Who Will Suffer as Oil Becomes a Weapon?

By David L. Brown

For decades oil producers in the Mideast have worked, individually and through OPEC, to hold down the price of oil. The purpose was at least two-fold:

First, to prevent high prices from suppressing demand (the thinking being to sell as much of the stuff as possible, since it was in plentiful supply and virtually free to the producers).

Second, to create disincentives to the development of alternative energy methods that could also threaten the demand for petroleum.

That was then, and this is now. Today oil is no longer plentiful and demand is nipping at the heels of supply. At the same time, Muslim nations in the Mideast have become more troubled internally, and troublesome to the world at large. Saddam had his day, but now it is Iran that poses the biggest threat to stability, both politically and in the international petroleum markets. In fact, just as Russia is using its new-found energy club against its once-and-future enemies in Europe, Iran is using the threat of disrupting the Persian Gulf oil fields as a weapon against the West.

Here is a quote from a Reuters story yesterday quoting Mohammad Bager Zolghadr, an Iranian deputy Interior Minister for Security Affairs, predicting the result of a presumed attack on Iran by America:

‘Today, if the slightest disorder in the region’s security and in the security of the Strait of Hormuz and the Persian Gulf is created, oil prices will reach $250 a barrel and this will lead to the death of European countries and America in terms of economy and security,’ he added.

Worries about any supply disruption from the world’s fourth biggest oil exporter, Iran, have been one of the factors helping to prop up oil prices. US crude is now around $65 a barrel.

So as we can see petroleum is no longer being seen merely as a commodity, but as a tool of power, a kind of “doomsday machine”. Like the Russians in their new-found arrogance, the Iranians believe that they can with impunity threaten the stability of the entire planet not only with their soon-to-be atomic weapons, but also through the threat of cutting off the oil supply. Neither of these terror strategies seems likely to yield great happiness for the perpetrators, and reminds me somewhat of a little boy threatening to hold his breath unless he gets his way.

Let’s assume that the West is forced to respond militarily to Iran’s nuclear and conventional threats, and that in accordance with their wildest dreams the Persians are able to lay waste to the Gulf oil infrastructure. (Nevermind what would be likely to happen to their own nation.) Would such an event result in “the death of European countries and America” as purported in the article quoted above. Almost certainly not.

In a relatively short time frame it would indeed have a severe impact on Western economies … but in the longer term the cost to Iran and their oil-producing neighbors would be immense. Such a disaster would have the immediate effect of cutting off almost the entire income stream of the Gulf nations, a catastrophe almost beyond imagining for the people of the region. It would leave the Oil Sheiks and Ayatollahs of the Mideast holding an empty sack. What would be their fate without the flood of oil money to arm themselves against their neighbors, and perhaps even more importantly, their own people? Famine and fear would almost certainly bring on a firestorm of revolt and anarchy that might see thousands of Saudi princelings slaughtered like sheep, and Shiite mullahs strung up like Christmas tree ornaments on the streets of Tehran. Even better (from the Western point of view), activities of radical jihad, funded in large part by Mideast petro-dollars, would be abruptly curtailed.

But would it even be possible for the price of oil to reach such an astronomical level? I seriously doubt it, because the law of supply and demand would immediately kick into play. Faced with skyrocketing prices, demand would almost immediately drop as world economies go into crisis mode. Traffic would diminish as drivers find alternatives or remain at home. Car pooling would sky rocket and gas guzzlers would remain parked. Buildings and streets would be darkened at night, thermostats would be turned down or up to the limit, and business and tourism travel would almost cease.

All this and more would create serious inconvenience, yes, and severe disruption—but such an event would once and for all write finis to the power of Arab petroleum, a decades-long dependence that has warped and perverted the Western economies in ways that are almost impossible to fathom. The need for real and serious change would become immediately apparent as the only possible route, and that would spell doom to the oil producing thieves of Riyadh and Tehran. There would be no chance of a recovery for the empty, corrupt, and yes, evil oil-based societies of the Mideast.

No, I am not saying it would be easy. During WWII we saw rationing of many basic commodities in the U.S., including not only gasoline but also tires, bacon, butter, eggs and many other items. In England the scarcity lasted for a decade, even for years after the end of the war. One might raise the point that today we are too spoiled to tolerate such sacrifices, but people of that time changed their consumption habits quite simply because they had no alternative. In a future of $250 oil as painted by Iran’s Mr. Zolghadr we would find ourselves in the same position, forced to change no-longer viable lifestyles founded on the wanton use of petroleum in all its many forms (not only gasoline and diesel fuel, but also plastics, fertilizer and other chemicals plus thousands of other products that are produced from or with the input of petroleum).

It should also be added that the Iranian threats may not have much substance. With U.S. forces well positioned in the region, any attack by Iran might prove less successful than the total destruction they might hope to wreak. In fact, it seems likely that the major impact of such an outbreak of hostilities would be borne by Iran itself, even to the possibility that they might be destroyed as a nation while other gulf oil producers survive relatively unscathed.

But all that aside, even a total shutdown of the entire Persian Gulf oil infrastructure would not mean there would be no petroleum available. In fact, only about 40% of the world’s oil today comes from that region. In America, our major suppliers are Mexico and Canada, besides which we hold a considerable strategic reserve of oil that could help tide us through the emergency. A shutdown of Mideast oil would impact places such as Europe, China and India far more directly than it would America.

Consider also that oil producers outside of the Gulf would be encouraged to ramp up production, and that sources presently deemed un-economic could suddenly become viable, and you can see that the shortfall might be closed quicker than one might think, through a convergence of lowered demand and growth of alternative supply.

So go ahead, Iran, pull the trigger. The world will surely tremble for a time, but in the end it will be a far better place as we quit the oil habit “cold turkey”. Sooner than might seem possible, economies will begin to revitalize in new models as alternative energy and production processes are exploited to their fullest in a post-industrial era. In that world there will be little place for meddling Mideastern regimes whose only significant exports are oil and jihad. When the West has gone through the painful withdrawal from its oil addiction, Arabs and Persians will be seen to have nothing of value to offer to civilized peoples.

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