Why Iraq was all about peak oil

By David Strahan. First published in the Guardian, 26 June 2007.

Even as one of the principal architects of the Iraq war washes his hands of the whole bloody mess there is still only a remarkably vague understanding of the real reason behind the invasion. True, evidence of the intense interest of the international oil companies continues to build. Both BP and Shell have assessed the condition of oilfields for the Iraqi government in the hope of securing major deals when conditions improve, Chevron has a team waiting over the border in Kuwait, and only last week ExxonMobil CEO Rex Tillerson said in London “We look forward to the day when we can partner with Iraq to develop that resource potential.” But despite the oil majors’ undoubted interest and influence, the decision to attack was not taken in the boardroom. Iraq was indeed all about oil, but in a sense that transcends the interests of individual corporations – however large.

The elephant in the drawing rooms of both the White House and No 10 was the fact that global oil production is likely to ‘peak’ and fall into terminal decline within about a decade – the inevitable result of 40 years of dwindling oil discoveries and ever-rising consumption. Oil production is already on the slide in 60 of the world’s 98 oil producing countries – including the US and Britain. Dr Michael Smith of the oil consultancy Energyfiles forecasts another 14 will join the descent during the next ten years. Aggregate oil production in the OECD has been falling since 1997, and all major forecasters – including noted optimists such as the International Energy Agency and ExxonMobil – expect output for the entire world except OPEC to peak by the middle of the next decade. From then on everything depends on the cartel, but unfortunately there is growing evidence that its members have been exaggerating the size of their reserves for decades, and that their output could also falter soon.

As I report in The Last Oil Shock, the international oil consultancy PFC Energy briefed Dick Cheney in 2005 that on a more realistic assessment of OPEC’s reserves, its production could peak by 2015. That would tip global output into terminal decline, almost certainly bringing soaring oil prices, deep recession and worse. A report published by the US Department of Energy, also in 2005, concluded that without a crash programme of mitigation 20 years before the event, the economic and social impacts of the oil peak would be “unprecedented”. The evidence suggests that these fears were already weighing heavily with Cheney, Bush and Blair.

In a world of looming oil shortage, Iraq represented a unique opportunity. With 115 billion barrels Iraq had the world’s third biggest reserves, and after years of war and sanctions they were also the most underexploited. In the late 1990s Iraqi oil production averaged about 2 million barrels per day, but with the necessary investment its reserves could support three times that output. Not only were sanctions stopping Iraqi production from growing, but also actively damaging the country’s petroleum geology by denying the national oil company access to essential chemicals and equipment. In one of a series of reports to the Security Council, UN specialist inspectors warned in January 2000 that sanctions had already caused irreversible damage to Iraq’s reservoirs, and would continue to lead to “the permanent loss of huge reserves of oil”. But sanctions could not be lifted with Saddam still in place, so if Iraq’s oil was to help defer the onset of global decline, the monster so long supported by the West would have to go.

As I reveal in The Last Oil Shock, the CIA was also well aware of Iraq’s unique value, having secretly paid for new maps of its petroleum geology to be drawn as early as 1998. Cheney also knew, fretting publicly about global oil depletion at a speech in London the following year, where he noted that “the Middle East with two thirds of the world’s oil and lowest cost is still where the prize ultimately lies”. Blair too had reason to be anxious about oil: British North Sea output had peaked in 1999 – and has been falling ever since – while the petrol protests of 2000 had made the importance of maintaining the fuel supply excruciatingly obvious.

The British government has never conducted its own assessment of when global oil production will peak, at least not one it has made public, and despite being urged to as part of its 2006 Energy Review. But it is significant that two of Blair’s closest advisors believe the event will happen by around 2015. In a speech last year Sir David Manning – Blair’s chief foreign policy advisor in the run-up to Iraq – noted the growing consensus that the peak would come at “some point between 2010 and 2020”, while chief scientific advisor Sir David King told me emphatically in 2005, “ten years or less”. So while the government refuses to engage with peak oil publicly, the idea has clearly penetrated policymaking at the highest levels.

Britain and America’s shared energy fears were secretly formalised during the planning for Iraq. It is widely accepted that Blair’s commitment to support the attack dates back to his summit with Bush at Crawford in April 2002. The Times headline was typical that weekend: Iraq Action Is Delayed But ‘Certain’. What is less well known is that at the same summit Blair proposed and Bush agreed to set up the US-UK Energy Dialogue, a permanent diplomatic liason dedicated to “energy security and diversity”. No announcement was made, and the Dialogue’s existence was only later exposed through a US Freedom of Information enquiry.

Both governments continue to refuse to release minutes of meetings between ministers and officials held under the Dialogue, but among some papers that have been released, one dated February 2003 notes that to meet projected world demand, oil production in the Middle East would have to double by 2030 to over 50 million barrels per day, and proposed “a targeted study to examine the capital and investment requirements of key Gulf countries”. So on the eve of the invasion British and American officials were secretly discussing how to raise oil production from the region and we are invited to believe this is mere coincidence. Iraq was evidently not just about corporate greed but strategic desperation.

The bitterest irony is of course that the invasion has created conditions that guarantee Iraqi oil production will remain hobbled for years to come, bringing the global oil peak that much closer. So if that was plan A, what on earth is plan B?

David Strahan is the author of The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man.