: US Energy Information Administration) In 1979, the Iranian people overthrew America's long-time brutal client, the Shah, who had been installed in office by the CIA in 1953. By this time, US and British leaders were bridling at the Shah's efforts to renegotiate his country's relationship with the oil companies doing business in Iran, and so Ayatolla Khomeini's rise to power was covertly supported. Soon war broke out between Iraq and Iran, two major oil-producing countries in the Middle East, with the US happy to see the countries mired in mutually destructive conflict. Since Europe imported large amounts of oil from both Iran and Iraq, a further artificial shortage ensued, and the international price of crude oil doubled again. In 1973, before the war between Egypt and Israel, oil prices had hovered at around $3 per barrel. After the embargo, the price rose to $12 per barrel, and after the commencement of the 1979 Iran-Iraq war it soared to more than $30 per barrel. As the resulting inflation worked its way through the international economy, the cost of all goods increased substantially. In the US, the price index of consumer goods rose approximately ten percent per year for several years in the late 1970s and early 1980s.

This economic upheaval motivated intense efforts toward energy conservation and the development of alternative energy sources (solar hot-water panels, wind turbines, methane digesters, etc). Industries made significant progress in improving building construction practices to conserve energy, in producing lighter and more fuel-efficient automobiles, and in developing more efficient lighting systems.

Investment in nuclear power plants increased as forecasters projected great increases in energy consumption in years to come. However, these projections went unrealized, due largely to the effectiveness of conservation measures. Conservation proved itself the least expensive response to the energy shortage. Nuclear power, by contrast, was extremely costly due to the expense of providing safety measures against the hazards of radiation release.

Higher oil prices also stimulated new exploration, which resulted in the discovery of new reserves in the North Sea, off the coasts of Nigeria and Angola, in Mexico, and on the north slope of Alaska.

Since the oil crises had not been due to a real shortage of oil, but to political events, conservation and increased reserves combined to generate a large oil surplus. OPEC was unable to sustain high prices, and in 1982 oil prices began to fall substantially. Inflation subsided and both the international economy and the US stock market enjoyed a recovery.

During the 1980s, many OPEC countries cheated on export quotas. Kuwait was the worst culprit, arbitrarily adding 50 percent to its reported reserves in 1985 to increase its quota, which was based on reserves. At the same time, Iran was motivated to cheat in order to finance its war with Iraq. Saudi Arabia found itself acting as the swing producer, reducing or increasing its production to keep prices stable; by 1985, the Saudis were selling less than half their quota. Up to this time, Britain had agreed to sell its North Sea oil at the official OPEC price, but Margaret Thatcher decided to let the price fluctuate. Reagan and Thatcher wanted to bring down the Soviets and persuaded King Fahd to increase his country's production substantially, thus dropping the price. The USSR relied on oil for foreign exchange, which it needed to match America's new arms buildup (princ.i.p.ally, Star Wars).10 In 1986, Saudi Arabia flooded the market and drove crude prices down sharply - from over $30 to less than $10; some producers were selling oil for as little as $6 a barrel. For the industry, this const.i.tuted a third oil shock: such low prices devastated US independent producers. Despite evident damage to the Soviet economy and despite Reagan's free-market rhetoric, George H.W. Bush - evidently acting at the behest of the US oil companies - persuaded the US administration to intervene and threaten to impose tariffs. Eventually both OPEC and non-OPEC producing countries agreed to coordinate production in order to maintain stable higher prices - though this never actually worked. The outcome was a victory for the Saudis, once again underscoring their power in the global market, but it led to a new commitment on America's part both to increase its presence in the Middle East (a decision that played a role in the lead-up to the Gulf War of 199091) and to diversify its import sources, relying more on Venezuela, Colombia, Ecuador, Canada, and Mexico, and less on the Arab states.

19802001: Lost Opportunities and

the Prelude to Catastrophe.

The oil crises of the 1970s had produced a significant shift in public att.i.tudes about energy. Many groundbreaking books about the links between energy consumption and social and environmental problems were published during the late 1970s and early 1980s, including Entropy, by Jeremy Rifkin; Soft Energy Paths, by Amory Lovins; and End of Affluence, by Paul and Anne Ehrlich. President Jimmy Carter appeared on television to tell the American people that "[o]urs is the most wasteful nation on Earth; we waste more energy than we import" and to exhort the American people to engage in a ma.s.sive national effort to conserve.11 Spurred by tax subsidies and grants, businesses specializing in energy conservation, and in solar and wind power, sprang up by the hundreds.

With the advent of the Reagan-Bush administration in 1980, the official discourse on energy had suddenly changed again. In campaign commercials, Reagan's publicists proclaimed that it was "morning in America": the people of the US should forget their worries about energy-resource limits and return to their proper pastimes - spending, driving, and wasting. In a highly symbolic act, Reagan ordered the solar hot-water panels installed by Carter on the White House roof removed and junked. Subsidies for conservation measures and for the development and purchase of alternative-energy systems evaporated.

During the 1980s, financier Ivan Boesky proclaimed that "greed is good," and the US undertook ma.s.sive investments in military hardware. The Reagan-Bush administration also covertly supported the Contras and other mercenary militias in Central America that opposed peasant efforts at land reform; significantly for future energy-related events, it also supported the Mujaheddin and other militant Islamist movements in Afghanistan, which opposed Soviet influence in south-central Asia. Representatives of the US administration convinced King Fahd of Saudi Arabia to pay for arms to be shipped from Egypt to the Mujaheddin, many of whom would later give rise to the Taliban and al Qaeda.

The collapse of the Soviet Union in 1991 - shortly following its oil-production peak in 1987 - came as a puzzling surprise to many US strategists, despite the fact that they had wished and plotted for this very eventuality for decades. Though the USSR had a long border with the Middle East, the US had managed to prevent the Soviets from forming strong trade or military alliances with any of the major Persian Gulf oil producers. The only major exception consisted of loans and trade agreements between the Soviets and Iraq. Had such alliances expanded, the USSR and the Middle East together would have had the resources necessary to successfully challenge the West, both economically and militarily. Moreover, the Soviets could have cushioned the effect of their oil-production peak in 1987 with imports, as the US did in the 1970s, and perhaps have avoided collapse. But this was not to be: as it happened, the USSR's production peak, coming shortly after the oil price drop of the mid-'80s, proved devastating to its oil export-dependent economy.

The US, with its former foe now in a state of economic chaos, found its ideological justifications for international military hegemony being undermined. Against whom or what was the US protecting the world now? Hence the American search, beginning in the early 1990s, for new enemies to replace the old Soviet Union.

The Gulf War of 1991 began with a dispute between Iraq and Kuwait over ports in the Gulf and over oil export quotas. Iraq's plan to invade Kuwait appeared initially to have been condoned by the US, and so the real motives for the entrance of the United States into the conflict were unclear. President Bush (Sr.) had sent his emissary Henry Shuyler to persuade his then-ally Saddam Hussein to intervene in OPEC to hike oil prices for the benefit of his Texas const.i.tuents. Bush and his advisers knew that OPEC cheated and fell on the idea of a border incident whereby Iraq would take the southern end of the Rumaila field, from which the Kuwaitis were pumping. On the eve of the invasion, the US Amba.s.sador in Baghdad, April Glaspie, said, "We have no opinion on the Arab-Arab conflicts like your border disagreement with Kuwait" - a statement countersigned by Secretary of State James Baker in Washington. Saddam a.s.sumed he had a wink and nod to invade his neighbor.12 Speculations about the reasons underlying the devastating US military intervention that followed had to do with Iraq's oil reserves, which were second only to those of Saudi Arabia - where the US installed permanent military bases during the war. In his book Iraq and the International Oil System: Why America Went to War in the Gulf, national security affairs a.n.a.lyst Stephen C. Pelletiere examined US motives in the war in depth, concluding that the Gulf War represented a forcible expression of America's resolve to consolidate its control of the Middle East.13 Iraq's decisive victory over Iran in 1988 had come as a shock to Washington, and neither the US nor Israel was about to tolerate a strong, independent, militarily competent Arab nation in the region.

Whatever the motive, the result was a quick military victory for the US and ongoing devastation for Iraq, which continued to suffer under UN-imposed trade sanctions throughout the following decade. During the hostilities, American strategists had apparently done some quick thinking and realized that they could make Saddam the swing producer of last recourse. By embargoing Iraq, they kept two to three million barrels of crude per day off the world market at no cost to anyone but Saddam. This is perhaps why they stopped at the gates of Baghdad and left him in power. Later, when oil prices rose uncomfortably, the US relaxed the embargo for "humanitarian" reasons, and most of Iraq's subsequent exports made their way to American gas tanks.

Beginning in 1993, the US attempted to control global oil prices through a policy of Dual Containment, in which the export quotas of Iraq and Iran were a.s.signed to the nations of the lower Gulf as a reward for their economic and logistical support during the Gulf War. Thus one side effect of the war was that, because the US forcibly took most of Iraq's production off the world market for the ensuing decade, another world oil glut was averted - but only partly so. Despite a significant price surge during the war itself, the remainder of the decade saw stable though generally falling prices. Consequently, revenues to producing countries dwindled. Saudi Arabia, which had one of the fastest-growing populations in the world, faced diminishing per-capita incomes and simmering political unrest, the latter exacerbated by the presence of US military bases on land sacred to all Muslims.

Simultaneously with the development of the Dual Containment policy, the US began using the World Bank, the International Monetary Fund, and related inst.i.tutions to secure non-OPEC oil sources through its funding of pipelines and exploration in less-consuming countries in Asia, Africa, and South America. From 1992 on, at least 21 agencies representing the American government, multilateral development banks, and other national governments approved billions of dollars in public financing in roughly 30 countries for energy projects that not only gave US oil companies new sources, but also aided a relatively new company called Enron - a complex ent.i.ty involved in energy trading and distribution - to gain global reach. In India, Guatemala, Panama, Colombia, and other countries, Enron struck deals with local politicians giving the energy firm control over electrical and gas utilities. Enron executives began lavishing generous campaign donations on Democrats and Republicans alike, and soon US officials started twisting arms: for example, Mozambique was threatened with a cutoff of US foreign aid if it did not accept Enron's bid for a natural gas field.14 Enron also implemented a domestic strategy, bribing state politicians to deregulate their utilities industries; in California, deregulation would result in the artificial energy crisis of 2001, in which utilities customers suffered through blackouts while the state itself racked up billions of dollars of debt in attempts to pay off electrical power generators and distributors (including Enron) that had been enabled by deregulation to systematically create both severe shortages and windfall profits.

The Clinton-Gore administration had taken office in 1993 amid high hopes on the part of environmentalists that some of the support for energy conservation and renewable energy programs that had flourished under Carter's administration would be revived. These hopes were based largely on Gore's timely book Earth in the Balance (1992). However, few substantial energy-policy changes were actually enacted during the following eight years.

Throughout the 1990s the most notable international political-economic development was the accelerating globalization of manufacturing, distribution, and corporate influence. Globalization was a complex phenomenon that outwardly had to do with high-speed communications, long-distance transportation, and the lowering of trade barriers through international agreements administered by trade adjudication bodies like the World Trade Organization; however, it had its roots in the inherent dynamics of industrialization itself.

In the previous two centuries, the machine-based production system had expanded by producing low-cost goods using fossil-fueled equipment to replace the skilled, and thus more expensive, labor of artisans. One result of industrialization was that the proportion of each enterprise's income going to wages typically fell, while the proportion going to investors and moneylenders gradually increased. This meant that, as more production processes became mechanized, the buying power of industrial workers would inevitably wane, resulting in a ma.s.sive overproduction of goods and the bankrupting of the entire system, unless foreign markets could be found for manufactured products.

During the 20th century, more and more countries adopted mechanized production in the hope of escaping poverty. Those that had industrialized earlier were always in a favored position because they held both more economic power and also machine tools, dies, and patents to production processes; selling production rights and equipment to developing nations enriched the already industrialized countries. Slowly an industrial pyramid emerged. Though its apologists always dangled the promise that eventually the entire world would live at the same standard as people in Europe and America, in fact the pyramid was becoming steeper, with countries at the top growing richer and those at the bottom growing poorer. The same trend of increasing economic inequality was occurring within many countries as well, most notably the US.15 By the 1990s, the point had been reached where there were virtually no more pre-industrial markets to be taken over. This left corporations in the industrial pyramid with no one to displace but each other; inevitably, international compet.i.tion grew much more intense.

Corporations adopted two strategies to survive: further automating, thus displacing human labor almost entirely; or moving production to countries where labor was cheaper. The combined result was that the share of industrial revenues being paid in wages and salaries fell even further, so that ever more people were left without the financial means to buy priced goods. For the hundreds of millions of people who had previously lived as self-sufficient rural peasants and who had been uprooted by the process of agricultural industrialization, the results were catastrophic. Corporations also began to merge at record rates since, lacking other new sources of revenue, they were now forced to consume each other.16 By this time the bulk of new investment capital was flowing not to manufacturing, but to speculation in fluctuating currencies, derivatives, options, and futures. The c.u.mulative effect of such speculative investments was to enrich the financial elites and to undermine the long-term stability of the system as a whole. With surplus production capacity in almost every sector and investment capital leveraged to absurd lengths, the world teetered on the brink of economic collapse.

In the US, George W. Bush and d.i.c.k Cheney took office in 2001 following a deeply flawed election. With strong ties to the oil industry and to Enron, the new administration quickly proposed a national energy policy that focused on opening federally protected lands for oil exploration as well as on further subsidizing the oil industry; Cheney pointedly proclaimed that energy conservation "... may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy."17 Enron, George Bush's largest campaign contributor, had grown to become the 7th largest corporation in the US and the 16th largest in the world. Despite its reported ma.s.sive profits, it had paid no taxes in four out of the five years from 1996 to 2001. The company had thousands of offsh.o.r.e partnerships, through which it had hidden over a billion dollars in debt. When this hidden debt was disclosed in October 2001, the company imploded. Its share price collapsed and its credit rating was slashed. Its executives resigned in disgrace, taking with them multimillion dollar bonuses, while employees and stockholders shouldered the immense financial loss. Enron's bankruptcy was the largest in corporate history up to that time, but its creative accounting practices appeared to be far from unique, with other corporations poised for a similar collapse.

In light of what was about to happen, the period from 1973 to 2001 can be seen as having represented a pivotal but lost opportunity. The oil embargo of 1973 and the global economic turmoil accompanying the Iranian revolution made it clear how dependent the world economy had become upon petroleum, and how dependent the US had become upon oil imports. Moreover, everyone knew that oil was a resource that was inherently nonrenewable and therefore limited in supply. The rational response would have been to undertake ma.s.sive, ongoing conservation efforts and investments in a transition to renewable energy sources. Such efforts were tentatively begun, but quickly abandoned. Greed and political influence on the part of the oil companies were no doubt factors in preventing that course from being pursued. But the companies do not deserve all of the blame: free-market economists and their acolytes in political office genuinely believed that the all-knowing market would provide for every contingency and that resource shortages would never amount to a serious problem.

In hindsight, the reasons for abandoning the path of conservation seem tragically wrongheaded. There was at the time a sizeable minority who decried the return to heedless consumerism, but their voice was destined not to prevail. The path actually taken was one not only of consumptive excess and increased global compet.i.tion but also of a growing attempt on the part of US geopolitical strategists to control global petroleum resources. Its consequences would materialize dramatically on the morning of September 11, 2001.

3.

Lights Out: Approaching the Historic Interval's End.

Pangloss is admired, and Ca.s.sandra is despised and ignored. But as the Trojans were to learn to their sorrow, Ca.s.sandra was right, and had she been heeded, the toil of appropriate preparation for the coming adversity would have been insignificant measured against the devastation that followed a brief season of blissful and ignorant optimism ....

Today, Ca.s.sandra holds advanced degrees in biology, ecology, climatology, and other theoretical and applied environmental sciences. In a vast library of published book and papers, these scientists warn us that if civilization continues on its present course, unspeakable devastation awaits us or our near descendants ....

As a discomforted public, and their chosen political leaders, cry out "Say it isn't so!", there is no shortage of rea.s.suring optimists to tell us, "Don't worry, be happy."

We sincerely wish that we could believe them. But brute scientific facts, and the weakness of the Panglossian arguments, forbid.

- Ernest Partridge (2000).

... by early in the twenty-first century, the era of pumping "black gold" out of the ground to fuel industrial societies will be coming to an end.

- Paul Ehrlich (1974).

We've embarked on the beginning of the last days of the age of oil.

- Mike Bowlin, Chairman and CEO, ARCO (1999).

My father rode a camel. I drive a car. My son flies a jet airplane. His son will ride a camel.

- Saudi saying.

The September 11 atrocities so dominated world news, politics, military affairs, and the economy that popular discussion soon divided all of recent history into two categories: "pre-9/11" and "post-9/11." For most Americans, the events were not only horrifying, but also entirely unexpected. Given the reputed Middle-Eastern origin of the airplane hijackers, many people suspected that oil was somehow involved.

Of the hijackers themselves, fifteen out of nineteen were described as Saudi Arabian nationals. American officials identified the mastermind of the attacks as Osama bin Laden, a scion of one of Saudi Arabia's wealthiest families - a family that had long-standing financial ties to the Bushes (the bin Ladens had, via an intermediary, helped finance George W. Bush's first business venture, Arbusto Energy Company, in 1979). Osama, according to his own published statements, regarded US military bases in Saudi Arabia as an affront to Islam.

As the world's largest oil producer, the Saudi kingdom had remained a faithful US client for decades, but a growing, youthful population and diminishing oil revenues were beginning to generate popular unrest within that nation. The Saudi royal family had sought to defuse any possible Islamist opposition by officially backing the ultraconservative Wahaabi sect and by permitting considerable sums in petrodollars to go to the financing of radical - some would say terrorist - Islamist groups both within and beyond the country's borders. To these latter efforts, recent American administrations had agreed to turn a blind eye in return for continued Saudi cooperation in maintaining stable oil prices.

For its part, the American leadership had been manipulating radical Islamist movements for decades. In Afghanistan during the 1980s, and the Balkans and Chechnya in the '90s, the US secretly armed and funded Islamist terror networks in order to destabilize troublesome nations. That tactic had achieved spectacular success against the USSR, whose disastrous military efforts to maintain control of neighboring Afghanistan const.i.tuted one of the princ.i.p.al factors leading to the Soviet empire's downfall. However, the radical Islamists, though willing to accept guns and dollars, had no natural sympathy for American interests.

Somewhat ingeniously, starting in the mid-1990s, the US intelligence community used the Islamists' obstreperousness to its advantage by dangling the threat of radical Muslim "terrorism"1 before its domestic audience as a way of gaining support for increased military and security budgets and of obtaining ever greater authority for surveillance, extrajudicial detentions, and other suspensions of civil liberties.

Osama bin Laden had been a key figure in the American-supported militant Islamist movement throughout most of the 1980s. Exactly when the US ceased indirectly sponsoring his activities is unclear. Libya was the first nation to call for his arrest, in 1994. Following two terrorist attacks against US interests later in the 1990s, after which then-President Clinton posted a reward for bin Laden's capture, the latter moved his headquarters to Afghanistan, where he trained his al Qaeda agents in secret bases - many of which had been planned or built by the CIA during the 1980s.

The Bush administration's response to the 9/11 attacks was to bomb Afghanistan, remove the Taliban regime from power, and install a compliant interim client government in its place.

A few commentators pointed out that Afghanistan was located near the strategically significant oil and gas reserves of the Caspian Sea, speculating that the war might be an effort to enforce the building of a gas pipeline through Afghanistan to warm-water ports in Pakistan. Two French investigative journalists, Jean-Charles Brisard and Guillaume Dasquie, even claimed that the US action in Afghanistan had been contemplated - if not planned - for months prior to the 9/11 attacks, as indicated by threats purportedly made to Taliban representatives during the pipeline negotiations. According to Brisard and Dasquie, in a meeting in Islamabad in August 2001 between Christina Rocca, in charge of Central Asian affairs for the US Government, and the Taliban amba.s.sador to Pakistan, the Taliban were told, "either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs."2 Others, including some oil-industry insiders, disputed the idea that the war was essentially about oil or natural gas, pointing out that Afghanistan was not itself essential to the domination of energy resources in the region and that the proposed pipeline was of minor economic consequence to the US. Thus both the ostensible and the real US motives must have been simply the pursuit of bin Laden and his organization.

While most people seemed to find these latter arguments convincing, a few important points should be emphasized: If not for oil, the US would have little interest in the Middle East. If not for US involvement in the Middle East (specifically, Saudi Arabia), Osama bin Laden would never have felt compelled to destroy symbols of American economic and military power. In this respect, though the violence took place in Afghanistan, New York, and Washington, the real strategic objectives on both sides had much to do with Saudi Arabia. Moreover, it appeared that pre-9/11 investigations by the FBI into Al Qaeda had been systematically obstructed by orders from the highest levels of the US government, perhaps to divert attention away from certain members of the Saudi royal family and the bin Laden family, who had for years been financially supporting Osama bin Laden.3 Thus energy resources lay at the heart of the conflict in any case. Further, however, the Afghan war entailed the construction of permanent American military bases throughout Central Asia - which, if US leaders had indeed determined to control the future exploitation of the oil and gas resources of the Caspian, would be of considerable a.s.sistance in that effort.

The Bush administration quickly proclaimed that the Afghanistan campaign was only the beginning of its "war on terrorism," and officials floated lists of other potential targets, numbering from three to nearly fifty nations. Critics of the Bush policy claimed that the administration had, in effect, declared war on much of the rest of the world. Most of the listed nations possessed important oil resources while many - including Iran and Iraq, which were high on the lists - had little or no discernible relationship with bin Laden or Al Qaeda. With "terrorism" as its ostensible but elusive enemy, the American administration appeared to be embarking on a grandiose plan to use its military might to gain footholds in strategic regions around the globe, and perhaps to seize full and direct control of the world's petroleum resources.

On to Mesopotamia.

Soon after the invasion of Afghanistan, the Bush administration turned its attention toward Iraq, claiming that the country was in defiance of UN resolutions and that it was harboring or collaborating with the perpetrators of the 9/11 atrocities. In response Saddam Hussein re-admitted UN inspectors, who began scouring the countryside for banned weapons. Bush administration officials continued escalating their rhetoric. In the words of Vice President d.i.c.k Cheney, "there is no doubt that Saddam Hussein now has weapons of ma.s.s destruction." A preemptive invasion would be justified and necessary because, according to Condoleeza Rice, "we don't want the smoking gun to be a mushroom cloud." Cheney also sought to tie the Iraqi regime with the 9/11 perpetrators, calling Baghdad a safe haven for terrorists. US officials made it clear that, with or without international backing, they intended to invade Iraq and depose its leader.

Millions of citizens in nations around the world took to the streets in unprecedented numbers to voice their dismay at the prospect of this preemptive attack. Washington officials tried but failed to obtain a UN Security Council resolution specifically authorizing the invasion, since without such a resolution the contemplated military action would be illegal under the UN charter (as was noted months later by UN Secretary General Kofi Annan). Opposition prinic.i.p.ally from France, Germany and Russia prevented pa.s.sage of the resolution. In the course of the debate, long-standing alliances frayed.

The US, with the partic.i.p.ation of Great Britain and token help from several other countries, launched the invasion in March 2003. The immediate military operations proceeded relatively quickly (concluding in a mere six weeks), though at points supply lines became so dangerously stretched that it was clear Washington had committed too few troops to do the job properly. Iraqis at first defended their homeland and thousands died. However, as US troops encircled Baghdad, resistance suddenly and mysteriously vanished. Soon the world was viewing video footage of a staged demonstration in which a small, handpicked group of Iraqis - aided by US soldiers in tanks and an armored personnel carrier - pulled down, defaced, and danced on a statue of Saddam Hussein.

Looters then began removing the archaeological and artistic treasures of the oldest civilization on Earth from Iraq's national museums and galleries. Though the Geneva Conventions clearly state that it is the responsibility of occupying forces to protect the lives and property of occupied peoples, US officials shrugged. War Secretary Rumsfeld mused that the looters were merely "blowing off steam." "It's untidy," Rumsfeld opined, "and freedom's untidy. And free people are free to make mistakes and commit crimes." By mid-April there was nothing left to loot - except at the Oil Ministry, the only government building to have been guarded by US troops.

American forces had also aggressively taken control of - and defended - the Iraqi oil fields, ports, and refineries.

Many Iraqis did initially rejoice at the overthrow of their hated dictator. However, resistance to the occupation materialized and expanded over the following months. As US casualties mounted week by agonizing week, it became clear that the entire exercise had been steeped in catastrophic miscalculation. Despite warnings from the CIA and the State Department, the war planners had a.s.sumed an easy post-invasion transition to capitalist democracy. But now, as Iraqi unemployment soared, and as Sunnis and Shias carried out dozens of daily attacks against the occupying forces, the nation teetered on the brink of civil war.

By October 2004, US combat deaths numbered over a 1000, with the Iraqi civilian toll between 10 and a 100 times that number. Unexploded cl.u.s.ter bombs littered the nation, and depleted uranium - from US and British tank sh.e.l.ls, bombs, and bullets - was causing soaring rates of cancers and birth defects. Basic services were still only partially restored, and large sections of the country were too dangerous for any but the most intrepid journalist to visit. Polls showed that the vast majority of Iraqis wanted the US to leave immediately.

Also by this time, the US government had officially admitted that Saddam Hussein had been telling the truth when he said he had no banned weapons, these having been destroyed soon after the first Gulf War. The Bush administration blamed faulty intelligence, saying that its officials genuinely believed that the weapons existed, and implied that this misreading of the situation was the CIA's fault. However, CIA officials chafed and pointed to clear doc.u.mentation showing that the agency had told the administration before the invasion that claims being made publicly about Iraq's imminent development of nuclear weapons, and about links between Saddam Hussein and al Qaeda, were exaggerated.

Still other doc.u.ments implied that the invasion had been planned months in advance, even prior to 9/11.

The Iraq and Afghanistan invasions were also accompanied by the extraordinary detention of individuals suspected of having some link with "terrorism." Suspects were swept up and held without charge or trial, and denied the right to seek legal counsel, or even to telephone relatives. Media and human rights organizations received no lists of detainees. Later it would emerge that many detainees in Iraq, Afghanistan, and the Guantanamo Bay detention facility in Cuba were being tortured.

During the first months after 9/11, the American media devoted little airtime to those questioning official policy. Television programs revolved around patriotic themes; flags sprouted on TV screens and billboards. But gradually, tentatively at first, public expressions of dissent began to emerge in print and in a remarkably popular string of video doc.u.mentaries from various independent producers. By the election season of 2004, it had become apparent that the nation was deeply polarized. While many believed that everything being done by the government in its "war on terror" was justified, others were convinced that the administration's actions were both criminal and incompetent.

As all of this played out, the new Department of Homeland Security issued repeated warnings of further terrorist attacks. The US military had failed so far to locate, capture, or kill Osama bin Laden, while the US presence in Iraq appeared to be providing a powerful recruiting tool for Islamist militant organizations.

Yet al Qaeda, the organization that was purportedly organizing terrorist actions around the world, remained shadowy. Although the US claimed to have captured or killed most of the top leadership, not a single confirmed al Qaeda member had been convicted of a crime. A BBC doc.u.mentary series ("The Power of Nightmares: The Rise of the Politics of Fear") aired in late 2004 went so far as to claim that al Qaeda was not an organized international network at all, that it did not have members or a leader, nor did it have "sleeper cells" or an overall strategy. In fact, according to series producer Adam Curtis, al Qaeda barely even existed, except as an idea about cleansing a corrupt world through religious violence.

But if al Qaeda was a mirage, then who was responsible for the events of September 11, 2001? As those events pa.s.sed into history, questions about what had actually happened that day only deepened. The Bush administration had destroyed physical evidence and delayed and inhibited an inquiry. When an official inquiry was eventually convened, the administration was able to handpick its key members. Important questions went unasked. Many relatives of the 9/11 victims, among tens of thousands of others, began to conclude that the available evidence suggested some form of government complicity in the events - at a minimum, willful and knowing efforts to hamper investigative efforts that could have prevented the attacks.

In short, during the first term of the Bush administration, something extraordinary had happened. The US had, it appeared, manufactured new enemies to replace the Soviet Union. And it was using these new enemies to justify the invasion and occupation of nations in the Middle East and Central Asia and the building of large, permanent military bases in those regions. Old alliances were being broken; new lines of contention were emerging.

If the Iraq invasion had never had anything to do with weapons of ma.s.s destruction or al Qaeda, it did seem to have something to do with oil. But what, exactly? The US had not simply commandeered Iraq's oil supplies. In fact, oil was flowing less freely from that country than it had prior to the invasion. What could Washington have hoped to accomplish?

The beginning of an answer to that question emerged in 2004, as oil prices began a long and steep climb. On previous occasions when oil prices spiked (in 1973, 1979, and 1991) there had been easy explanations. Now a.n.a.lysts cited many converging factors - strikes in Norway, political unrest in Nigeria, pipeline sabotage in Iraq - that, even when added together, hardly seemed to justify the dramatic price surge.

The actual cost of extracting oil had not increased substantially. If the high prices continued, importing nations like the US would be squeezed, while exporters would luxuriate in new profits.

In the 1970s, as well, immense wealth had flowed from oil-importing nations to oil exporters. The US had been able to control the situation then by getting the oil exporters to reinvest their newfound wealth in the US economy. This was not a hard sell, as at that time the US offered investors a universally accepted currency and the world's most stable economy.

But now the situation was different. After decades of increasing trade deficits and three years of exploding national debt, the US economy was increasingly an empty sh.e.l.l. And the US dollar now had a rival for the t.i.tle of world reserve currency - the euro. It seemed that America might soon lose its ability to control the flow of wealth around the world. Yet it still held one ace in hand: its extraordinary military machine.