Current Issue

Back Issues

Contact Us



Support Us


About Us



On May 30, Saudi commandos stormed a residential complex for oil workers at Khobar to rescue some 50 foreigners held hostage by unknown militants clad in paramilitary uniforms, who killed several people when they seized the complex the previous day and slit the throats of several more who tried to escape--leaving a death toll of up to 22. The dead included a British oil executive and an unnamed American--but also eight Indian nationals, three Filipinos and two Sri Lankans who worked at the complex, as well as a ten-year-old Egyptian boy, burned alive when the car he was riding in was hit by a bullet and exploded. Saudi authorities said the militants, armed with grenades and machine guns, had rigged the building where the hostages were held with explosives. Three of the four attackers managed to escape. Various militant Islamic web sites claimed responsibility for the attack in the name of the "al-Quds Brigade" and "al-Qaeda in the Arabian Peninsula," boasting that several "crusaders" were killed. (Newsday , ChinaDaily, May 30; NY Daily News, May 31)

This was but the most recent in a wave of attacks on regional oil infrastructure which have driven the price above $40 a barrel on NY Mercantile Exchange--a rise of nearly ten percent since April 24, when suicide bombers made a failed attack on a critical Iraqi offshore terminal. A week later, on May 1, terrorists killed foreign and Saudi workers at Saudi Arabia's Yanbu oil hub. Foreigners were apparently singled out as gunmen ran through the complex firing: the dead were two Americans, two Britons, one Australian and one Saudi. A Canadian was also seriously wounded. Several US-based contractors announced they were pulling their personnel out of Saudi Arabia following the attacks. (NYT, May 3, 12)

The attacks are part of a greater wave of insurgent violence in the region. On April 21, five--including two police officials and a young girl--were killed and some 150 wounded in a suicide bombing at the General Administration Building in Riyadh, former headquarters of the Saudi internal security services. A group calling itself the al-Haramin Brigades claimed responsibility. On April 12, a shoot-out in a poor Riyadh neighborhood led to a chain of bloody skirmishes across Saudi Arabia, which left six police officers dead. (NYT, April 22, 23)

See also WW3 REPORT #95

April 27 also saw a car bomb attack on a former UN building in an upscale diplomatic quarter of Damascus, followed by a 90-minute shoot-out between attackers and police, leaving four dead. Syrian authorities later said the attackers were among Arab volunteers who flooded Iraq to fight the US last year. (NYT, April 29; AP, May 17))

The cover story in the June National Geographic, "The End of Cheap Oil," was obviously written before global prices were jacked up by the terror wave, but now seems eerily prophetic. However, the story predicts an eventual much bigger and more fundamental reckoning:

"You wouldn't know it from the hulking SUVs and traffic-clogged freeways of the United States, but we're in the twilight of plentiful oil. There's no global shortage yet; far from it. The world can still produce so much crude that the current price of about $30 for a 42-gallon barrel would plummet if the Organization of the Petroleum Exporting Countries (OPEC) did not limit production. This abundance of oil means, for now, that oil is cheap. In the United States, where gasoline taxes average 43 cents a gallon (instead of dollars, as in Europe and Japan), a gallon of gasoline can be cheaper than a bottle of water--making it too cheap for most people to bother conserving. While oil demand is up everywhere, the U.S. remains the king of consumers, slurping up a quarter of the world's oil--about three gallons a person every day--even though it has just 5 percent of the population.

"Yet...slaking the world's oil thirst is harder than it used to be. The old sources can't be counted on anymore. On land the lower 48 states of the US are tapped out, producing less than half the oil they did at their peak in 1970. Production from the North Slope of Alaska and the North Sea of Europe, burgeoning oil regions 20 years ago, is in decline. Unrest in Venezuela and Nigeria threatens the flow of oil. The Middle East remains the mother lode of crude, but war and instability underscore the perils of depending on that region."

The story presents some interesting figures from the US Energy Department's Energy Information Administration. Despite fears of fast-spreading car culture in China (pop. 1.2 billion) overstretching global oil supplies, it is the USA (pop. 280 million) which far outstrips the rest of the world in oil consumption. The 2002 figures for global oil products consumption puts China at 1.9 billion barrels (still slightly behind Japan) to the USA's towering 7 billion. Russia is down at a lowly 985 million, and Germany at 949 million. Meanwhile, US domestic production has dropped from a 1970 peak of over 3 billion to just under 2 billion today. By 2025, US consumption is projected to surpass 10 billion, while production will have further dropped. In 2002, Saudi Arabia was the largest source of US imported oil at 17%, followed by Canada and Mexico at 16% each, Venezuela at 13%, Nigeria at 6% and Iraq at 5%.

Tim Appenzeller, author of the Nat Geo piece, finds that "the real threat to the world economy 20 years from now may be a global shortage of conventional oil. These days a raging debate divides oil experts, with prophets of imminent shortage pitted against believers in at least a couple more decades of abundance. Pessimists note that oil prospectors had their best luck in the early 1960s, and that discoveries have slowed since then. They conclude that little conventional oil is left to be found and that the oil peak could be upon us by 2010. Optimists call that a naive extrapolation, which overlooks the economic and political factors that drive the search for oil."

In any case, despite US policy since the '73 oil shock to diversify beyond the big Arab suppliers, the Middle East is only likely to become more critical in the years to come: "With nearly two thirds of proven conventional reserves, Middle Eastern lands will be the supply of last resort as oil production declines elsewhere."

In his April 27 NY Times column, Paul Krugman recalls that the 2000 "energy crisis" in California (in the electricity rather than oil sector) now appears to have been contrived by the energy industry itself--and Vice President Dick Cheney still refuses Congressional demands that he turn over documents related to his White House energy task force: "The main public justification for the Cheney task force was the 2000-2001 electricity crisis in California. For at least two years, we've known that this crisis was largely the result of market manipulation by energy companies--and surmised that some of those same companies were advising Mr. Cheney on energy policy. But the public will pay a lot more attention if it turns out there is documentation that any energy executives were telling Mr. Cheney how to solve power shortages even as their traders were busily creating those shortages."

See also WW3 REPORT #19

Could the current oil shock also be serving US energy industry interests, even if White House collusion with the terrorists is likely to be (at least) better laundered than with Enron? As we noted in December 2001 (when oil prices were below $20 a barrel): "Low oil prices are bad news for Bush plans to open Alaska's Arctic National Wildlife Refuge... Low prices also present an obstacle to Chevron, Unocal and other investors in the Caspian Basin region, which has not been brought on line due to political instability, problems with pipeline routes and depressed markets."

See WW3 REPORT #13

While we don't dismiss the possibility that oil prices will mysteriously and conveniently drop again just before the presidential election, high prices are first and foremost among those "economic and political factors that drive the search for oil." And those who see US domination of Iraq's oil--the world's second-largest proven reserves after Saudi Arabia--as merely a windfall for Exxon and Halliburton are missing the inexorable geopolitical imperative: getting the Middle Eastern "mother lode" firmly under US control is critical to maintaining US power relations vis-a-vis the rest of the world as oil production peaks and the developing nations grow and industrialize in the years and generations to come.

(Bill Weinberg)

Special to WORLD WAR 3 REPORT, June 5, 2004
Reprinting permissible with attribution

Reprinting permissible with attribution.