Katrina and the Coming World Oil Crunch

Katrina and the Coming World Oil Crunch

Katrina and the Coming World Oil Crunch

Beyond the human suffering, Katrina’s sucker punch will be felt in America’s increasing dependence on foreign petroleum.


More than any other domestic disaster, Hurricane Katrina has significant implications for America’s foreign and military policies. There is, of course, the obvious connection to the war in Iraq: National Guard troops that were desperately needed to conduct rescue operations in New Orleans and southern Mississippi were instead fighting a pointless war in the Middle East, and a President whose attention should have been focused on hurricane relief was instead trying to put a positive spin on the Iraqi Constitution debacle. The international coverage of the human tragedy of New Orleans has also torpedoed the Administration’s just-announced campaign to enhance America’s image abroad. But far more important than any of these is the impact of Katrina on the global oil supply and the resulting increase in US dependence on foreign petroleum. To appreciate the significance of all this, it is first necessary to conduct a quick review of the pre- and post-Katrina oil situation, both in this country and abroad.

Before Katrina, the United States was consuming 20.4 million barrels of oil per day; some 44 percent of this was being refined into gasoline for use by motor vehicles, while another 30 percent was used to make diesel and jet fuel. Continuing a long trend toward increased dependence on foreign oil, imports accounted for 58 percent of America’s total petroleum supply in 2004. And here’s the kicker: Of the 5.5 million barrels of oil produced every day in the United States, 28 percent (or 1.6 million barrels) came from Louisiana and adjacent areas of the Gulf of Mexico. One cannot underestimate the importance of the Gulf area in America’s overall energy equation. While oil output is dropping everywhere else in the United States, it has been increasing in the Gulf, with new wells being drilled in ever-deeper waters. “Generally speaking,” the Department of Energy reported in January, “Lower-48 onshore production, particularly in Texas, has fallen in recent years, while offshore (mainly Gulf of Mexico) production is rising.” The Gulf Coast also houses approximately 10 percent of the nation’s refining capacity and a significant share of its natural gas production.

Meanwhile, the global oil equation has become increasingly dire. While international consumption has been rising at a torrid pace, with much of the new demand coming from China and India, the frenzied search for new fields has largely come up empty. At the same time, many older fields in Mexico, Canada, Russia, Indonesia and even the Middle East have gone into decline. These developments have led some analysts to conclude that the world has reached the moment of “peak,” or maximum sustainable daily oil output; others say that we have not yet reached peak but can expect to do so soon. This is not the place to elaborate on the matter, except to say that there was widespread worry about the future availability of petroleum before Katrina struck, as demonstrated by record high prices for crude. (For background on “peak” oil, see Klare, “Crude Awakening,” November 8, 2004.)

And then came Katrina. In the course of a few hours, the United States lost one-fifth of its domestic petroleum output. Some of this is expected to come back on stream in the weeks ahead, but it is doubtful that all of the offshore rigs in the Gulf itself will ever be operational again. On top of this, most of the refineries in the Gulf Coast area are shut down, and imports of oil have been hampered by the damage to oil ports and unloading facilities. How quickly all of these installations can be repaired is not currently known. With no idle facilities elsewhere in the nation to replace lost Gulf capacity, supplies are likely to remain sparse (and prices high) for months to come.

But it is not the short-term picture that we should worry about the most; it is the long-term situation. This is so because the Gulf was the only area of the United States that showed any promise of compensating for the decline of older onshore fields and thus of dampening, to some degree, the nation’s thirst for imported oil. There has been much discussion about the potential for drilling in the Arctic National Wildlife Refuge (ANWR) in Alaska, but energy professionals scoff at the prospects of obtaining significant amounts of crude there; instead, all of their attention has been on the deep waters of the Gulf. Spurred by the Bush Administration’s energy plan, which calls for massive investment in deep-water fields, the big oil firms have poured billions of dollars into new offshore drilling facilities in the Gulf. Before Katrina, these facilities were expected to supply more than 12 percent of America’s Lower 48 petroleum output by the end of 2005, and a much larger share in the years thereafter.

It is this promise of future oil that is most in question: Even if older, close-to-shore rigs can be brought back on line, there is considerable doubt about the viability of the billion-dollar deep-water rigs, most of which lie right along the path of recent hurricanes, including Ivan and Katrina. If these cannot be salvaged, there is no hope of slowing the rise in US dependence on imports, ANWR or no ANWR. This can mean one thing only: growing US reliance on oil from Saudi Arabia, Iraq, Angola, Nigeria, Colombia, Venezuela and other conflict-torn producers in the developing world.

And it is this that should set the alarm bells ringing. If recent US behavior is any indication, the Bush Administration will respond to this predicament by increasing the involvement of American military forces in the protection of foreign oil potentates (like the Saudi royal family) and the defense of overseas oil installations. American troops are already helping to defend the flow of petroleum in Iraq, Kuwait, Saudi Arabia, the United Arab Emirates, the Republic of Georgia, Colombia and offshore areas of West Africa, producing an enormous strain on the Pentagon’s finances and capabilities. In addition, plans are being made to establish new US bases in Azerbaijan and Kazakhstan, two promising producers, and in the oil-producing regions of Africa. (See Klare, “Imperial Reach,” April 25, 2005.) Given the need for even more foreign oil, these plans are likely to be accelerated in the months ahead. This means that the United States will become even more deeply embroiled in foreign oil wars, with an attendant increase in terrorist violence.

Hurricane Katrina has many distressing domestic consequences, and these should rightfully command our attention and compassion. But we must not lose sight of its foreign policy implications, as these are sure to spark new crises and disasters. We must not allow the White House to exploit our current energy woes to justify the further militarization of America’s petroleum dependency, with all that entails. Along with other critical measures, we should use this time of reflection and reconstruction to fashion a new national energy policy, based above all on conservation and the rapid development of petroleum alternatives.

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