US appears to have fought war for oil and lost it

By Ian Rutledge

Published: April 11 2005 03:00 | Last updated: April 11 2005 03:00

From Dr Ian Rutledge.

Sir, Your recent report that oil prices have reached an all-time nominal high

and that Goldman Sachs has suggested the possibility of a "super spike" in

prices to as high as $105 per barrel ("Crude at all-time high despite Opec's

efforts", April 5) should be of no surprise to anyone who has studied the

informed opinions of US energy experts in the period leading up to the invasion of

Iraq. Nor, for that matter, to anyone who has seen my own observations on future

world oil prices in my recent book Addicted to Oil.

In a crucial report to President George W. Bush by the US Council on Foreign

Relations in April 2001, the president was warned that: "As the 21st century

opens, the energy sector is in a critical condition. A crisis could erupt at

any time . . . Theworld is currently close to utilising all of its available

global oil production capacity, raising the chances of an oil supply crisis with

more substantial consequences than seen in three decades."

With US oil consumption in 2001 at an all-time high (19.7m b/d), import

penetration at 53 per cent, and dependence on Arabian Gulf oil also at an all-time

record (14.1 per cent of total US domestic and foreign supplies), the council

stated that it was absolutely imperative that "political factors do not block

the development of new oil fields in the Gulf" and that "the Department of

State, together with the National Security Council" should "develop a strategic

plan to encourage reopening to foreign investment in the important states of

the Middle East".

But while the council argued that "there is no question that this investment

is vitally important to US interests" it also acknowledged that "there is

strong opposition to any such opening among key segments of the Saudi and Kuwaiti

populations".

However, there was an alternative. In the words of ESA Inc (Boston), the US's

leading energy security analysts: "One of the best things for our supply

security would be liberate Iraq"; words echoed by William Kristol, the Republican

party ideologist, in testimony to the House Subcommittee on the Middle East on

May 22 2002 that as far as oil was concerned, "Iraq is more important than

Saudi Arabia".

So when, according to the former head of ExxonMobil's Gulf operations, "Iraqi

exiles approached us saying, you can have our oil if we can get back in

there", the Bush administration decided to use its overwhelming military might to

create a pliant - and dependable - oil protectorate in the Middle East and

achieve that essential "opening" of the Gulf oilfields.

But in the words of another US oil company executive, "it all turned out a

lot more complicated than anyone had expected". Instead of the anticipated

post-invasion rapid expansion of Iraqi production (an expectation of an additional

2m b/d entering the world market by now), the continuing violence of the

insurgency has prevented Iraqi exports from even recovering to pre-invasion levels.

In short, the US appears to have fought a war for oil in the Middle East, and

lost it. The consequences of that defeat are now plain for all to see.

Ian Rutledge, Chesterfield S40 4TR