OIL CRISIS: Energy, US national security and the Mideast
R. James Woolsey

May 9, 2005

Improving America`s oil security is the most significant near-term energy challenge the US faces. It is my personal opinion that there are at least seven major reasons why dependence on petroleum for the lion`s share of the world`s transportation fuel creates special dangers in our time.

First, the current transportation infrastructure is committed to oil and oil-compatible products. This fact substantially increases the difficulty of responding to oil price increases or disruptions in supply by substituting other fuels. Moreover, it leads to the conclusion that to have an impact on our vulnerabilities within the next two decades, any new types of vehicles and fuel that would compete with products derived from conventional oil for the transportation fuel market will need to be compatible with the existing energy infrastructure and require only modest amendments to it.

Secondly, the Greater Middle East will continue to be the low-cost and dominant petroleum producer for the foreseeable future. Home of around two-thirds of the world`s proven reserves of conventional oil - 45 percent of it in just Saudi Arabia, Iraq, and Iran - the Greater Middle East will inevitably have to meet a growing percentage of increasing world oil demand. For the foreseeable future, as long as vehicular transportation is dominated by oil as it is today, the Greater Middle East, and especially Saudi Arabia, will remain in the driver`s seat.

Third, the petroleum infrastructure is highly vulnerable to terrorist and other attacks. The Islamist movement, pre-eminently Al Qaeda, has on a number of occasions explicitly called for worldwide attacks on the petroleum infrastructure and has carried some out in the Greater Middle East. Successful hits on major refineries, oil pipelines, or sulfur-cleaning towers could send oil prices much higher than even today`s elevated prices.

Fourth, the possibility exists, particularly under regimes that could come to power in the Greater Middle East, of embargoes or other disruptions of supply. It is often said that whoever governs the oil-rich nations of the Greater Middle East will need to sell their oil. This is, however, not true if the rulers choose to try to live, for all intents and purposes, in the seventh century. There was a serious Islamist coup attempt in Saudi Arabia in 1979. Osama Bin Laden has advocated, for example, major reductions in oil production.

Fifth, wealth transfers from oil have been used, and continue to be used, to fund terrorism and its ideological support. Some $85-90 billion has been spent from sources in Saudi Arabia in the last 30 years spreading Wahabi beliefs throughout the world. Some oil-rich families of the Greater Middle East fund terrorist groups directly. The Wahabi doctrine - fanatically hostile to Shia and Sufi and many other Muslims, Jews, Christians, women, modernity, and much else - plays a role with respect to Islamist terrorist groups similar to that played in the decades after WWI with respect to Nazism by angry German nationalism.

Sixth, the current account deficits for a number of countries create risks ranging from major world economic disruption to deepening poverty and could be substantially reduced by reducing oil imports. The US, in essence, borrows about $13 billion per week, principally now from major Asian states, to finance its consumption. Oil is an extremely large category of imports; more than $2 billion per week of this borrowing is used to import it. This degree of borrowing and the accumulated debt increases the risk of a flight from the dollar or major increases in interest rates.

And finally, global warming gas emissions from man-made sources create at least the risk of climate change. Although the point is not universally accepted, the weight of scientific opinion suggests that global warming gases produced by human activity are one important component of potential climate change. Reducing oil use will also help mitigate the impacts of climate change.

We need strong US action to increase global oil production. But we also need to reduce US oil consumption through enhanced vehicle fuel economy, such as with hybrid gasoline-electric vehicles, and through increased production of non-petroleum transportation fuels, such as cellulosic ethanol and biodiesel, that are compatible (unlike hydrogen) with the existing infrastructure. And in their interest and ours, we need to help our friends in the Middle East diversify their economies.

R. James Woolsey is a former director of the Central Intelligence Agency. He is a member of the National Commission for Energy Policy, an independent bi-partisan group of 16 Americans.