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Strategic gloom and doom: Rees-Mogg on oil and Islam

In the Cockburns' recent book, a world-weary diplomat states, "When oil
reaches $40/barrel, (the West) will rehabilitate Saddam as Mother Theresa"
(approx.).   There's an echo of this line in the first article below, which
concerns OPEC, our addiction to oil, and its inevitable depletion.  The
second piece (also by William Rees-Mogg of the London Times) is gloomier
still, drawing from a dangerously influential hypothesis against which
Edward Said and others have argued (and which Clinton, Indyk, and Talbot
have all - publicly, at least - disavowed): Samuel Huntington's 'Clash of

Depressing autumnal reading.  Cheers and regards,
Drew Hamre
Golden Valley, MN USA

August 30 1999  OPINION 

Black gold has made the modern age possible. The end of the Earth's supplies
has often been predicted. Soon those predictions will come true 

Troubled waters for oil 

The Times of London
by William Rees-Mogg
Great issues have long histories. Last Friday was the 140th anniversary of
the drilling of the first oilwell at Titusville, Pennsylvania, an event that
made the 20th century possible. The use of petroleum products as the main
source of energy has given the modern world its character, but the oil
business developed quite slowly. 

In 1898, nearly 40 years after Titusville, Britain imported only 3.7
million of petroleum products, a little more than the value of imports of
coffee, and a fifth of the 18.1 million of coal exports. In terms of energy
supply, coal was still king. The motor car and the aeroplane changed all
that; they also changed the world, in peace and war. 

The drawback to the petroleum economy of our now departing century is that
it is based on a finite resource. No one can be sure when the oil will run
out - there have been too many pessimistic forecasts that have already been
proved mistaken - but run out it will. The best estimate is that oil will be
about a 200-year phenomenon, and that there will be a rapid decline in
supplies by the second half of the next century. 

Some estimates suggest that we are now about halfway through the totality of
oil resources, but there are potential technical developments which could
defer that, including oil shale, better recovery methods, and even new
discoveries. No one expects to find another Saudi Arabia or even another
Alaska. The largest reserves of accessible oil have almost certainly been
found already. 

In the 1970s, it looked as though the crunch would come much earlier; in
that decade there were oil shocks which, from low to high, raised crude oil
prices by no fewer than 20 times. The oil economists of that period expected
this trend to continue into the 1980s and 1990s, but it did not. The market
did its work. Very high prices led to increasing exploration, to more
efficient production and more efficient use. 

Supply and demand came back into balance and prices fell to unexpectedly low
levels. Market forces undermined the Organisation of Petroleum Exporting
Countries (Opec), the cartel, which lost control of the oil price. 

Yet the market cannot overcome depletion. The United States was a huge
exporter of oil in the early part of this century, and is now a huge
importer. There is no way for the market to put the oil back under Texas. It
has been used up. 

On Friday The Times published a lead letter from Dr David Fleming, the
director of the Lean Economy Initiative. He argues that the turning point is
with us already. "Next year," he writes, "world oil production, with the
exception of the five Middle East Opec members, will reach its halfway mark;
in 2001 it will start its steady decline towards depletion." This may be too
precise, but in terms of the radical shift between the old and new
centuries, it is probably justified; the 20th century was based on oil; the
21st will have to adjust to the decline of the oil economy. 

The recent rise in the market price supports Dr Fleming's argument, at least
in the short term. The price of crude oil has already doubled this year. The
Opec cartel has managed to regain a substantial part of its control over the
price. But this has been a price recovery from the exceptionally low levels
at the end of 1998. 

Dr Fleming argues that Middle East Opec, whose members are Iraq, Iran,
Kuwait, Saudi Arabia and the United Arab Emirates, will from now on have a
rapidly rising market share, going above the 30 per cent mark, which he
regards as critical. 

He comments: "The last time it had a share of 30 per cent or more was in the
period 1973-79," the period of the great oil price inflation. Last weekend
oil ministers from Mexico, Saudi Arabia and Venezuela were meeting in
Caracas to discuss mechanisms for maintaining oil prices "within a
predetermined range". 

Opec has already played its part in the doubling of the oil price;
obviously, it is better that the new target should be a stable price within
a predetermined range. Nevertheless, the renewed power of Opec is
disturbing. All cartels work to raise prices; if the underlying market has
put Opec back in business, that must mean that the equation of supply and
demand has already moved towards higher prices. 

In the 1970s, oil proved to be the fundamental commodity. The world seemed
to move on to an oil standard, as currencies responded to the inflation of
the oil price by inflation of their own. There was a global financial battle
in the 1970s between the oil cartel, organised by Opec, and the currency
cartel, organised by the world's central bankers. In the 1970s, Opec won
that battle, only to lose in the 1980s and 1990s. Battle may again be joined
in the first decade of the next century. If Dr Fleming is correct, the trump
cards may be back in Opec's hand, although painful experience may make Opec
play them less aggressively than in the 1970s. 

In that decade, inflation rose in almost all countries, interest rates rose,
real values fell, share prices fell, unemployment rose, governments were
turned out. It was a miserable decade. The gold price followed the oil
price; as currencies weakened, the historic commodity standard of gold
benefited from the victory of the new commodity standard of oil. Whether
this year's central bank attack on the gold price has been a pre-emptive
strike by the central bankers, fearful of a return to 1970s conditions is an
interesting question; probably it is nothing as well considered as that. 

A return to the oil market conditions of the 1970s would be very damaging
for the global economy, for the developing countries of Asia, for Europe,
for Japan and for America. Britain would have some protection from North Sea
oil; Russia would benefit hugely; sheikhs would again become hyper-rich; oil
would be an investment of choice. The United States already has a
dangerously large balance of payments deficit; more expensive oil imports
would make that worse, although the US dominance in defence would encourage
Opec states to recycle their wealth back into dollars. 

If the price of crude oil rose by a factor of 20, as it did in the 1970s,
one would have to expect spectacular consequences. Crude oil would go to
$200 a barrel, there might be 20 per cent inflation, or higher, gold at
$2,000 or $3,000 an ounce, US reconciliation with Iraq, the break-up of the
euro and a Conservative majority of over 100. Yet this all seems quite
unlikely. The oil market situation is not as strong as it was in 1973. The
political unity of Opec is not as great. There is no new war in the Middle
East; in 1973, war with Israel triggered the first oil price shock. 

I do not believe that anyone can predict the timing of oil depletion, or its
effect on oil prices. There are too many variables, in the development of
technology, in changing patterns of use, in the effectiveness of Opec, in
the response of the consumer governments, in reserves. I suspect that Dr
Fleming's forecast will prove to have been premature. Yet the difficulty of
forecasting means that he may prove right even in the short term. 

He will certainly be right in the longer term. Coal was king in 1800; coal
was still king in 1900; coal is a dethroned monarch in 2000. Oil is king in
2000; oil will have abdicated before 2100. 

The best guide is always the market. If the price of crude settles down at
about $20 a barrel, the oil doomsday will be postponed. If it continues to
rise to $40 a barrel and beyond, the next decade will be facing the return
of the oil crisis of the 1970s. Even on the most favourable short run
movement of the oil price, Dr Fleming's warning is necessary. When coal was
dethroned, oil took over the throne. 

When oil abdicates, there will be no pretender to take its place. No one
knows how the eight or nine billion people who may be living on Earth in
2050 will manage on far less oil than is being used by the six billion who
are alive now. 


September 20 1999  OPINION 
Forecasts of worldwide conflict on the Islamic fault-line are chillingly

A prophet of doom 
The Times of London
by William Rees-Mogg
The world is full of violence. There are the massacres in East Timor; the
murder of 300 Russians by terrorist bombs, probably related to Chech-nya;
the ethnic cleansing of the Albanians and then of the Serbs in Kosovo; the
Nato bombing itself, which has left Serbia devastated and Kosovo polluted
with unexploded cluster bombs; the grumbling confrontation in Kashmir
between India and Pakistan, both nuclear powers; Saddam Hussein's plans for
weapons of mass destruction; the Anglo-American response of sanctions and
bombs. However safe we may feel going about our usual business in one of the
West's great cities, this century of violence is ending with worldwide
violence, and the threat of worse to come. 

Those episodes of violence which seem of more than local relevance, or have
resulted in intervention by the United Nations or the United States, all
have something in common that the world is very reluctant to recognise. In
one sense, East Timor, Chechnya, Kosovo, Iraq and Kashmir are all parts of a
single global problem - they are all conflicts between Islamic countries or
ethnic groups and other cultures. 

They are not all confrontations between Islam and the West, though Iraq is
such a confrontation, and is recognised as such throughout the Islamic
world. Even the great Arab peacemaker, King Hussain of Jordan, said that the
Gulf War was "a war against all Arabs and all Muslims and not against Iraq
alone". The West is also deeply involved in the conflict in East Timor; the
East Timorese are Roman Catholics, and Australia is the leading peacekeeping

Yet the other three conflicts are not of Islam against the West, but of
Islam against other world cultures. Kashmir is a conflict between the
resurgent Islam of Pakistan and the resurgent Hinduism of India. Chechnya is
a conflict between Islam and Russia, the core nation of Slav Orthodoxy.
Kosovo is an even more extraordinary situation, a conflict between Islam and
Slav Orthodoxy, in which the West intervened on the side of Islam. 

In 1993 Samuel Huntington, a Professor of International Studies at Harvard,
published an article in Foreign Affairs arguing that after the end of the
Cold War conflicts between civilisations would dominate the future of world
politics. He gave warning of the seriousness of "fault-line conflicts"
between civilisations, and was much criticised for his observation that
"Islam has bloody borders". East Timor, Chechnya, Kosovo, Iraq and Kashmir
seemed to confirm that observation, whether or not one thinks that Islam is
the more to blame in any particular case. 

In 1996 Professor Huntington expanded his argument into a book, The Clash of
Civilisations and the Remaking of the World Order (Simon and Schuster,
16.99), which was described by Henry Kissinger as presenting "a challenging
framework for understanding the realities of global politics in the next
century". To an alarming degree, Professor Huntington's analysis seems to be
proving accurate. 

His thesis is that the people of the world have grouped into separate
civilisations which have been a powerful force of cohesion in early human
history. "Blood, language, religion, way of life, were what the (Ancient)
Greeks had in common . . . of all the elements which define civilisations,
however, the most important usually is religion." He identifies several
major contemporary civilisations: the Chinese, Japanese, Hindu, Islamic,
Orthodox, Western and Latin American, all more than 1,000 years old. 

The four largest are the Chinese, Hindu, Islamic and Western, each with
about a billion people. Each has its founding religion, around which the
civilisation is formed: Confucianism, Hinduism, Islam and Christianity.
China and India are the core countries of their own civilisation; the West
is seen as double-headed between the United States and Europe; Islam has no
core country, which makes it more difficult to relate to from the outside.
Islam and the West, in different ways, present the world with the greatest
difficulties. The West is perceived as claiming a unique dominance; it
represents both a universal power, based on American technology, and a
universal ideology, based on liberalism, democracy and human rights. The
bombing of the Chinese Embassy in Belgrade was seen by the Chinese, and by
the other civilisations, as a symbolic exercise of Western arrogance. 

The other civilisations perceive the West as alarmingly powerful in military
and economic terms, while being undermined by social indiscipline, the
break-up of the family, loss of religious belief, crime, drugs and the
underclass, as well as by ageing populations, low savings and unemployment. 

The West may see itself as the model for the next century; all the other
civilisations see as much to avoid as to emulate. "The West is
overwhelmingly dominant now and will remain number one in terms of power
well into the 21st century. Gradual, inexorable and fundamental changes,
however, are also occurring in the balances of power amongst civilisations,
and the power of the West . . . will continue to decline," Huntington says. 

In the 75 years between 1920 and 1995, the West's share of political control
of territory declined by 50 per cent, of world population by 80 per cent, of
world manufacturing output by 35 per cent and of military manpower by 60 per

Islam is divided into some 45 independent states, but is united by the
strongest of the great world religions, in terms of its cultural hold on its
followers. It has one great economic advantage - control of much of the
world's oil reserves, which are predicted to run out some time in the next
century. It is still in a stage of rapid population growth and Muslims are
expected to make up about 30 per cent of the world's population by 2025.
Already, Islamic immigration has caused a strong political reaction in
Western Europe; half of the babies born in Brussels, the headquarters of the
European Union, are to Arab mothers. Young, unemployed and disaffected
Muslims are a threat both inside their own countries and to the West. 

"The Islamic resurgence has given Muslims renewed confidence in the
distinctive character and worth of their civilisation and values compared to
that of the West. The West's simultaneous efforts to universalise its values
and institutions . . . and to intervene in conflicts in the Muslim world,
generate intense resentment among Muslims." 

The danger lies in the reaction between this revival of Islamic confidence,
backed by a growing population, and the fears of the neighbouring
civilisations. All the neighbouring civilisations feel potentially under
threat. The West is concerned about oil, nuclear proliferation,
immigration,the survival of Israel and human rights. The threat to Russia is
even more direct, from the current wave of terrorism and claims for
independence. The Serbs fear a greater Albania. India fears Pakistan and
potentially the alienation of the 100 million Muslims in India itself. China
is concerned about Central Asia and about the Chinese in Indonesia. The
non-Muslim population of sub-Saharan Africa has anxieties as well. 

It cannot be said that Professor Huntington's proposed remedies are as
convincing as his analysis. I am more optimistic than he seems to be about
the future relationships of three of the four largest civilisations. I
expect the West's relationships with China and India, and their relationship
with each other, to continue to improve. 

Islam is the unresolved problem. Certainly the West needs to show much
greater insight into the Islamic revival, which will develop further.
Arrogance, cultural supremacism or downright hostility must be the worst
possible response. Yet, as in Serbia, the neighbours of Islam will find
their own populations reacting to Islamic revival. It was fear of the
Albanians in 1987 which brought Milosevic to power. The world is not going
to find it easy to bind up the "bloody borders" of Islam. 
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