As Oil Declines, So Does America
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America and Oil. It’s like bacon and eggs, Batman and Robin. As the old song lyric went, you can’t have one without the other. Once upon a time, it was also a surefire formula for national greatness and global pre-eminence. Now, it’s a guarantee of a trip to hell in a handbasket. The Chinese know it. Does Washington?
America’s rise to economic and military supremacy was fueled in no small measure by its control over the world’s supply of oil. Oil powered the country’s first giant corporations, ensured success in World War II and underlay the great economic boom of the postwar period. Even in an era of nuclear weapons, it was the global deployment of oil-powered ships, helicopters, planes, tanks and missiles that sustained America’s superpower status during and after the cold war. It should come as no surprise, then, that the country’s current economic and military decline coincides with the relative decline of oil as a major source of energy.
If you want proof of that economic decline, just check out the way America’s share of the world’s gross domestic product has been steadily dropping, while its once-powerhouse economy now appears incapable of generating forward momentum. In its place, robust upstarts like China and India are posting annual growth rates of 8 percent to 10 percent. When combined with the growing technological prowess of those countries, the present figures are surely just precursors to a continuing erosion of America’s global economic clout.
Militarily, the picture appears remarkably similar. Yes, a crack team of SEAL commandos did kill Osama bin Laden, but that single operation—greeted in the United States with a jubilation more appropriate to the ending of a major war—hardly made up for the military’s lackluster performance in two recent wars against ragtag insurgencies in Iraq and Afghanistan. If anything, almost a decade after the Taliban was overthrown, it has experienced a remarkable resurgence even facing the full might of the US, while the assorted insurgent forces in Iraq appear to be holding their own. Meanwhile, Iran—that bête noire of American power in the Middle East—seem as powerful as ever. Al Qaeda may be on the run, but as recent developments in Egypt, Libya, Syria, Yemen and unstable Pakistan suggest, the United States wields far less clout and influence in the region now than it did before it invaded Iraq in 2003.
If American power is in decline, so is the relative status of oil in the global energy equation. In the 2000 edition of its International Energy Outlook, the Energy Information Administration (EIA) of the US Department of Energy confidently foresaw ever-expanding oil production in Africa, Alaska, the Persian Gulf area, and the Gulf of Mexico, among other areas. It predicted, in fact, that world oil output would reach 97 million barrels per day in 2010 and a staggering 115 million barrels in 2020. EIA number-crunchers concluded as well that oil would long retain its position as the world’s leading source of energy. Its 38 percent share of the global energy supply, they said, would remain unchanged.
What a difference a decade makes. By 2010, a new understanding about the natural limits of oil production had sunk in at the EIA and its experts were predicting a disappointingly modest petroleum future. In that year, world oil output had reached just 82 million barrels per day, a stunning 15 million fewer than expected. Moreover, in the 2010 edition of its International Energy Outlook, the EIA was now projecting 2020 output at 85 million barrels per day, hardly more than the 2010 level and 30 million barrels below its projections of just a decade earlier, which were relegated to the dustbin of history. (Such projections, by the way, are for conventional, liquid petroleum and exclude “tough” and “dirty” sources that imply energy desperation—like Canadian tar sands, shale oil and other “unconventional” fuels.)
The most recent EIA projections also show oil’s share of the world total energy supply—far from remaining constant at 38 percent—had already dropped to 35 percent in 2010 and was projected to continue declining to 32 percent in 2020 and 30 percent in 2035. In its place, natural gas and renewable sources of energy are expected to assume ever more prominent roles.
So here’s the question all of us should consider, in part because until now no one has: Are the decline of the United States and the decline of oil connected? Careful analysis suggests that there are good reasons to believe they are.
From Standard Oil to the Carter Doctrine
More than 100 years ago, America’s first great economic expansion abroad was spearheaded by its giant oil companies, notably John D. Rockefeller’s Standard Oil Company—a saga told with great panache in Daniel Yergin’s classic book The Prize. These companies established powerful beachheads in Mexico and Venezuela, and later in parts of Asia, North Africa and, of course, the Middle East. As they became ever more dependent on the extraction of oil in distant lands, American foreign policy began to be reorganized around acquiring and protecting US oil concessions in major producing areas.
With World War II and the cold war, oil and US national security became thoroughly intertwined. After all, the United States had prevailed over the Axis powers in significant part because it possessed vast reserves of domestic petroleum, while Germany and Japan lacked them, depriving their forces of vital fuel supplies in the final years of the war. As it happened, though, the United States was using up its domestic reserves so rapidly that, even before World War II was over, Washington turned its attention to finding new overseas sources of crude that could be brought under American control. As a result, Saudi Arabia, Kuwait and a host of other Middle Eastern producers would become key US oil suppliers under American military protection.
There can be little question that, for a time, American domination of world oil production would prove a potent source of economic and military power. After World War II, an abundance of cheap US oil spurred the development of vast new industries, including civilian air travel, highway construction, a flood of suburban housing and commerce, mechanized agriculture, and plastics.
Abundant oil also underlay the global expansion of the country’s military power, as the Pentagon garrisoned the world while becoming one of the planet’s great oil guzzlers. Its global dominion came to rest on an ever-expanding array of oil-powered ships, planes, tanks and missiles. As long as the Middle East—and especially Saudi Arabia—served essentially as an American gas station and oil remained a cheap commodity, all this was relatively painless.
In addition, thanks to its control of Middle Eastern oil, Washington had its hand on the economic jugular of Europe and Japan, both of which remain highly dependent on imports from the region. Not surprisingly, then, one president after another insisted Washington would not permit any rival to challenge American control of that oil jugular—a principle enshrined in the Carter Doctrine of January 1980, which stated that the United States would go to war if any hostile power threatened the flow of Persian Gulf oil.
The use of military force, in accordance with that doctrine, has been a staple of American foreign policy since 1987, when President Ronald Reagan first applied the “principle” by authorizing US warships to escort Kuwaiti tankers during the Iran-Iraq War. George H. W. Bush invoked the same principle when he authorized American military intervention during the first Gulf War of 1990–91, as did Bill Clinton when he ordered missile attacks on Iraq in the late 1990s and George W. Bush when he launched the invasion of Iraq in 2003.
At that moment, the United States and oil seemed at the pinnacle of their power. As the victor in the cold war and then the first Gulf War, the American military was ranked supreme, with no conceivable challenger on the horizon. And nowhere were there more fervent believers in “unilateralist” America’s ability to “shock and awe” the planet than in Washington. The nation’s economy still appeared relatively robust as a major housing bubble was just beginning to form. China’s economy was then a paltry 15 percent as big as ours. Only seven years later, it would be approximately 40 percent as large. By invading Iraq, Secretary of Defense Donald Rumsfeld planned to demonstrate the crushing superiority of America’s new high-tech weaponry, while setting the stage for further military exploits in the region, including a possible attack on Iran. (A neocon quip caught the mood of the moment: “Everyone wants to go to Baghdad. Real men want to go to Tehran.”)