War, Oil and Energy Diversification
By: George Friedman
What I do know about is geopolitics, and the war in Iran has revealed a profound vulnerability endemic to hydrocarbons in the global geopolitical and economic systems.
It’s not that war itself is becoming obsolete.
Wars between nations are commonplace.
There is nothing to indicate that warfare has or will become obsolete.
The current incarnation of war, dependent as it is on unmanned aerial vehicles, drones, missiles and satellite-based intelligence, has largely replaced the previous model, which was based primarily on long-range missiles with nuclear warheads delivered to static targets.
This evolution was first evident in the Russo-Ukrainian war and is even more pronounced in the Iran war.
Modern warfare has been based on hydrocarbons ever since steam engines started using coal to power ships.
Today, oil derivatives are central to engines for powering drones, missiles and manned aircraft, and are still used in armored fighting vehicles and the delivery of supplies to soldiers.
One of the foundations of war is to deny the resources needed by the enemy to execute its end of the conflict.
Those resources, if destroyed, can cripple an enemy.
This is why new weapons systems have been used not only on the battlefields but against all manner of oil infrastructure.
Capturing or destroying the means of extracting, transporting and producing oil products is essential.
Here, geography is a singular determinant: Some places teem with oil, others are barren, and all oil needs to be moved from one place to another.
When war breaks out in a massive oil-producing country or region, and when facilities for production and refining are crippled, countries that are not even involved are negatively affected.
Iran produces roughly 5 percent of the world’s oil, and as much as 30 percent of the world’s oil transits the Strait of Hormuz.
Iran’s counter to the U.S. and Israeli bombing campaign was to shut down this corridor and put economic pressure not only on its enemies but also on the entire global system.
There are many oil and gas producers in the world – the U.S. is blessed with a large amount of reserves, for example – but the price of oil is nevertheless increasing, threatening the economic well-being of countless countries.
Rough calculations suggest the Middle East accounts for about 30 percent of all global oil production.
It’s not impossible to imagine a wider war escalating in the region, slowing supplies and crippling exports from Saudi Arabia, the second-largest global supplier of oil.
If the U.S., Russia and Canada (all major producers) were drawn into a region-wide war, and if non-nuclear weapons were used to cripple their production and transport of oil, it would create a global disaster.
Therefore, the matter of oil as the foundation of the global economy is a question not only of global warming but also of geopolitical vulnerability.
It follows that the dependence on oil is a national security issue of the first order, and that diversification is essential.
I am not an authority on this, but I have had recent conversations with several experts – one being Marc Landry from PrometheOn Technologies Inc., in New Mexico, formerly an energy expert in the U.S. government and now a consultant on national energy security – to understand the possibilities.
He argues that nuclear small modular reactors are now designed to be safe with the uranium more controlled, so the disasters of large-scale nuclear reactors like Three Mile Island and Chernobyl are highly unlikely.
However, while SMRs should be less expensive, there are always a lot of hidden costs with fission, and like oil, uranium is something some countries have a lot of and others none.
A second alternative is wind and solar energy, having the advantage of being the least expensive, but their disadvantage is storage challenges and an antiquated grid system based on what Thomas Edison and George Westinghouse designed over 130 years ago.
It will take years to upgrade the world’s grid systems to meet global energy needs.
The third alternative is what’s known as deep geothermal.
The Earth below is warm, and the Earth’s core is extremely hot.
Drilling into the Earth as we do for oil, but far deeper through to the molten rock, would be a major source of geothermal energy that could drive the economy and, increasingly, transportation.
It also has the advantage of being available everywhere.
In short, unless any of the alternatives come up to speed soon, SMR technology could bridge the gap until a combination of solar, wind, fusion and deep geothermal can create a more flexible and resilient alternative to oil and gas, which would likely still be used, just not as the foundation of the global economy.
The dependence on oil and hydrocarbons for our economic survival has become dangerous, perhaps from a global warming perspective but certainly due to wars that are able to curb production and halt transportation.
This is a case where geopolitics affects the economy, and where new technology alleviates the threat, even if it has weaknesses of its own.
Given the nature of humanity, war will always be a threat and diversifying energy sources a fundamental geopolitical imperative.
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