The United States would be all but powerless to
protect the American economy in the face of a
catastrophic disruption of oil markets, high-level
participants in a war game concluded yesterday.
The exercise, called "Oil Shockwave" and played
out in a Washington hotel ballroom, had real-life former
top U.S. officials taking on the role of members of the
president's Cabinet convening to respond to escalating
energy crises, culminating in $5.32-a-gallon gasoline
and a world wobbling into recession.
The The American people are going to pay a
terrible price for not having had an energy strategy,"
said former CIA director Robert M. Gates, who took on
the role of national security adviser. Stepping out of
character, he added that "the scenarios portrayed were
absolutely not alarmist; they're realistic."
The exercise began with ethnic unrest in Nigeria,
leading to the collapse of the oil industry in that west
African nation. Then al Qaeda launched crippling attacks
on key energy facilities in Valdez, Alaska, and Saudi
Arabia.
But the war game's participants -- including
former CIA director R. James Woolsey, former Marine
Corps commandant Gen. P.X. Kelley and former EPA
administrator Carol Browner, soon realized the U.S.
government had few options in the short term to prevent
an economic crash in this country and worldwide.
When the exercise's planners first met last year,
oil was in the $40-a-barrel range. As they fantasized
where oil prices would be for the war game's start in an
imagined late 2005, they said, they set them at $58 but
worried they were being absurdly pessimistic. Yesterday,
the closing price for a barrel of oil was $59.42.
The war game players also referred several times
to other real-life events of today. A major feature of
the exercise was how China's voracious appetite for oil
is driving up world prices, and only yesterday it was
announced the Beijing government, in a bold and
unprecedented act, is bidding to buy the U.S. oil
company Unocal.
The exercise was organized by two nonprofit groups
that focus on the national security implications of U.S.
dependence on foreign oil: the National Commission on
Energy Policy and Securing America's Future Energy
(SAFE). The scenarios were dreamed up by a team of
former oil industry executives and government officials,
including Rand Beers, a White House counterterrorism
official who quit in 2003 to protest the Iraq war.
The underlying situation dramatized in the
exercise -- and accepted by most energy analysts -- is
that tolerances are so tight between supply and demand,
that even small disruptions in the delivery of oil and
natural gas can cause cascades of unpleasant
developments.
The war game contemplated that when oil prices
spiked and the Cabinet met to consider its options, it
realized it had almost no clout to influence events.
The standard response, drawing on the Strategic
Petroleum Reserve, was symbolic at best. The president
should not give in to Saudi offers that the kingdom
would lower prices if he stopped pressing for Saudi
democracy, the participants agreed. Within weeks
conditions were worsening -- the Valdez oil terminal was
on fire, as was a major Saudi oil port, and Western
technicians were being killed there.
Foreign oil firms soon pulled tens of thousands of
workers out of Saudi Arabia. Suddenly lacking technical
expertise, Saudi facilities could no longer play their
decades-long role of guaranteed "swing" provider of oil
in response to disruptions elsewhere. As the global
recession deepened, there was no "central banker" of oil
to smooth out temporary dislocations.
The participants concluded almost unanimously that
they must press the president to invest quickly in
promising technologies to reduce dependence on overseas
oil, such as hybrid cars powered by gasoline and plug-in
electricity; and cars that run on fuels derived from
prairie grasses, animal waste and other products. They
all agreed these projects would take years to yield any
benefit but should not wait for the kind of crisis they
were dramatizing.
"If you want to put a frown on the face of [Saudi]
Wahhabis, talk about 100-mile-per-gallon vehicles,"
Woolsey said. "We don't need a Manhattan Project to do
it."
