How would the global framework transform if the trans-national trade in energy ceased to be a significant factor in strategic affairs? Some states, dependent principally on the export of oil or gas, would cease to be powers by that measure. Other states, dependent on oil or gas imports for viability, might be freed of that foreign exchange drain and the need to project power merely to dominate energy trade sources and supply lines. They could project power for more traditional reasons.
It is now possible to foresee a 21st Century world in which the great driver of the international trade in energy as a commodity may not necessarily be the determinant of strategic policy or the cause of conflict. This does not mean that energy will not be critical in determining strategic outcomes. Quite the contrary. However, even if energy determines outcomes, as it does, energy as a commodity may not — if emerging technologies and market factors continue — be the reason wars are fought or geo-strategic alliances and force projection structures built.
The world is seeing — particularly with the new viability of exploiting shale-trapped energy or “tar sands” — a situation where major new reserves of fossil fuels, quite apart from renewables (as well as thorium-derived safe nuclear power), are capable of being exploited within areas hitherto regarded as being dependent upon imported fuels. And energy, particularly for electrical and motive power, continues to be the existential driver of urban societies.
Energy, however, has been a very recent historical driver of transnational trade and international competition. Energy, for most of human history, was a local issue: a commodity acquired and used in close proximity. Energy, when it began to be used to transform life, political-military might, and wealth, became a reason to develop population centers, and the great coincidence of coal, iron ore, and water created mighty “forge cities”, such as Liege and Brescia.
But the truly great international trade in energy as a commodity began to transform the world, and to create the basis of modern industrial society, when Spanish traders began to exploit, and transport in the 19th Century, the great guano deposits of Peru back to Europe, where guano as a fertilizer enabled a massive increase in agricultural productivity. Arguably, natural fertilizer was, with coal, a significant early form of transportable power for economic productivity. Both — as with petroleum and gas and other carbon-based combustibles, and uranium, and so on — are forms of latent energy which lend themselves to surface transportation and storage to be used when, and where, they are needed.
Transportable “latent energy” forms underwent another milestone when, for example, the Royal Navy changed from the use of coal to oil to power its ships, very soon (in the early 20th Century) after the Navy had changed from sail to internal combustion power, and most of society followed, even as households moved from whale oil to petroleum-based products for lighting and then adopted the new oil for motive power.
The global trade in oil, gas, and coal, as well as in “finished” energy in the form of electricity, had, by the early 21st Century, become probably the biggest single international area of physical commerce. It drove most other forms of trade. The international trade in armaments and other advanced technologies was given great impetus by either the wealth created by energy sales, or the need to protect lines of energy dependency.
Why is this changing?
A report in The Financial Times on May 15, 2013, captured some of the essence of the change: “Technological advances in hydraulic fracturing [of shale-bound energy] and horizontal drilling [for oil and gas], pioneered by small and mid-sized companies, have opened up shale oil and gas reserves that were not previously viable. As a result, US crude oil production is on course to be about 50 percent higher this year  than in 2008. Analysts have begun to speculate that North America — the US plus Canada and possibly Mexico — could become a net oil exporter within 10 years, and even the sober government-backed International Energy Agency has forecast that the US could overtake Saudi Arabia to become the world’s largest energy producer by 2017.”
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He went on to cite Joe Stanislaw, a veteran energy industry consultant and now an adviser to Deloitte, who noted that many of the “touted benefits” from the oil and gas revolution had yet to be realized. “Most of us grew up in a world of scarcity,” he was quoted as saying. “But now the mindset has changed: it’s not scarcity, it’s energy security and energy abundance.”
Significantly, the new understanding of the abundance of shale- trapped energy — in, for example, the Americas, Europe, Australia, the Russian Far East, and elsewhere, and the recognition of new types of oil or gas energy pockets around Taiwan (the Republic of China: ROC) and around the East China Sea islands historically dominated by Taiwan and claimed by the ROC — is being challenged by some traditional patterns of interest. There is often challenge to exploitation on the grounds of environmental concern. There is a revival of territorial claims, such as those relating to the First Island Chain of the Western Pacific, including Taiwan but also those islands known to Japan as the Senkakus, the the People’s Republic of China (PRC) as the Diaoyu, and to the ROC as the Diaoyutai. (And particularly in the area known as the Xihu/Okinawa Trough.) The list of such revived territorial claims will grow as states see the opportunity to incorporate areas hitherto thought of little value but which now offer the prospect of energy independence.
Argentina, teetering toward national bankruptcy for a century, now has discovered and begun work to exploit its shale oil and gas prospects, particularly around its vast Vaca Muerta (Dead Cow) formation.
As writer Jude Webber noted in The Financial Times: “Few countries need to crank up domestic oil and gas production more than Argentina. Its energy import bill, with its reliance on imported liquefied natural gas, was about $9.5-billion in 2012 and is expected to leap to $13-billion to $15-billion this year .”
For much of the world, however, outside the Americas, a significant baseload energy production commodity remains coal, and the low cost of coal seems likely to mean that — for some societies — the pressure to develop domestic shale- embedded energy will remain low, or ambiguous, for the time being. But that does not change the reality that the pattern of the vast trade in oil and gas may undergo transformation within the next two decades.
This not only changes patterns of physical dependency for most societies on one of the commodities they find critical to survival; it also changes the pattern of economics. Both patterns are critical to national approaches and to defense planning and spending.
Initially, the “shale rush” will not mean a sudden end to the great oceanic and pipeline transportation of oil and gas between nation-states. But it will transform some of the major energy use patterns. By May 2013, the pattern was making headlines. Stanley Reed, writing in The International Herald Tribune, noted: “In a sign the US shale gas boom is making global waves, two Japanese conglomerates and a big French energy player have agreed to invest up to $7-billion in a liquefied natural gas project in Louisiana.” The plant would begin operations in 2017.
So we see a pattern taking shape over the coming decade or so, and Japanese investors clearly see a need to acquire stable sources of gas, and to wind down dependency on oil and gas imports to Japan from the Middle East, and the vulnerable transport of such supplies through the ASEAN sea lanes and narrows linking the Indian Ocean with the Pacific, and then bringing them through waters which would increasingly be dominated by the People’s Republic of China (PRC). This writer had also noted in 2012 the clear need of Japan and the Republic of Korea (ROK) as well as the ROC to also consider trans-Pacific energy logistical lines as being more secure than those from the Indian Ocean and directly through waters dominated by the PRC.
The evolution of the global energy framework to this point has not been unexpected, even though most societies have been slow — in this as in all aspects of change — to break linear paths to adopt new technologies, or new approaches to satisfying energy needs. Strategist Dr Stefan Possony, writing in Defense & Foreign Affairs in 1974, outlined in detail the extent of the US and Canadian (and other) shale and tar sands-trapped petroleum. Even in 1974, he was able to note: “There are three great potential sources of shale in the world: the US, the USSR and Brazil, with a question mark in regards the People’s Republic of China. The world has at least two- quadrillion barrels (2,000-trillion) of shale-embedded oil, with some 200-billion (one percent) easily recoverable.”
As it transpired, additional basins of shale-trapped oil and gas were discovered in Continental Western Europe and the United Kingdom, as well as in Australia and elsewhere. But Possony foresaw the strategic patterns evident in the fairly narrow approach to petroleum exploitation and competition in the early 1970s. He prefaced his remarks in that landmark study with the following comments:
Mankind has plodded a swerving willful path through history, a highway marked by extremes: extreme hatred, extreme greed, extreme righteousness and extreme profligacy. Modern technology has led us to the last of these, and only disruption of the basic fuels of life has forced an examination of our wasteful ways.
The continuation of energy consumption, along the lines of the conditioning of the past 50 years, would lead the world further into an unnecessary imbalance. Such extremes must lead to a rapid monetary imbalance of such proportions that the international currencies would crash. The resultant chaos would be the climate for conflict.
And yet it can be prevented.
Possony outlined a number of energy paths then not being considered which could have been taken to alleviate the linearist approach to energy strategy. Apart from outlining many of the technologies then lying dormant, he noted: “The need is not to make one county ‘self sufficient’ but to extend the technology of the many alternate sources of energy available. Most of these have not been considered in their relationship to one another or to consumption requirements. Governments should be concerned with authorizing exploration, and exploitation of these sources, rather than concentrating on one or two energy forms.”
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The evolution of the situation, then, has now — almost four decades after Possony wrote — been to start a process whereby the geopolitical aspects of energy are absolutely changing. This will change, and already is changing, the strategic terrain of the world. And apart from changing geographic dispersal of energy resources and trade, the emerging pattern will also change the economics of energy. Indeed, energy consumption as a percentage of GDP of most industrial societies peaked in the early 1970s, and then began to decline. However, that did not mean that national vulnerabilities to energy interruption had diminished. Today, by comparison, the US agricultural sector is worth about one percent of US GDP (depending on how it is measured), but the loss of a US food production surplus would have profound and disastrous economic and strategic consequences for the country.
What is emerging, then, is not a revolutionary transformation of the global strategic framework by the transformed patterns of energy sourcing, but an evolutionary pattern. However, the mere absence of a “date” to mark the switch of the global energy pattern from one form to another does not make the reality any less dramatic; it merely makes it more palatable in social terms and manageable in economic terms. New-era energy companies will gradually supplant old-era ones (and some old-era companies will transform and embrace the new sources and new technologies). But the geography is changing, and therefore the entire nature of geo- political planning.
Some old-era energy producers, such as Iran, Saudi Arabia, Kuwait, Nigeria, and Venezuela, may find that their chance to evolve their economies and develop into balanced nation-states in the “modern” civilizational sense has been lost, or their transformation )or return) to more balanced economies would have to be accelerated. But by any measure, they may have lost the strategic leverage which their oil and gas fields had once given them.
What would that do, for example, to such phenomena as the economic backing once given to the spread of Islam, as a byproduct of wealth and prestige, under the financial prestige of Riyadh or Tehran? It is not yet feasible to determine the full consequences of the impact of possible declining sovereign wealth on the links between that wealth and ideological proselytization, but there is no doubt that a relationship exists.
Significantly, although we presently see little diminution in the wealth of, say, Saudi Arabia (and certainly no signs for the coming few years in the diminution of such gas players as Qatar), we have already seen a marked reduction in, for example, US dependency on Arabian Peninsula and Iranian energy. Even US dependency on Gulf of Guinea energy (Nigeria, etc.) has peaked, as of about 2013, and seems set to decline.
The changing patterns already emerging are beginning to change where societies spend their money. That alone transforms the strategic commons. It also transforms areas of industrial productivity. But clearly, as well, legislative frameworks need to change to adapt to changing energy patterns. The US has, in the past, avoided the reduction of foreign oil and gas imports because it did not wish to become involved in the industrial programs needed to achieve this. When cash was plentiful, it was easy to merely import refined fuel.
With economies under pressure, societies are more prepared to find ways to achieve economies. What we have yet to see on a global scale, however, is whether “advanced” societies, in an economic sense, having become “pseudo-post-industrial”, can make themselves return to physical forms of productivity, such as industrial activities. That is another test for 21st Century society, now dominated by urban abstract approaches and “service” or white collar thinking. But economic hardship or collapse can be the ultimate taskmasters.
Again: what does all this do to patterns of defense and threat planning?
And what is the likely impact of changing population levels as urbanization and other factors drive reductions in human reproduction rates? This trend is already evident and the growth curve in population levels has begun to reach its apogee on a global basis (while decline is already evident in some major regions). This, too, transforms energy requirements.
Too often we see defense and security planning in terms of absolutes and constants, when, as with all things, they are merely variables in an evolving strategic terrain. As geopolitics change — and transforming the strategic energy trade is a fundamental lever in transforming geopolitics — so do threat and opportunity assessments. This, when coupled with transformative technologies, mean that planners need to re-assess how defense and national security are calculated and achieved on a more fluid, or frequent, basis.
We have only to recall how changes in lace manufacturing processes and costs transformed the fortunes — and therefore the security — of European states with the Industrial Revolution in the late 18th Century. Arguably, although lace and the manpower engaged in the industry were significant economic components of 18th Century Europe, they were not vital aspects of the functioning of societies. Energy, particularly with the new urban dominance of states, is an existential component of society and its security.
By. Gregory R. Copley, Editor, GIS/Defense & Foreign Affairs