Massive oil disruptions - Imminent Danger to the U.S. # 2

By Don Koenig - 2006 - updated 2015


Possible causes Islamist radicals, major wars, punitive measures taken against the U.S. by major oil producers.


U.S. Vulnerability -  Any large-scale disruption of petroleum products to the West would have consequences so severe to the U.S. that she would face a massive inflationary depression or she would be forced into a major war to secure access to the oil.


Likelihood of this threat occurring before A.D 2025

Thanks to the oil and gas fracking revolution the threat is now less then when I first wrote about this threat in 2006. The threat to gas disruptions in the U.S. is now over. Even so, the threat of an oil disruption is still very real. There certainly can be major oil disruptions from the major producers of the Middle East and that could have dire economic consequences to our nation. I would say the threat of this oil disruption occurring in the next decade or so is still about 6 on a scale of one 1 to 10 when you consider the rising Islamist threat in the Middle East and a proxy war or worse between NATO and Russia.


Saudi Arabia is the largest producer of oil on earth yet the government of Saudi Arabia is tenuous at best. The majority of the population of Saudi Arabia are against the royal family with its amoral princes who oversee the country. The royal family largely retains control by tyranny and bribery. The largest exporter of radical violent Islamic fundamentalism in the world comes out of Saudi Arabia and it is also a real threat to the royal family. If the government of Saudi Arabia becomes unstable, either the U.S. will have to send in troops to protect the oil fields or the United States will see oil prices that are beyond belief.


Iran also could bring about this scenario if she were to take punitive action against the West by disrupting shipping lanes in the Persian Gulf or by warring against the Saudis. If you honestly look at the situation in Iran today it is very difficult not to see this situation developing. Something will have to be done about Iran's nuclear program and if that something comes by the hand of the United States or by Israel, oil prices will rise to levels where only the wealthy can afford it.


Likewise, another major Middle-East war against Israel might see a coordinated effort to cut off oil to the United States. Then the U.S. would only have only one recourse, and that would be military action.


A wider war against Islamists by the United States could also bring a coordinated effort by oil producing nations to discipline the United States and/or bring more terrorism against oil production and refineries. Many of the oil rich countries could undergo upheaval or civil war and bring oil shortages that would cause economic disaster to the U.S. and world economy.


The U.S. government should have regulated oil companies and overridden environmental groups that hindered their development so that there would be a sufficient margin of spare capacity in the refining of oil. The government should have provided alternative sites where the refineries could be built in areas where environmental concerns were valid. It takes no divine insight to see that the lack of spare refinery capacity someday will bring us disruptions. More refineries should have been and should be a vital national security issue. This failure in leadership now allows the American citizen to become hostage to every miscalculation by the oil industry or to any disruption that is within or without its control.

I think the oil companies were all too willing not to build new refineries. They all know refined inventory is so tight that shortages are now inevitable whenever there is a very cold winter or some other unforeseen event. They also know that these inevitable shortages allow them to make huge amounts of money. The oil lobby has enormous power over the politicians. If the oil lobby really wanted new refining capacity they would have obtained it. The reason it did not happen is that it was not in their interest to push for more refineries and to have surplus in their inventory. Most of politicians in the U.S. do what the huge lobbies want because it will get them large contributions for reelection. Thus far the politicians have done nothing to fix this problem at the expense of all the people in the United States.


Effects of massive fuel shortages – Short term effects would see the price of fuel becoming so high that low wage earners could not afford to travel to their jobs. Those on low and fixed incomes could not afford to heat their homes. All products would have higher costs due to increased production and transportation costs. The social pressures would eventually bring about gas rationing and price controls leading to a secondary gray market for gas that only the wealthy would be able to afford.


Very high fuel prices and shortages would bankrupt major industries dependent on travel and tourism. Longer term effects would bring about the collapse of real estate prices in all areas where long commutes are necessary. SUV, RV and truck sales would be almost non-existent. Make no mistake about it, any medium or long-term shortage of petroleum will bring about grave consequences to the economy of the United States and it will affect the lifestyle of everyone in the country. With the high debt the United States is carrying the whole financial system house of cards would likely collapse. This would bring a major inflationary depression that will require the United States to withdraw from around the world to attend to matters at home. I suggest it will bring about a scenario in the United States similar to what took place in the old Soviet Union.


What can be done to stop the threat? 


The US has plenty of oil to develop if government gets out of the way and allows it to be developed. We have the largest oil shale, gas, and coal reserves in the world. The shale deposits alone can provide all the oil we need for hundreds of years at about $60 a barrel without damage to the environment. We also have large reserves of oil off-shore and in the arctic and the only thing preventing it from being tapped is radical environmentalism and politics. There must also be an immediate major effort by the U.S. to develop all sorts of alternative energy and end foreign oil dependence.

New refineries need to be built ASAP and the federal government needs to take proactive steps to see that this gets done.

There is a large surplus of natural gas from fracked shale, larger users of energy should be converting to natural gas if it is reasonably feasible.

The oil cartel fixes the price of oil. This needs to be ended by international law.

The United States must stop selling its soul to the lowest bidder for cheap energy. The only reason the U.S. is dependent on oil is that she is addicted to unrealistically low oil prices from nations that can get a barrel of oil out of the ground for almost nothing. The United States has the technology to develop energy at reasonable prices but the government hinders development.


There is political cost to taking a correct stand against the lobbies and to take the necessary action to legislate the bills necessary to break the United States from bondage to foreign oil producers. How many in our United States government have the guts to do what is right for the nation instead of seeking financial favors from lobbies to get them re-elected? This selfishness by politicians will lead the U.S. to its ruin. She cannot even get election laws changed to stop the buying of policy because the power crazy politicians want to keep the present laws since it enables them to get all the money they need to retain power. Very few incumbents in the United States government are ever defeated because challengers simply do not have the same access to special interest group money.


The U.S. can make things much easier on herself if she becomes proactive rather than reactive. Doing what it takes to get the U.S. weaned off of the foreign oil bottle will be much easier in good times than it will be in a time of crisis.


The United States is rich in renewable energy sources and that should also be pursued. The U.S. could produce tremendous amounts of bio-mass to make alcohol or bio-diesel for fuel without using food lands. The U.S. has the largest reserves of coal and oil shale on earth and new technologies have been developed to get it out of the ground without significant environmental damage. There is more oil in U.S. shale than there is in the entire Middle East reserves. Canada, our friend to the north, also has enough peat and oil sands to supply the whole hemisphere for many centuries.


There simply is no reason for the United States to be held hostage over energy. She certainly has the means to do something about it if the people of the United States would just get the environmental radicals in our government out of the way.

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