Ouch. This one appeared on TOD today. The caption says "Excuse me, I'm going to need this to run my car." The original (Oct 30, 2008) can be found at http://www.ibdeditorials.com/CartoonsMonthly.aspx?m=21#

Who knew what? The CIA and the Soviet “peak”

One has to wonder what level of peak oil awareness exists among governments. It seems at the policy level that they’re not doing a lot to address the coming shortages, but there are a number of reasons why this could be, and inaction in itself does not necessarily point to ignorance..

A CIA report, an Intelligence Memorandum titled "The Impending Soviet Oil Crisis (ER 77-10147)," was issued in March 1977 by the Office of Economic Research and classified "Secret" until its public release in January 2001 in response to a Freedom of Information Act (FOIA) request (available from http://www.foia.cia.gov (enter “er 77-10147” in search box). As Richard Heinberg notes (1):

The Memorandum predicts an impending peak in Soviet oil production "not later than the early 1980s" (the actual peak occurred in 1987 at 12.6 million barrels per day, following a preliminary peak in 1983 of 12.5 Mb/d). "During the next decade," the unnamed authors of the document conclude, "the USSR may well find itself not only unable to supply oil to Eastern Europe and the West on the present scale, but also having to compete for OPEC oil for its own use." The Memorandum predicts that the oil peak will have important economic impacts: "When oil production stops growing, and perhaps even before, profound repercussions will be felt on the domestic economy of the USSR and on its international economic relations."

Heinberg notes that the peak in US oil production had already passed by the time this memorandum was written. He suggests that, at US insistence, the Saudi Arabian government raised production levels, helping to reduce the USSR’s capacity to raise foreign reserves. Whether or not it was a coincidence, the actual peak of Soviet production preceded the fall of the Berlin Wall by only two years. Perhaps not also coincidentally, the peak of US production (1970) was followed not long after by the decoupling of the US dollar from the gold standard.

(It’s worth noting, though Heinberg does not, that the memorandum’s dire predictions for Russia are due in large part to its reliance on exports for foreign exchange and regional influence. The central problem with the decline of oil production is a reduction in national income and higher energy prices, but the report also suggests that Russia will be able to pick itself up by diversifying its economy and developing coal and natural gas.)

Surely the most significant implication of this document is, as Heinberg notes, its status as clear evidence that US security analysts were well aware of the phenomenon of peak oil and its potential implications. (This might be thought of in terms of the value of the US “containment” policy as a means to exclude the USSR from benefiting economically from its significant oil production capacity.)

Interestingly, Heinberg also alerts us to the fact that Matthew Simmons, author of Twilight in the Desert and a leading voice on peak oil awareness, was an advisor to Dick Cheney’s Energy Task Force. (Check out Simmons’ recent presentations at http://www.simmonsco-intl.com/research.aspx?Type=researchspeeches. What is not clear is whether Simmons was himself really thinking about peak oil in 2001. Twilight was published in 2005, and the book details Simmons’ own awakening to the peak in Saudi production, which he equates with the peak in global production.)

The same declassified report was met by Time magazine with an assurance that the conclusion was “faulty” and “at odds with reality” (2). Nonetheless, Time’s confidence leaves room for doubt:

To be sure, Soviet oil production was trailing off. But the Soviets were not running out of oil. Nor would they become dependent on imports. Rather, they were using primitive technology and needed to make investments in their infrastructure. In fact, Russia today is the world's second largest producer, after Saudi Arabia. Instead of becoming a major buyer of Middle East oil, as the CIA had warned, Russia ships 3 million bbl. a day to other countries, including the U.S.

As all this makes clear, the former Soviet Union was not running out of oil. Neither is the world. The one exception: the U.S., which was the Saudi Arabia of the first half of the 20th century, is finally running out. As a result, thanks in part to American policy that put an emphasis on foreign intervention rather than domestic conservation, Americans are more dependent than ever on imported oil.

In recent years, of course, the Russian oil deposits have seen significant investment, and there is debate about whether Russian production is approaching a second “peak”. More interestingly, perhaps, is the way the Time article neglects the implications of the decline in US production, which peaked in 1970. Surely this decline is not due to a lack of investment or up-to-date technologies. Surely the US decline is near proof that technology can’t solve this particular problem. Surely the US is not “the one exception” in a world of finite oil fields (check out the North Sea, for instance). We can keep looking, and may yet find lots more oil, but it seems to me delusional to deny that sooner or later the global peak will arrive.

Notes

(1) Richard Heinberg, Smoking Gun: The CIA's Interest in Peak Oil (Special to From the Wilderness)

by Richard Heinberg (August 2003) http://www.fromthewilderness.com/free/ww3/081503_cia_russ_oil.html

(2) Donald L. Barlett and James B. Steele, “The Oily Americans”, Time,

Tuesday, May. 13, 2003

http://www.time.com/time/magazine/article/0,9171,450997,00.html

Further Resources:

William R. Clark, Petrodollar Warfare: Oil, Iraq and the Future of the Dollar (New Society, 2004), also available on Google Books.

The Gulf, Energy, And Global Security. Edited by Charles F. Doran and Stephen W. Buck. Lynne Rienner, 1991, 234 pp. $35.00.

Matthew Simmons, “Twilight in the Desert: The Peaking of Fossil Fuels and the Transformation of the National Security Environment”, Pentagon Briefing, Washington DC, Feb 19, 2008.

http://www.simmonsco-intl.com/files/Pentagon%20Briefing%20BW.pdf

Campbell, David, The Biopolitics of Security: Oil, Empire, and the Sports Utility Vehicle
American Quarterly - Volume 57, Number 3, September 2005, pp. 943-972

Doug Stokes, “Blood for oil? Global capital, counter-insurgency and the dual logic of American energy security”, Review of International Studies (2007), 33:245-264

Energy Security: Current and Future Strategic Challenges, A Special Edition of Strategic Insights 7 (1), Feb 2008, http://www.ccc.nps.navy.mil/si/2008/Feb/introFeb08.asp