About two weeks ago, BP launched its Statistical Review of World Energy, a rich seam of energy industry stats that journalists, analysts and academics will mine for nuggets of data. The Financial Times led with “China becomes leading user of energy” – hardly a revelation to even the casual industry observer, though pleasing to those in the US who point to the rise of the Middle Kingdom as a reason to forestall domestic action on climate change.
Noteworthy in BP’s latest tome is that crude oil remains the biggest source of energy, contributing just over one-third of the global total. In terms of growth, China again leads the way, increasing its consumption by 860 000 barrels a day, or 10.4 percent over the previous year.
Of course, in per capita terms China’s oil consumption pales in comparison to the US: at 2.5 barrels a person a year, the average Chinese citizen consumes nine times less oil than their US counterpart. Nevertheless, China’s growing thirst for oil represents a threat to US economic supremacy.
The US may have been the first oil addict in the global village, but as others increase their appetite for the drug – the supply of which is concentrated in the hands of a few volatile countries – the US must face the prospect of weaning itself. The only plausible alternative is to brace for military conflict.
Middle East stakeholder
History has shown us that the US is not afraid to go to war to protect its interests. Reliant on imports for roughly two-thirds of its annual demand, America is a major stakeholder in the affairs of the Middle East petro-states. The Carter Doctrine leaves little room for doubt: the Persian Gulf region is vital to the interests of the US and will be protected “by any means necessary, including military force”.
Dick Cheney, during his stint as chief executive of Halliburton, addressed an Institute of Petroleum conference in London, saying: “Energy is truly fundamental to the world’s economy. The (first) Gulf War was a reflection of that reality.”
As the occupation of Iraq winds down analysts are asking: was it worth it? In 2008, economist Joseph Stiglitz put the true cost of the Iraq war to the US at around $3 trillion (R20 trillion). More recently he concluded this figure was probably too low.
To provide a sense of scale, consider that since the invasion kicked off in March 2003, the US has burned through roughly 60 billion barrels of oil at a cumulative cost of around $3.5 trillion. But this does not indicate whether the US will get a decent payback or not.
Donald Trump’s suggestion to take Iraq’s oil as compensation for the cost of the invasion makes sense from a narrowly defined financial perspective. According to BP’s latest data, Iraq’s oil reserves measure 115 billion barrels, which would keep the US ticking over for 16 years at current rates of consumption. Translated into dollars at today’s oil price, Iraqi reserves are worth some $12 trillion, not including the cost of development. That represents a four-fold return on the investment! Except that Trump’s proposition – a bit like a burglar justifying the theft of your home cinema system as recompense for the outlay on his crowbar – is morally reprehensible.
Perhaps another way to think about it is this: how else could the US have spent the $3 trillion? For every man, woman and child in the US a whopping $10 000 could have been invested in measures to avoid oil consumption, such as developing the type of safe, clean and efficient mass transit solutions that many European and Asian citizens enjoy, or investing to establish a leading electric vehicle industry.
Oil independence
Instead, during the eight years of the war, US citizens set fire to some 1.15 trillion gallons of petrol, while Beijing was busy plotting a domestic automotive industry based on electricity. The astounding fact is that while it remains political suicide for a US administration to consider a meaningful tax on petrol, it is politically acceptable to place at risk the lives of young US soldiers in the Middle East in order to secure flows of the very oil that it is impossible to tax back home.
Impossible to tax transparently, that is. The $3 trillion cost to the US taxpayer of projecting military force in Iraq translates to a phantom tax of $2.69 on every gallon of petrol consumed in the US since 2003, effectively doubling the average pump price to more than $5 a gallon over the period of the war. In other words, instead of agreeing to invade a sovereign state, Congress could have slapped a 100 percent tax on petrol back in 2003 – its citizens would be no worse off financially and the federal coffers would have been boosted rather than drained.
With most Europeans paying north of $8 a gallon of petrol and diesel, it is difficult to sympathise with US motorists and easy to appreciate why Europe’s automotive fleet is twice as efficient.
For the majority of global citizens living in the developing world, the question they should be asking is: should they seek to emulate the oil-drenched model of economic development pursued by the US? Or might China, for all its shortcomings and pressing development challenges, offer a less dystopian vision of the future?
Returning to BP’s statistical review, the data show that while China surpassed the US in total energy consumption, it is also the leading generator of carbon-free electricity from wind turbines. With its planned 45 000km of high speed rail by 2015, burgeoning renewable energy sector and more than 120 million electric bicycles, there may be good reasons to reorient our attention from west to east.
Dr Gary Kendall is a senior associate of the South African office of the Cambridge Programme for Sustainability Leadership and author of Plugged In: The End of the Oil Age.