The “Worst News of 2015” Just Got Worse

Just a garden-variety protest in some Middle Eastern county, you say, nothing to be afraid of here? Wait till you find out where these people are. (BBC Photo by Safa Al-Ahmad)

Just a garden-variety protest in some Middle Eastern county, you say, nothing to be afraid of here? Wait till you find out where these people are. (BBC Photo by Safa Al-Ahmad)

The news photo I labeled the scariest of 2014, back in August, and the news story I called the worst of 2015 a few weeks ago, just got scarier, and worse. The photo was of demonstrators who have managed to keep an insurgency alive in the Eastern Province of Saudi Arabia for three years despite everything a boundlessly wealthy state can do to snuff it out. Bad for us, because the Eastern Province is where the Saudi oil is. The worst news of the year for us was that the Saudi king was in hospital with a terminal illness. Now the king is dead, and the difficulties faced by his successor just became worse by at least an order of magnitude.

Why do we care? Because if Saudi Arabia becomes another Libya or another Iraq, unable to get a large portion of its its oil to market because of internal strife, or invasion, or some other sort of breakdown, we Americans will suffer. Those who remember the oil shocks of the 1970s, that rocked this country to its foundations, should recall that our oil imports were only reduced by about 10%. The current meltdown in oil prices seems to have been caused by an excess of only two per cent of world supply over world demand. Small changes in oil markets, especially in these the last days of oil, have very large results. And Saudi Arabian oil is not small. The country pumps about 10 million barrels of crude oil per day, eight million of which it exports. Of that, America buys a million barrels a day. We can’t leave home without it.

The transition of power to the new Saudi king has been untroubled, but it is the next transition — he is 79 years old and is rumored to have some problems with dementia —  that could get ugly. King Salman is the last of the 45 sons of the original King Saud, and the next transition will be to a member of the next generation, of which hundreds of people will believe they have some reason to aspire to power.

Whoever sits on the throne, under whatever circumstances, is going to have, at best, a very rough several years. Saudi production of crude oil, its only source of income, has been virtually flat since 2005. Meanwhile its population is growing and demanding more and more cheap gas (subsidized by the government, it costs drivers 16 cents per liter), air conditioning, electricity, fresh water, cars and stuff. With the population consuming an ever larger proportion of its oil (among other things, they burn crude oil to generate electricity) the amount of money coming in to pay the government’s expenses — such as those gas subsidies — is steadily declining. The Saudis are rich, but not infinitely so, and these trends have to be dealt with.

What the Saudis fear in the long term is running short of oil and thus money, but in the short term they are terrified of the shadow of the Arab Spring that took down the rulers of Libya, Egypt and Algeria, and the implacable hostility of Shia-majority Iran, which may or may not be contemplating the building of a nuclear weapon (the Saudis are on the Sunni side of the Muslim street).

Now there’s a new source of fear if not panic: the government of Yemen has collapsed and the southern Saudi border, once secure in the hands of an ally of both them and the U.S., is now exposed to the Houthis, the Shia rebels who brought down the government;  Al Qaeda in the Arabian Peninsula (sponsor of the recent terror attack in Paris); and now ISIS as well, all organizations that have demonstrated that if they can’t rule the world they will happily burn it down.

So with Iraq to the north (not to mention Israel, and let’s not), Yemen to the south, Iran just across the Persian Gulf to the east and Egypt disintegrating on the other side of the Red Sea to the west, it’s not a great time to be a Saudi. And not a great time to live in a country that depends utterly on Saudi peace, stability, success and oil.



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6 Responses to The “Worst News of 2015” Just Got Worse

  1. Michael says:

    Perhaps all of this latest instability is just the trigger needed for the energy picture to change for the better.

    Please let me explain. In the the 1970s, during the Carter administration and the days of gas lines, I worked for a consulting engineering firm that was awarded a contract (it was a consortium and their were many others) to develop synthetic fuel. It was expensive compared to more traditional forms of fuel but we did a successful demonstration that it could be done.

    Along came Reagan and the program was immediately cancelled because the energy companies had no incentive to continue or the government to sponsor it because there were cheaper alternatives. If they had continued we probably would not be in such a panic today over energy from unstable parts of the world.

    This is where I will probably be attacked by many here, but my point is that the market and innovation and creativeness of the players really does work. That is, if there is a market and a demand for something–in this case power and energy–then that industry starts to develop technologies to meet that demand. So even if the government pushes change (like it did with synfuels and later with alternative energy technology like wind, etc.) it really does not happen until the private sector believe they need to change, which is driven usually by the bottom line of a business.

    I truly believe that if affordable fossil fuel was not available, we would see a surge in innovation and new ways of powering our lives. Despite critics, the market really does work in that regard. (And, yes, I am ignoring climate change here–that is a whole other discuss…)

    Does anyone really believe that if wind power, tidal power, electric cars, or whatever really worked and were technologically and economically feasible that companies would not be pursuing and marketing them with gusto?

    Someone may correct me, but when have we really ever had a major transition in our history (e.g., from buggies to cars or whatever) that was driven by the government? It doesn’t generally happen that way, Instead it is driven by the private sector and the market.

    That doesn’t mean that there are not really challenging periods during such transition or that greedy Masters of the Universe do not seek to skew things for profit. They do, they have, and they will again. That said, the underlying market forces and the innovation of the private sector are still working to meet consumer demands.

    So, for me, I don’t see anything that nudges us towards new ways as necessarily catastrophic. In this case, in the long run, it may just trigger something positive in the way we develop the energy needed.

    Just my thoughts.

    • SomeoneInAsia says:

      As far as we can tell there is no alternative energy source that can be a substitute for oil. None of them, even when taken together, can enable the modern economy to continue running at its current rate — they just can’t deliver like fossil fuels can. Besides, all alternative energy sources ultimately still need oil for building the infrastructure necessary for tapping into them, so they still can’t free us of the need for oil. If we could use solar energy ITSELF to build and maintain solar energy plants (and strictly solar energy ONLY), then alone would we be truly free of the need for oil. Maybe this will happen, but I want to see it before I can believe it.

      Even market forces and the innovation of the private sector can’t alter the basic laws of physics and arithmetic. Sorry.

    • Kathleen says:

      The “market” might be better positioned to encourage alternatives if the fossil fuel industry no longer received government subsidies. Not holding my breath for that.

      “If there is demand, someone will try to satisfy it.” In this, I agree with Michael, however it’s the “try” part that gets me. Just because we would LIKE there to be a 1:1 alternative to fossil fuels, I think we are foolish to count on the market to drive its discovery and implementation. Why? I see two possible reasons. 1.) Maybe it’s not in the market’s short-term economic interest to do it. Perhaps that is why, as an example, there are no new antibiotics coming along. There is a need, so probably a market, but where are the new ones? Or 2.), it could also be that it is not POSSIBLE to find a 1:1 replacement, however hard the market wishes there were–see reply by someoneinasia about laws of physics, etc.

      It matters not to me which reason it is, or whether it’s some combination of both. The end result is that we’ll be up to our necks before anything truly viable makes it to market, if it ever does, and it does no good to wait around for it. Just because the industrial world isn’t going to abandon fossil fuel early because it’s the right thing to do doesn’t mean we shouldn’t, as individuals and communities, begin transitioning away from them right now. I think waiting around for the market (or the government, just to be clear) to save us is a bad idea.

  2. Tom says:

    Hey Michael. Just to be clear, you’re saying we should once again “go around” the oil limit to keep industrial civilization going at all costs and ignore the fact that the global environment (the entire biosphere) is tanking due to our continuous population increase, mining of all resources and total pollution and just keep going until we can’t then?

    • Michael says:

      I am not saying that at all, but the world is not going to suddenly stop using energy and as long as there is demand someone will try and satisfy it. There are many sides to the story and figuring out how to find a balance is what we need to struggle to find. I don’t believe we go from where we are to the stone age. It won’t happen voluntarily, If alternative energy is going to happen then many conditions must be met or it simply won’t happen. So far those conditions have not been met.