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The Recurring Myth of Peak Oil

By ISMAEL HOSSEIN-ZADEH | October 1, 2008

The Peak Oil theory maintains that world production of conventional oil will soon reach a maximum, or peak, and decline thereafter, with grave socio-economic consequences. Some proponents of the theory argue that world oil production has already peaked, and is now in a terminal decline [1]. Although, on the face of it, this sounds like a fairly reasonable proposition, it has been challenged on both theoretical and empirical grounds. While some critics have called it a myth, others have branded it as a money-making scam promoted by the business interests that are vested in the fossil fuel industry, in the business of war and militarism, and in the Wall Street financial giants that are engaged in manipulative oil speculation.

Regardless of its validity (or lack thereof), the fact is that Peak Oil has had significant policy and political implications. It has also generated considerable reactions among various interest groups and political activists.

While environmental and similar activists have used Peak Oil to promote more vigorous conservation and more energetic pursuit of alternative fuels, the oil industry and its representatives in and out of the government have taken advantage of Peak Oil to argue in support of unrestrained extraction of oil and expanded drilling in the offshore or wildlife regions.

Because of its simple logic and facile appeal, Peak Oil has also led many ordinary citizens, burdened by high fuel bills during periods of energy crisis, to support unrestrained or expanded drilling. According to a recent Rasmussen poll, 57 percent of Americans favor more offshore drilling. Misled and misplaced popular perceptions, in turn, play into the hands of the oil industry and their representatives to lobby for the lifting of the Federal ban on oil production in hitherto restricted regions.

Citing voter anger over soaring energy prices, Senator John McCain of Arizona, the Republican presidential nominee, recently argued that opening vast stretches of the country’s coastline to oil exploration would help America eliminate the dependence on foreign oil. “We have untapped oil reserves of at least 21 billion barrels in the United States. But a broad federal moratorium stands in the way of energy exploration and production,” he said. “It is time for the federal government to lift these restrictions” [2].

Perhaps the financial giants of New York and London have benefited the most from the misleading implications of Peak Oil: “As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. . . . Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the tail that wags the dog,” points out William Engdahl, a top expert on energy and financial markets [3].

Just as Peak Oil plays into the hands of manipulative speculators and beneficiaries of fossil fuel, so too can it be used by the champions of unilateral wars and military adventures, as it implies that war power and military strength are key to access or control of the “shrinking” or “soon-to-be-shrinking” oil. It thus provides fodder for the cannons of war profiteering militarists who are constantly on the look out to invent new enemies and find new pretexts for continued war and escalation of military spending—that is, for the looting of the national treasury, or public money.

By the same token that Peak Oil can serve as a pretext for war and military adventures, it can also serve as a disarming or pacifying factor for many citizens who accept the Peak Oil thesis and, therefore, internalize responsibility for U.S. foreign policy every time they fill their gas tank. In a vicarious way, they may feel that they own the war!

Thus, Peak Oil serves as a powerful trap and a clever manipulation that lets the real forces of war and militarism (the military-industrial complex and the pro-Israel lobby), and the main culprits behind the soaring energy prices (the Wall Street financial giants engaged in manipulative commodity speculation) off the hook; it is a fabulous distraction. All evils are blamed on a commodity upon which we are all utterly dependent.

Not only millions of lay-citizens, but also many scholars and academics have taken the bait and fallen right into this trap by arguing that recent U.S. wars of choice are driven primarily by oil and other “scarce” resources. More broadly, they argue that most wars of the future, like the recent and/or present ones, will be driven by conflicts over natural resources, especially energy and water—hence, for example, the title of Michael T. Klare’s popular book, Resource Wars [4].

As a number of critics have pointed out, this is reminiscent of Thomas R. Malthus’s theory of “scarcity” and “overpopulation.” Malthus (1766-1834), a self-styled British economist, argued that the woes and vagaries of capitalism such as poverty, inequality and unemployment are largely to be blamed on the poor and the unemployed, since they produce too many mouths to be fed, or too many hands to be employed.

In a similar fashion, Peak Oil implies that the current crisis in energy (and other commodities) markets is to be blamed, in part, on less-developed or relatively poorer nations such as India and China for growing “too fast” and creating “too much” demand on “scarce” resources. (Similarities between the Peak Oil theory and the Malthusian theory of scarcity are further discussed below.)

Peak Oil Thesis Is Not New: Geology vs. Geopolitics

Peak Oil theory is not altogether new. M. King Hubbert, a well-known geologist, provided a dramatic discussion of the theory in 1956. A year later, Admiral Rickover discussed the end of the fossil fuel era even more emphatically—at the time, he gave oil about fifty more years to run out. Thirty years ago, the Club of Rome predicted an end of oil long before the present day.

Indeed, there is evidence that projections of oil peaking, then declining and running out, have been floated around ever since oil was discovered in the second half of 19th century. For example, the chief geologist of Pennsylvania predicted in 1874 that we would run out of oil in four years—just using it for kerosene [5].

While Peak Oil theory has been around for a long time, it has usually been dormant during “normal” economic times, or “reasonable” oil prices, but has gained heightened currency during periods of energy crisis and high oil prices. For example, Peak Oil became quite popular during (and immediately after) all of the three recent oil crises: the early 1970s crisis, the late 1970s and early 1980s crisis, and the early 1990s crisis.

The obvious reason for the rise in the Peak Oil popularity in the context of those periods of energy crisis was the perception that oil shortage must have played a major role in the respective oil price hikes. It is not surprising, then, that as recent geopolitical convulsions in the Middle East have triggered a new round of oil price hikes, Peak Oil theory has once again become fashionable.

It turns out, however, that oil price shocks of all the previous periods of energy crisis were precipitated not by oil shortages, or any real prospects of oil “peaking and running out,” but by international political convulsions, revolutions and wars: the Arab-Israeli war of 1973, the 1979 Revolution in Iran, and the 1990-91 invasion of Kuwait by Saddam Hussein’s armed forces. Each time, as the turbulent period of war or revolutionary atmosphere ended, higher oil prices of the respective crisis situation subsided accordingly [6].

The current oil price hike too is precipitated not by an oil shortage, as popularly perceived, but by manipulative speculation in energy futures markets—which are, in turn, prompted largely by the unstable atmosphere of war and geopolitical turbulence in the Middle East.

Evidence is therefore unambiguous that, so far, almost all oil price shocks can be explained not by geology, or the so-called Peak Oil, but by geopolitics.

The Paradoxical Reasonableness of Peak Oil: Return of Thomas Malthus

Peak Oil has a prima facie reasonableness that makes it readily acceptable to most people: since oil is a finite natural resource, it is subject to depletion.

But while the rationale behind Peak Oil seems reasonable, it is also seriously flawed and misleading.

One of the major defects of Peak Oil is its facile extrapolation or transition from micro to macro level, that is, an unwarranted generalization or extention of what is true in the case of an existing oil well or oil field to the entire world oil production. It is true that every operating or producing oil well or field increases in production rate until it reaches a maximum or peak flow rate, after which the rate of production enters a terminal decline. It does not follow, however, that global world oil production as a whole must soon reach a maximum and begin to run out afterward—some Peak Oil champions claim that this has already taken place.

Proponents of Peak Oil are quick to point to oil wells or fields that have actually peaked and declined, such as those correctly predicted by geologist M. King Hubbert. They fail, however, to point out the ever newer discoveries of new oil fields and/or other sources of energy that tend to more than offset the depleted ones.

The Peak Oil debate boils down, essentially, to natural versus social limits, or naturally-determined versus socially-determined limits. A similar debate erupted more than 200 hundred years ago over the limits of population growth, on the one hand, and the growth of food supplies, on the other. The debate was prompted largely by a 1778 essay written by the British economist Thomas R. Malthus, titled “An Essay on the Principle of Population.”

Malthus projected an alarming specter of food shortages, hardship, and even starvation “because of faster population growth than food supply.” According to his theory, poverty and distress are unavoidable because, if unchecked, population increases at a geometrical rate (i.e. 1, 2, 4, 8, 16, etc.), whereas the means of subsistence grow at an arithmetical rate (i.e. 1, 2, 3, 4, 5, etc.), thereby leading to inevitable shortages of foodstuff.

As Malthus thus blamed misery and poverty on the poor and the miserable (for giving birth to too many mouths to be fed), he also concluded (logically) that poverty alleviation depended on selective restriction of population growth, that is, curbing the number of the poor and working people.

As checks on population growth, Malthus accepted war, famine, and disease. He also recommended “moral restraint” (marrying late or not at all, coupled with sexual abstinence prior to, and outside of, marriage) as additional checks on the growth of population. His hostility toward the poor was expressed most vividly when he openly argued in favor of dismantling social safety net programs, called “poverty laws”: “We cannot, in the nature of things, assist the poor, in any way, without enabling them to rear up to manhood a greater number of their children.”

By blaming social ills and economic calamities on the poor and working people, Malthus’s views tended, willy-nilly, to exonerate the underlying socio-economic structure, and to prove the inevitability of privation and misery under any social system.

What Malthus failed to see is the fact that growth rates of population and food supplies are not determined purely by nature as fixed, innate, or immutable rates. Instead, they are dynamic categories that can change drastically, depending on the level of economic development, social structure of production, and the state of technology.

Although not identical, the Peak Oil theory is similar to the Malthusian theory in that it too is based on natural, innate, or fixed and immutable limits. There are, of course, limits to everything—energy, food, water, population. But those limits are not absolute or pre-determined, as implied by the Peak Oil thesis. They are perhaps more social than natural limits.

This is why although the Peak Oil theory is not false in saying that there are limits to oil production, it does not explain much. In a real sense, it is a truism. It explains neither the current energy crisis nor any of the past ones. Nor can, therefore, its dire predictions about future global oil production be trustworthy.

More Oil Found than Used Up

Peak Oil misconceptions have many times led to alarmist predictions and dire warnings of an end of global oil production before the current day. Time and again, those forecasts turned out wrong because oil reserves, including proven or cost-efficient reserves, have continued to grow, and more oil wells or fields have been brought under utilization than those peaked and declined. The following is a partial list, as collected by Jason Schwarz, Options Strategist for Lone Peak Asset Management, Westlake Village, CA:

1. An offshore find by Brazilian state oil company Petrobras (PBR) in partnership with BG Group (BRGYY.PK) and Repsol-YPF may be the world’s biggest discovery in 30 years, the head of the National Petroleum Agency said. A deep-water exploration area could contain as much as 33 billion barrels of oil, an amount that would nearly triple Brazil’s reserves and make the offshore bloc the world’s third-largest known oil reserve. “This would lay to rest some of the peak oil pronouncements that we were out of oil, that we weren’t going to find any more and that we have to change our way of life,” said Roger Read, an energy analyst and managing director at New York-based investment bank Natixis Bleichroeder Inc.

2. A trio of oil companies led by Chevron Corp. (CVX) has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost U.S. reserves by more than 50 percent. A test well indicates it could be the biggest new domestic oil discovery since Alaska’s Prudhoe Bay a generation ago. Chevron estimated the 300-square-mile region where its test well sits could hold up to 15 billion barrels of oil and natural gas.

3. Kosmos Energy says its oil field at West Cape Three Points is the largest discovery in deep water West Africa and potentially the largest single field discovery in the region.

4. A new oil discovery has been made by Statoil (STO) in the Ragnarrock prospect near the Sleipner area in the North Sea. “It is encouraging that Statoil has made an oil discovery in a little-explored exploration model that is close to our North Sea infrastructure,” says Frode Fasteland, acting exploration manager for the North Sea.

5. Shell (RDS.A) is currently analyzing and evaluating the well data of their own find in the Gulf of Mexico to determine next steps. This find is rumored to be capable of producing 100 billion barrels. Operating in ultra-deep waters of the Gulf of Mexico, the Perdido spar will float on the surface in nearly 8,000 ft of water and is capable of producing as much as 130,000 barrels of oil equivalent per day.

6. In Iraq, excavators have struck three oil fields with reserves estimated at about 2 billion barrels, Kurdish region’s Oil Minister Ashti Horami said.

7. Iran has discovered an oil field within its southwest Jofeir oilfield that is expected to boost Jofeir’s oil output to 33,000 barrels per day. Iran’s new discovery is estimated to have reserves of 750 million barrels, according to Iran’s Oil Minister, Gholamhossein Nozari.

8. The United States holds significant oil shale resources underlying a total area of 16,000 square miles. This represents the largest known concentration of oil shale in the world and holds an estimated 1.5 trillion barrels of oil with 800 billion recoverable barrels—enough to meet U.S. demand for oil at current levels for 110 years. More than 70 percent of American oil shale is on Federal land, primarily in Colorado, Utah, and Wyoming.

9. In western North Dakota there is a formation known as the Bakken Shale. The formation extends into Montana and Canada. Geologists have estimated the area holds hundreds of billions of barrels of oil. In an interview provided by USGS, scientist Brenda Pierce put the North Dakota oil in context: “Of the current USGS estimates, this is the largest oil accumulation in the lower 48. . . . It is also the largest continuous type of oil accumulation that we have ever assessed.” The USGS study says with today’s technology, about 4 billion barrels of oil can be pumped from the Bakken formation [7].

In the face of such overwhelming evidence, which seriously undermines the Peak Oil theory, proponents of the theory argue that their thesis is based on “proven,” not all, reserves. Proven reserves are reserves that, given a certain level of technology and a certain amount of investment, are proven or estimated to be economical, or cost efficient. Let us briefly examine this “proven vs. total reserves” argument of the Peak Oil champions.

Proven Reserves Are not a Measure of Future Oil Production: Short-Term Market Imperatives vs. Long-Term Public Policy/Interests

That oil companies would want to invest only in the narrow category of proven, or cost efficient, reserves is understandable; it is a simple business principle. But to base future oil supplies on the currently proven reserves, as Peak Oil theory does, is problematic. It represents a short-term, static view of future oil supplies that implicitly ignores the critical role of new investments and technological innovations that can make profitable, or cost efficient, what is currently considered unprofitable, or cost inefficient.

M.A. Adelman points out that “in 1944 a special expert mission estimated Persian Gulf reserves at 16 billion proved and 5 billion probable. By 1975, those same fields had produced 42 billion barrels and had 74 billion remaining. In 1984, geologists estimated a five percent probability of another 199 billion barrels remaining to be added in the Gulf region. In five years those reserves had already been added” [8].

Market imperatives and short-term profitability measures, thus severely limit oil reserve estimates because they effectively exclude not only huge reserves of unconventional oil, but also vast reservoirs of conventional oil that are not currently profitable. This is obviously a major flaw of the Peak Oil theory, as it judges future supplies of oil by the narrowest definition of oil production: currently proven reserves.

However, just as proven reserves determine the current level of oil production, and therefore of investment, the amount of current investment also plays a crucial role in the determination of the amount of proven reserves in the future. Peak Oil views this mutual relationship as a one-way street, or causality—going from the amount of currently proven reserves to the level of the necessary (or cost efficient) investment, and the global production of oil.

Furthermore, reserves that may be considered unprofitable from the viewpoint of private oil companies may well be economical from the viewpoint of state- or publicly-owned companies. For example, while a private oil company, may find an estimated profit rate of below x or y percent cost inefficient, a publicly-owned oil company might invest in reserves as long as estimated profit rate is not negative.

Indeed, as the experiences of state-owned oil companies in Russia, China, Venezuela, and many other countries show, publicly-owned oil companies often take large short-term losses in pursuit of long-term returns or rewards. Free from short-term market imperative, Russia, for example, has invested heavily in long-term oil projects, with fantastic results that have more than offset the enormous short-term costs of those projects. Here is how Joe Vialls, an expert with first-hand experience in “ultra-deep drilling,” explains:

“In 1970, the Russians started drilling Kola SG-3, an exploration well which finally reached a staggering world record depth of 40,230 feet. Since then, Russian oil majors including Yukos have quietly drilled more than 310 successful super-deep oil wells, and put them into production. Last Year Russia overtook Saudi Arabia as the world’s biggest single oil producer, and is now set to completely dominate global oil production and sales for the next century. . . . With no shareholders holding out their grubby little hands for a wad of pocket money every month, the Russian oil industry managed to surge ahead, under-reaming thousands of its older existing onshore wells in less than ten years” [9].

The Role of Technology: a Dynamic, not Static, Process

A major flaw of Peak Oil, as already pointed out, is that it discounts the fact that energy-saving technologies have drastically improved (and will continue to further improve) not only the efficiency of oil production but also of oil consumption. Evidence shows that, for example, “over a period of five years (1994-99), U.S. GDP expanded over 20 percent while oil usage rose by only nine percent. Before the 1973 oil shock, the ratio was about one to one” [10].

Cars, airplanes and other means of transportation have become more fuel-efficient than ever before—though not as much as they could, or should. Both businesses and consumers are also doing a better job of trimming their energy costs. Obviously, this means that our demand for energy does not grow as fast as the growth of our economy. For example, According to the Energy Information Administration, in 1981 the United States devoted nearly 14 percent of its overall gross domestic product to energy; by 2006 that number had fallen to about 9 percent.

One of the results of the more efficient means of research and development has been a far higher success rate in finding new oil fields. The success rate has risen in twenty years from less than 70 percent to over 80 percent. Computers have helped to reduce the number of dry holes. Horizontal drilling has boosted extraction. Another important development has been deep-water offshore drilling, which the new technologies now permit. Good examples are the North Sea, the Gulf of Mexico, and more recently, the promising offshore oil fields of West Africa [11].

The following are some of the recent technological advances that (as described by Red Cavaney, a top oil expert) have dramatically increased the ability not only to find and extract new oil, but perhaps more importantly, to recover more or additional oil from existing reserves that were formerly considered “peaked and dried” under old technologies.

  • Directional Drilling. It used to be that wellbores were basically vertical holes. This made it necessary to drill virtually on top of a potential oil deposit. However, the advent of miniaturized computers and advanced sensors that can be attached to the drill bit now allows companies to drill directional holes with great accuracy because they can get real-time information on the subsurface location throughout the drilling process.
  • Horizontal Drilling. Horizontal drilling is similar to directional drilling, but the well is designed to cut horizontally through the middle of the oil or natural gas deposit. Early horizontal wells penetrated only 500 to 800 feet of reservoir laterally, but technology advances recently allowed a North Slope operator to penetrate 8,000 feet of reservoir horizontally. Moreover, horizontal wells can operate up to 10 times more productively than conventional wells.
  • 3-D Seismic Technology. Substantial enhancements in computing power during the past two decades have allowed the industry to gain a much clearer picture of what lies beneath the surface. The ability to process huge amounts of data to produce three-dimensional seismic images has significantly improved the drilling success rate of the industry [12].

“Primarily due to these advances,” Cavaney further points out, “the U.S. Geological Survey (USGS), in its 2000 World Petroleum Assessment, increased by 20 percent its estimate of undiscovered, technically recoverable oil. USGS noted that, since oil became a major energy source about 100 years ago, 539 billion barrels of oil have been produced outside the United States. USGS estimates there are 649 billion barrels of undiscovered, technically recoverable oil outside the United States. But, importantly, USGS also estimates that there will be an additional 612 billion barrels from reserve growth—nearly equaling the undiscovered resources. Reserve growth results from a variety of sources, including technological advancement in exploration and production, increases over initially conservative estimates of reserves, and economic changes” [13].

Thanks to new technologies, additional oil can now be recovered from the apparently exhausted reserves. Specifically, the peaking and declining of oil from an existing well is not the same as the peaking and declining of oil from the respective oil field or reservoir. While oil production from an existing well is bound to peak and then slow down, “offset wells” can be drilled later into the same field or reservoir to produce more oil. Here is how Vialls explains:

“Now we come to the completely false [or deliberately misleading] claim by Peak Oil shills that production from existing oil wells is ‘slowing down,’ thereby proving that the oil fields are ‘running dry.’ This is so wrong that it is almost breathtaking. Think of this slowing down process in the same way you might think of the engine oil in your automobile. The longer you run the engine, the higher the level of contaminates that get into the oil. The higher the level of contaminates, the higher the level of friction. Sooner or later you have something closely akin to glue coating your piston rings, and the performance of your engine declines accordingly. This is an inevitable mechanical process well known to all automobile owners.

“Henry Ford and others managed to slow down the rate of contamination in engine oils by inventing the oil filter, through which the oil has to circulate each time it passes around inside the engine. A high percentage of the contaminates stick to the filter element, thereby allowing extra miles between oil changes, though heaven help the careless motorist who thinks he can get away without ever changing his clogged oil filter when recommended.

“When oil is extracted from a producing formation underground, it flows out through pores in the reservoir rock, and then into the open borehole, from where it is transported to surface by the production tubing string. So by the very nature of the beast, the bottom section of the well is ‘open hole’ which allows the oil to flow out in the first place, but because it is comprised of exposed and sometimes unstable rock, this open hole section is also continually subject to all manner of turbulence and various contaminates. For example, tiny quantities of super fine silt may exit through the pores but not continue to the surface with the oil, tumbling around in the turbulence instead, until the silt very slowly starts to block off the oil-producing pore throats. Yes, of course there are a variety of liners that can be used to slow down the contamination, but there is no such thing as a Henry Ford oil filter 10,000 feet underground.

“The inevitable result of this is that over time, the initial production rate of the well will slowly decline, a hard fact known to every exploration oilman in the business. However, this is certainly not an indication that the oil field itself is becoming depleted, proved thousands of times by ‘offset wells’ drilled later into the same reservoir. Any new well comes on stream at the original production rate of its older cousins, because it has not yet had time to build up a thin layer of contaminates across the open hole. Though as we shall see it is possible to ‘do an oil change’ on a producing well and bring it back to full production, this is extremely expensive, and rarely used in the west” [14].

Substitutes or Alternative Sources of Energy

Peak Oil is also subject to criticism because it pays insufficient attention to substitutes or alternative sources of energy, both actual and potential. These include solar, wind, non-food bio-fuel, and nuclear energies. They also include natural gas. Natural gas is now about 25 percent of energy demand worldwide. It is estimated that by 2050 it will be the main source of energy in the world. A number of American, European, and Japanese firms have and are investing heavily in developing fuel cells for cars and other vehicles that would significantly reduce gasoline consumption [15].

Peak Oil also pays short shrift to what is sometimes called “unconventional” oil. These include Tar Sands, Heavy Oils, and Oil Shale.

Tar Sands can be recovered via surface mining or in-situ collection techniques. Canada’s Athabasca Tar Sands is the best known example of this kind of unconventional reserve—estimated at 1.8 trillion barrels. Although this was originally considered cost inefficient, experts working in this area now claim that they have brought down the cost from over $20 a barrel to $8 per barrel.

Heavy Oils can be pumped and refined just like conventional petroleum except that they are thicker and have more sulfur and heavy metal contamination, necessitating more extensive refining. Venezuela’s Orinoco heavy oil belt is the best known example of this kind of unconventional reserve—estimated at 1.2 trillion barrels.

Oil Shale requires extensive processing and consumes large amounts of water. Still, reserves far exceed supplies of conventional oil, and costs are bound to decline as newer and more efficient processing techniques become available [16].

A rarely mentioned but potentially very important substitute for conventional oil “is an even bigger hydrocarbon resource that can be developed to provide nearly endless amounts of energy: methane hydrates (methane frozen in ice crystals). The deposits of methane hydrates are so vast that when we develop the technology to bring them to market, we will have clean-burning energy for 2,000 years. It’s just one of the exciting scenarios we may see in the far-off future” [17].

Except for natural gas and nuclear energy, most of these alternative sources of energy are still highly costly, and are therefore used in only insignificant quantities. But, considering the ever evolving newer and more efficient technologies, they are bound to rise in significance. This means that the prospects of reaching a day in our search for energy sources when conventional oil is no longer the world’s dominant source of energy are quite realistic. Humans did not invent motor vehicles because they ran out of horses or horse-driven carriages; nor did they invent electricity because they ran out of candles.

Concluding Remarks

Predictions of global oil production peaking, and then running out, have been around almost as long as oil was discovered in the second half of the 19th century. Time and again, such dire predictions turned out to be false, largely because of the Peak Oil’s apparently sound but actually deceitful logic: while it is true that, as Peak Oil maintains, oil is a finite natural resource that is bound to run out some day, it does not follow, again as Peak Oil argues, that therefore oil is or must be running out soon.

A major flaw of Peak Oil is that it is based on a static, or technology-neutral, assumption: it implicitly assumes that limits to oil are set as natural, innate, and immutable. Yet, limits to oil, like those to most other resources, are determined as much (if not more) socially as they are naturally. Research, development, and technological advances have made (and will continue to make) both the amounts of oil reserves and of oil production much more fluid or elastic than perceived by the champions of Peak Oil.

Viewed in conjunction with the vast pool of substitutes, both actual and potential, oil limits loom less vitally than when they are considered in isolation from such energy alternatives. The constantly evolving newer and more efficient technologies are bound to further expand those limits far beyond the narrow, “natural” limits set by the Peak Oil theory.


[1] Robert L. Hirsch, Roger Bezdek, and Robert Wendling, “Peaking of World Oil Production: Impacts, Mitigation, and Risk Management,” Testimony on Peak Oil before the House Subcommittee on Energy and Industry (7 December 2005),

[2] Matthew Mosk, “Industry Gushed Money After Reversal on Drilling,” Washington Post (27 July 2008),

[3] F. William Engdahl, “Perhaps 60% of Today’s Oil Price Is Pure Speculation,” (2 May 2008),

[4] Michael T. Klare, Resource Wars: The New Landscape of Global Conflict (Holt Paperbacks, 2002).

[5] Red Cavaney, “Global Oil Production about to Peak? A Recurring Myth,” World Watch (01 January 2006),

[6] Eliyahu Kanovsky, “Oil: Who’s Really Over a Barrel?” Middle East Quarterly (Spring 2003),

[7] Jason Schwarz, The Peak Oil Myth: New Oil is Plentiful,” Seeking Alpha (22 June 2008),

[8] M.A. Adelman, The Genie out of the Bottle: World Oil since 1970, (Cambridge: MIT Press, 1995); cited in Bill Kovarik, “The Oil Reserve Fallacy: Proven reserves are not a measure of future supply,”

[9] Joe Vialls, “Russia Proves ‘Peak Oil’ Is A Misleading Zionist Scam,” (25 August 2004),

[10] Eliyahu Kanovsky, “Oil: Who’s Really Over a Barrel?” Middle East Quarterly (Spring 2003),

[11] Ibid.

[12] Red Cavaney, “Global Oil Production about to Peak? A Recurring Myth,” World Watch (01 January 2006),

[13] Ibid.

[14] Joe Vialls, “Russia Proves ‘Peak Oil’ Is A Misleading Zionist Scam,” (25 August 2004),

[15] The Wall Street Journal (10 March 1998); cited in Eliyahu Kantovsky, “Oil: Who’s Really Over a Barrel?” Middle East Quarterly (Spring 2003),

[16] For an informative discussion of unconventional oil reserves, and a scathing critique of Peak Oil see Bill Kovarik, “The Oil Reserve Fallacy: Proven reserves are not a measure of future supply,”

[17] Red Cavaney, “Global Oil Production about to Peak? A Recurring Myth,” World Watch (01 January 2006),

Ismael Hossein-zadeh, author of the recently published The Political Economy of U.S. Militarism (Palgrave-Macmillan 2007), teaches economics at Drake University, Des Moines, Iowa.

December 3, 2009 Posted by | Deception, Full Spectrum Dominance, Illegal Occupation, Malthusian Ideology, Phony Scarcity, Militarism, Science and Pseudo-Science, Timeless or most popular | 10 Comments

Oil and the Israel Lobby

Reknowned economist M. Shahid Alam
offers this excellent critique of Noam Chomsky’s defective analysis of the relative influence of Oil versus the Israel lobby over US foreign policy:

In the slow evolution of US relations with Israel since 1948, as the latter mutated from a strategic liability to a strategic asset, Israel and its Jewish allies in the United States have always occupied the driver’s seat.

President Truman had shepherded the creation of Israel in 1947 not because the American establishment saw it as a strategic asset; this much is clear. “No one,” writes Cheryl Rubenberg, “not even the Israelis themselves, argues that the United States supported the creation of the Jewish state for reasons of security or national interest.”(1) Domestic politics, in an election year, was the primary force behind President Truman’s decision to support the creation of Israel. In addition, the damage to US interests due to the creation of Israel – although massive – was not immediate. This was expected to unfold slowly: and its first blows would be borne by the British who were still the paramount power in the region.

Nevertheless, soon after he had helped to create Israel, President Truman moved decisively to appear to distance the United States from the new state. Instead of committing American troops to protect Israel, when it fought against five Arab armies, he imposed an even-handed arms embargo on both sides in the conflict. Had Israel been dismantled [at birth], President Truman would have urged steps to protect the Jewish colonists in Palestine, but he would have accepted a premature end to the Zionist state as fait accompli. Zionist pressures failed to persuade President Truman to lift the arms embargo. Ironically, military deliveries from Czechoslovakia may have saved the day for Israel.

Once Israel had defeated the armies of Arab proto-states and expelled the Palestinians to emerge as an exclusively Jewish colonial-settler state in 1949, these brute facts would work in its favor. Led by the United States, the Western powers would recognize Israel, aware that they would have to defend this liability. At the same time, the humiliation of defeat had given an impetus to Arab nationalists across the region, who directed their anger against Israel and its Western sponsors.

This placed Israel in a strong position to accelerate its transformation into a strategic asset. In tandem with the Jewish lobby in the United States, Israel sought to maximize the assistance it could receive from the West through policies that stoked Arab nationalism; and as Israel’s military superiority grew this emboldened it to increase its aggressive posture towards the Arabs. Israel had the power to set in motion a vicious circle that would soon create the Arab threat against which it would defend the West. As a result, at various points during the 1950s, France, the United States, and Britain began to regard Israel as a strategic asset.

America’s embrace of Israel did not begin in 1967. Israel’s victory in the June War only accelerated a process that had been underway since its creation – even before its creation. Indeed, the Zionists had decided in 1939 to pursue the United States as their new mother country; they knew that they could use the very large and influential population of American Jews to win official US backing for their goals.

This paid off handsomely in 1948; but thereafter, the United States sought to contain the damage that would flow from the creation of Israel. However, these efforts would be self-defeating; the die had been cast. Israel – not the United States – was in the driver’s seat; and Israel would seek to maximize the negative fallout from its creation. As Israel succeeded in augmenting – within limits – the Arab threat to itself and the United States, the Jewish lobby would regain confidence; it would re-organize to reinforce Israel’s claim that it was now a strategic asset.

We have here another vicious circle – virtuous, for Israel. The Jewish lobby would gain strength as the Arab-cum-Soviet threat to the Middle East grew. When Israel scaled back the Arab threat in 1967, the Jewish lobby would step in to spend the political capital the Jewish state had garnered in the United States. The Israeli capture of Jerusalem in 1967 also energized the Christian Zionists, who, with encouragement from Jewish Zionists, would organize, enter into Republican politics, and soon become a major ally of the Jewish lobby. The sky was now the limit for Israel and the Zionists in the United States. The special relationship would become more special under every new presidency.

Several writers on the American left have pooh-poohed the charge that the Jewish lobby has been a leading force shaping America’s Middle East policy. They argue that the United States has supported Israel because of the con-vergence of their interests in the region. (2) Oil, primarily Saudi Arabian oil, they maintain correctly, is “a stupendous source of strategic power, and one of the greatest material prizes in world history.”(3) Incorrectly, however, they insist that this is what has driven US policy towards the Middle East.

A priori, this is an odd position to maintain, since Britain – up until 1948 – had managed quite well to maintain complete control over Middle Eastern oil, a dominance the United States could not sustain ‘despite’ the ‘strategic support’ of Israel. Successively, they argue, Western control over oil came under threat from Arab nationalism and militant Islamism. Israel has demonstrated its strategic value by holding in check and, later, defeating, the Arab nationalist challenge. Since then, Israel has fought the Islamist challenge to US hegemony over the region.

It may be useful to examine Noam Chomsky’s analysis of this relationship, since he enjoys iconic status amongst both liberal and leftists in the United States. Chomsky frames his analysis of ‘causal factors’ behind the special relationship as essentially a choice between “domestic pressure groups” and “US strategic interests.” He finds two limitations in the argument that the “American Jewish community” is the chief protagonist of the special relationship between Israel and the United States.

First, “it underestimates the scope of the “support for Israel,” and second, it overestimates the role of political pressure groups in decision-making.” Chomsky points out that the Israel lobby is “far broader” than the American Jewish community; it embraces liberal opinion, labor leaders, Christian fundamentalists, conservative hawks, and “fervent cold warriors of all stripes.”(4) While this broader definition of the Israel lobby is appropriate, and this is what most users of the term have in mind, Chomsky thinks that the presence of this “far broader” support for Israel diminishes the role that American Jews play in this lobby.

Two hidden assumptions underpin Chomsky’s claim that a broader Israel lobby shifts the locus of lobbying to non-Jewish groups. First, he fails to account for the strong overlap – barring the Christian fundamentalists – between the American Jewish community and the other domestic pressure groups he enumerates. In the United States, this overlap has existed since the early decades of the twentieth century, and increased considerably in the post-War period. It is scarcely to be doubted that Jews hold – and deservedly so – a disproportionate share of the leadership positions in corporations, the labor movement, and those professions that shape public discourse. Starting in the 1980s, the ascendancy of Jewish neoconservatives – together with their think tanks – gave American Jews an equally influential voice in conservative circles. Certainly, the weight of Jewish neoconservative opinion during the early years of President Bush – both inside and outside his administration – has been second to that of none. The substantial Jewish presence in the leadership circles of the other pressure groups undermines Chomsky’s contention that the pro-Israeli group is “far broader” than the American Jewish community.

There is a second problem with Chomsky’s argument. Implicitly, he assumes that the different pro-Israeli groups have existed, acted and evolved independently of each other; alternatively, the impact of the lobbying efforts of these groups is merely additive. This ignores the galvanizing role that Jewish organizations have played in mobilizing Gentile opinion behind the Zionist project. The activism of the American Jews – as individuals and groups – has operated at several levels. Certainly, the leaders of the Zionist movement have directed a large part of their energies to lobbying at the highest levels of official decision-making. At the same time, they have created, and they orchestrate, a layered network of Zionist organizations who have worked very hard to create support for their aims in the broader American civil society.

American Jews have worked through several channels to influence civil society. As growing numbers of American Jews embraced Zionist goals during the 1940s, as their commitment to Zionism deepened, this forced the largest Jewish organizations to embrace Zionist goals. In addition, since their earliest days, the Zionists have created the organizations, allies, networks and ideas that would translate into media, congressional and presidential support for the Zionist project. In addition, since Jewish Americans made up a growing fraction of the activists and leaders in various branches of civil society – the labor, civil rights and feminist movements – it was natural that the major organs of civil society came to embrace Zionist aims. It makes little sense, then, to maintain that the pro-Israeli positions of mainstream American organizations had emerged independently of the activism of the American Jewish community.

Does our contention fail in the case of the Christian Evangelicals because of the absence of Jews in their ranks? In this case, the movement has received the strongest impetus from the ingathering of Jews that has proceeded in Israel since the late nineteenth century. The dispensationalist stream within Protestant Christians in the United States – who believe that the ingathering of Jews in Israel will precede the Second Coming – has been energized by every Zionist success on the ground. They have viewed these successes – the launching of Zionism, the Balfour Declaration, the creation of Israel, the capture of Jerusalem, ‘Judea’ and ‘Samaria’ in 1967 – as so many confirmations of their dispensationalist eschatology. The movement expanded with every Zionist victory. At the same time, it would be utterly naïve to rule out direct relations between the Zionists and the leaders of the evangelical movement. The Zionists have rarely shrunk from accepting support even when it has come from groups with unedifying beliefs.

Noam Chomsky raises a second objection against the ability of the Jewish lobby to influence policy on its own steam. “No pressure group,” he maintains, “will dominate access to public opinion or maintain consistent influence over policy-making unless its aims are close to those of elite elements with real power (emphases added).”(5) One problem with this argument is easily stated. It pits the Jewish lobby as one “pressure group” – amongst many – arrayed against all the others that hold the real power. This equation of the Jewish lobby with a narrowly defined “pressure group” is misleading. We have argued – a position that is well supported by the evidence – that Jewish protagonists of Zionism have worked through many different channels to influence public opinion, the composition of political classes, and political decisions. They work through the organs that shape public opinion to determine what Americans know about Israel, how they think about Israel, and what they can say about it. This is no little Cuban lobby, Polish lobby or Korean lobby. Once we recognize the scale of financial resources the Jewish lobby commands, the array of political forces it can mobilize, and the tools it commands to direct public opinion on the Middle East, we would shrink from calling it a lobby.

Chomsky quickly proceeds to undermine his own argument about “elite elements with real power.” He explains that the “[elite] elements are not uniform in interests or (in the case of shared interests) in tactical judgments; and on some issues, such as this one [policy towards Israel], they have often been divided.”(6) Yet, despite the differences in their interests, their tactics, and their divisions, Chomsky maintains that these “elite elements” have “real power.” Oddly, these “divided” elites – whoever they are – exercise the power of veto over the multi-faceted Jewish lobby with its deep pockets, hierarchical organizations, and influence over key organs of civil society, campaign contributions, popular votes, etc.

Chomsky’s argument shifts again – a second time in the same paragraph – away from “elite elements” to “America’s changing conceptions of its political-strategic interests” in the Middle East.(6) This suggests a new theory of the chief determinant of US policy towards Israel. At the heart of these “political-strategic interests” is the oil wealth of the Middle East – and the twin threats to American control over this oil wealth from Arab nationalists and the Soviets. Presumably, Israel protects these “political-strategic interests” by holding the Arabs and the Soviets at bay. Chomsky conveniently forgets that the Arab nationalist threat to US interests in the Middle East was – in large part – the product of Israel’s insertion into the region, its ethnic cleansing of Palestinians, and its aggressive posture towards Arabs since its creation. It is unnecessary to account for the Soviet threat, since they entered the region on the back of Arab nationalist discontent. Indeed, had Israel never been created, it is more than likely that all the states in the Middle East – just like Turkey and Pakistan – would have remained firmly within the Western sphere of influence.

In another attempt to convince his readers that oil has driven US policy towards the Middle East, Chomsky claims that the United States was “committed to win and keep this prize [Saudi oil].” Presumably, the United States could not keep this “prize” without help from Israel.

This argument fails because it ignores history. Starting in 1933, American oil corporations – who later merged to form Aramco – gained exclusive rights to explore, produce and market Saudi oil. Saudi Arabia first acquired a 25 percent ownership stake in Aramco in 1973. Had there emerged an Arab nationalist threat to US control over Saudi oil in the 1950s – in the absence of Israel – the United States could have handled it by establishing one or more military bases in Saudi Arabia or, preferably, in one of the Emirates, since American military presence in Saudi Arabia might inflame Islamic sentiments. Far from helping entrench American control of Saudi oil, Israel, by radicalizing Arab nationalism, gave Saudi Arabia the excuse to first gain a 25 percent stake in Aramco and then nationalize it in 1988.

Chomsky claims that the United States was committed to winning and keeping the “stupendous” oil prize. This claim is not supported by the results that America’s Middle Eastern policy has produced on the ground over the years. If the United States was indeed committed to this goal, it would have pursued a Middle East policy that could be expected to maximize – with the lowest risks of failure – the access of US oil corporations to exploration, production and distribution rights over oil in this region. This is not the case.

In creating, aiding and arming Israel, the United States has followed a policy that could easily have been foreseen to produce, as it did produce, exactly the opposite effects. It gave a boost to Arab nationalism, radicalized it, and led within a few years to the Arab nationalist takeover of three of the four key states in the Arab world. In turn, this contributed to the nationalization of oil wealth even in those Arab countries that remained clients of the United States, not to speak of countries that were taken over by Arab nationalists , who excluded the US oil corporations from this industry altogether. In addition, America’s Middle Eastern policy converted the Middle East into a leading arena of wars. It also became a source of deep tensions between the US and the Soviets, since US partisanship of Israel forced the Arab nationalist regimes to ally themselves with the Soviet Union. In the October War of 1973, the United States provoked the Arab nations – because of its decision to re-supply the Israeli army during the war – to impose a costly oil embargo against the United States. In opposition to the pleadings of its oil corporations, the United States has also prevented them from doing business with three oil-producing nations in the Middle East – Iran, Iraq and Libya.(8)

If oil had been driving America’s Middle East policy, we should have seen the fingerprints of the oil lobby all over this policy. In recent decades, according to Mearsheimer and Walt, the oil lobby has directed its efforts “almost entirely on their commercial interests rather than on broader aspects of foreign policy.” They focus most of their lobbying efforts on getting the best deals on tax policies, government regulations, drilling rights, etc. Even the AIPAC bears witness to this. In the early 1980s, Morris J. Amitay, former executive director of AIPAC, noted, “We rarely see them [oil corporations] lobbying on foreign policy issues…In a sense, we have the field to ourselves.”(9)

Why does it matter whether it is oil or the Jewish lobby that determines US policy towards Israel and the Middle East?

The answer to this question has important consequences. It will determine who is in charge, and, therefore, who should be targeted by people who oppose Israel’s war mongering and its destruction of Palestinian society. If US policy is driven by America’s strategic interests – and Israel is a strategic US asset – opposing this policy will not be easy. If Israel keeps the oil flowing, keeps it cheap, and keeps down the Arabs and Islamists – all this for a few billion dollars a year – that is a bargain. In this case, opponents of this policy face an uphill task. Sure, they can document the immoral consequences of this policy – as Noam Chomsky and others do. Such moral arguments, however, will not cut much ice. What are the chances that Americans can be persuaded to sacrifice their “stupendous prize” because it kills a few tens of thousands of Arabs?

On the other hand, if the Jewish lobby drives US policy towards the Middle East, there is some room for optimism. Most importantly, the opponents of this policy have to dethrone the reigning paradigm, which claims that Israel is a strategic asset. In addition, it is necessary to focus attention on each element of the real costs – economic, political and moral – that Israel imposes on the United States. Winning these intellectual arguments will be half the battle won; this will persuade growing numbers of Americans to oppose a policy because it hurts them. Simultaneously, those who seek justice for the Palestinians must organize to oppose the power of the Israel lobby and take actions that force Israel to bear the moral, economic and political consequences of its destructive policies in the Middle East.

M. Shahid Alam is professor of economics at Northeastern University. He is author of Challenging the New Orientalism (2007). Send comments to Visit the author’s website at .


  1. “Virtually every professional in the for-eign affairs bureaucracy, including the secretaries of state and war (later, defense) and the joint chiefs of staff, opposed the creation of Israel from the standpoint of US national interests (Rubenberg: 1986, 9-10).”
  2. For criticisms of Chomsky, see James Petras, The Power of Israel in the United States (Atlanta: Clarity Press, 2006): 168-81; and Jeff Blankfort, Damage control: Noam Chomsky and the Israeli-Palestine conflict.
  3. This assessment comes from a 1945 re-port of the State Department (Chomsky: 1999, 17).
  4. Noam Chomsky, Fateful triangle: 13.
  5. Noam Chomsky, Fateful triangle: 17.
  6. Noam Chomsky, Fateful triangle:: 17.Noam Chomsky, Fateful triangle:: 17.
  7. Mearsheimer and Walt, The Israel lobby and US foreign policy (Farrar, Straus and Giroux, 2006): 143.
  8. Mearsheimer and Walt, The Israel lobby: 145.


Militant Zionism and the Invasion of Iraq

December 3, 2009 Posted by | Deception, Ethnic Cleansing, Racism, Zionism, Full Spectrum Dominance, Militarism, Science and Pseudo-Science, War Crimes | Comments Off on Oil and the Israel Lobby