October 10, 2002
President George W. Bush
1600 Pennsylvania Avenue
Dear Mr. President,
I know a fantastically good way to sell your proposed use of force in Iraq to the American People. I understand that the focus of the debate has been Iraq's programs to build weapons of mass destruction (WMD) and the reason for that has been the argument's conceptual simplicity. However, it leaves out a larger part of the problem and the real motivation for taking action. What follows here is a short description of some problems we face, which I'm sure you are already aware of, and how to more effectively use them, and other factors, in the debate.
As you are certainly already aware, the world production of oil is going to peak in the next few years. According to Kenneth S. Deffeyes in his book "Hubbert's Peak: The Impending World Oil Shortage" the world's production of oil will reach its peak in 2008, plus or minus a year or two. When that happens the price of oil will begin to climb very rapidly and never again come down. The first economic realization from this fact is that anyone who has oil now should do whatever they can to not sell it until after the peak. The first political realization from this fact is that the "bad guys", like Saddam Hussein, who are currently not being allowed to sell oil stand to be in a very powerful position when the shortages hit. We are in effect forcing him to conserve his supply until after the peak passes and we have no choice but to allow him to sell -- on his terms. We can not allow people like him to be in such a position of power over us because he is all too likely to use it to our detriment.
It is clear from Hussein's past adventures that he wants to build what amounts to a replacement world Superpower to fill the "power vacuum" left by the former Soviet Union. His vision seems, obviously, to take over the major parts of the world's oil production and to use that as leverage to build his new Superpower state. During the time of the first Gulf War it should have been obvious to all -- as it was to me -- that Hussein was attempting to do this. What the whole world should wish to avoid is another, decades long, standoff like the Cold War.
It is a well known fact of twentieth century warfare that the most effective strategic targets to hit are the enemy's energy supplies. This is because they are "upstream" from all other aspects of production and war making and have a cascade effect on all operations below them. They are also much more centralized than other critical "upstream" components such as the food supply.
The threat posed by a global manipulation of oil prices is not that it would be a uniform global manipulation. The real threat comes from the use of differential price manipulations as a tool to aid one's friends and thwart one's enemies. Giving cheap oil to one side of the competition while denying it to the other does more than simply make the economic efforts of the former more costly than the later. It gives the one with access to cheap energy a universal advantage over its competitors in the marketplace. It is as if the country with control of the energy market has an invisible strategic bombing force that they can employ against any country who's economy they feel like ruining. You could call it something like "Hussein's stealth bomber force."
For example, if the US decided to implement an array of alternative energy plans in order to decouple ourselves from the external energy markets we could probably become locally self sufficient. However, we would still be faced with external competition with access to cheap oil. This would cause all our production to be more expensive in relation to the competition so that even though we could be self sufficient we could not be competitive globally. We would lose our place at the global table.
Clearly we are not the only ones who should be concerned about the potential damage Hussein could accomplish by engaging in a ruthless pattern of energy market abuse. All the industrial nations that depend on oil should be very worried about having Hussein's hand on the faucet. Market manipulation should be of concern to more than just a domestic audience so what I'm outlining here as a strategy to persuade our nation could be of use in persuading other nations as well. But that would be the subject of another paper.
As I understand it, during the early 1980s President Reagan cut a deal with the Saudis. The gist of the deal was that the Saudis would set oil prices slightly higher than the real market rates and we'd pay it without complaint in exchange for market stability. With market stability comes the ability to do long term planning and implement long term policy. If, on the other hand, the price of energy is fluctuating wildly, then making long term plans is more challenging. I have outlined above the perils of differential price fluctuations but global fluctuations can be very destructive to an industrial economy as well. Wild global fluctuations in energy costs can have the effect of preventing any useful long term industrial planning.
So the Saudis helped us out by agreeing to keep the price of oil more stable and more uniform than it had been in the 1970s. Of course in the process of helping us they became very rich. The Saudis could be bought off by the simple application of lots of money, unlike Hussein who seems to crave more direct forms of dominance and power. Giving Hussein lots of money would only allow him to invest it in other forms of strategic weapons for later use against us. Which you know would be a foolish thing for us to do.
Suppose we let Hussein get away with building both his oil empire and his weapons, what will the world be like? He will be in a position to grossly manipulate energy markets world wide and thereby cause whoever he wants to either prosper or perish. It would be literally as if he had control over the food supply; do what he says to do or starve to death. Not only that, but with a significant arsenal of nuclear and other weapons of mass destruction, he would have the capacity to defend himself against anyone who did not like being manipulated his way. Clearly the industrialized world can not allow itself to be held hostage like this. Therefore, we must avoid, at all cost, being dependent on sources of energy governed by people like Hussein and the best way to do that is to not have people like Hussein in charge of the energy reserves. But you already know all this, right?
Above I have set forth a brief description of the perils posed by the manipulation of global energy markets. I think my brief explanation is probably a pretty good one but it lacks the visceral punch it might otherwise have because it will seem too far away from the average American's life. Sure, we'll all be faced with the consequences of such market manipulations if they indeed come to pass, but the question in everyone's head will be "will it really happen?" The answer in the affirmative would be a lot more believable if there were an example ready at hand. Fortunately there is and you are in a very good position to use it.
I mention the words "Enron" and "price manipulation" and I really do not need to say much more. But, just in case your imagination is not as vivid as mine, here is a caricature of my thoughts.
Once upon a time there was an Evil Empire called Texas and was run by a despotic crew of cut throat oil men. The Empire wanted to "horn in" on the prosperous economy of their neighbors to the west, the peace and freedom loving people of the Kingdom of California. What could the evil Texans do to cause some of the wonderful high technology companies in California to relocate to Texas? Well, since the Empire had control of the Kingdom's energy supply (because they foolishly did not exercise their nuclear options) all they needed to do was manipulate the energy flow into the kingdom and the peace loving peoples of California would lose all their treasury (the budget surplus) and their economy would be left in ruins. To add insult to injury those evil Texans could run advertisements in the Kingdom's free press about how companies should relocate to the Empire because energy was cheap and plentiful.
While the exact events may or may not have been like I depict so fancifully here it does indeed make a very good and very appropriate parable about energy dependence and manipulation. But it does more than that because the same people who would object to the use of force against Hussein are the same people who clamor for the use of force (of law) against the executives of the energy companies like Enron who put the squeeze on California. The question to use to show the hypocracy of their objections is this:
Is it a matter of authority or one of principle? Is it only bad that the rich Texans were manipulating the market because it is a local one governed by US laws? Or, as I think is the case, is there a principle involved here that goes beyond the issue of domestic laws? I think the case could be made that the destruction of another people's economic wellbeing by the manipulative methods outlined here is in fact the use of force. And force used in response, preemptive or not, is justified to counter it. As I said above it is as if the country with control of the energy market has an invisible strategic bombing force and if they are going to use it to cause damage rather than cause prosperity then they need to expect violence in return. Why? because in the international community there is no "higher authority" to which the victims of energy market manipulation can appeal so violence is the only recourse.
Up until now I have only told you about things that you already know but here is a trick that you might not know. When you are faced with multiple problems it sometimes happens that they can be used against each other to your advantage. In the case here you have the opportunity to pit a domestic problem and a global problem against each other and come out looking like the hero on all sides. Here's how to do it -- if you haven't already guessed.
Tell them about how important the energy issues are. Tell them about Hubbert's Peak and how it will affect the world. Use the weapons of mass destruction issue only as an adjunct to the more significant oil and energy issues. Tell them about how we can not allow ourselves to be put in the position of being manipulated by a ruthless despot. Explain to them that in a global economy we can not escape from the energy market by being self sufficient if it costs more than buying oil. Most importantly, tell them that it would not only be bad for America, but that another decades-long armed standoff like the one with the USSR would be bad for everyone in the world.
Also, you know quite well that as soon as it looks like we're going to war in the Middle East that the counter argument always goes "no blood for oil" and the villains are always rich oil men. So you should explain to the American people how energy and petrochemicals from oil are vital to their wellbeing, not just the wellbeing of a few rich oil men. Get out in front of this before it turns on you (oil man) because you have the expertise and connections in the oil industry. Play up the fact that your staff is oil heavy -- who else should we want in charge when the issues are about oil and oil scarcity?
Here is the hard part. In order to demonstrate that having an oil heavy staff in the White House is a good thing you need to make a demonstration of principle. You need to land -- and land hard -- on the executives at the energy companies that were the cause of the California energy crises. (They can be let back into the game in a few years, after the war in Iraq is done with and they are needed to exploit the oil reserves there.) You need to do this to show that it is wrong in principle to wreck someone else's economy by doing what Hussein could do with 20% of the world's oil supply. Show by example and lead by example.
You have the opportunity here and now to show, in no uncertain terms, that you care about energy market manipulation and corporate corruption. You can seize the initiative on a key domestic issue while at the same time leveraging it against the resistance to your foreign policy. Also, by doing it this way you would be paving the way to make the case to the international community that allowing Hussein to manipulate their energy markets is a bad idea. What could be more sweet than winning both domestically and globally in the long run? But there's a catch: you're gonna have to think bigger than Texas to do it.
The original of this letter may be found on my web site at
Page first created Monday, March 24, 2003
Page last modified Wednesday, March 26, 2003 7:33 PM