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ALARAB ONLINE
Portrait of an Oil-Addicted Former Superpower
How Rising Oil Prices Are Obliterating America's Superpower Status
By Michael T. Klare*
Nineteen years ago, the fall of the Berlin Wall effectively eliminated
the Soviet Union as the world's other superpower. Yes, the USSR as a
political entity stumbled on for another two years, but it was clearly
an ex-superpower from the moment it lost control over its satellites
in Eastern Europe.
Less than a month ago, the United States similarly lost its claim to
superpower status when a barrel crude oil roared past $110 on the
international market, gasoline prices crossed the $3.50 threshold at
American pumps, anddiesel fuel topped $4.00. As was true of the USSR
following the dismantling of the Berlin Wall, the USA will no doubt
continue to stumble on like the superpower it once was; but as the
nation's economy continues to be eviscerated to pay for its daily oil
fix, it, too, will be seen by increasing numbers of savvy observers as
an ex-superpower-in-the-making.
That the fall of the Berlin Wall spelled the erasure of the Soviet
Union's superpower status was obvious to international observers at
the time. After all, the USSR visibly ceased to exercise dominion over
an empire (and an associated military-industrial complex) encompassing
nearly half of Europeand much of Central Asia. The relationship
between rising oil prices and the obliteration of America's superpower
status is, however, hardly as self-evident. So let's consider the
connection.
Dry Hole Superpower
The fact is, America's wealth and power has long rested on the
abundance of cheap petroleum. The United States was, for a long time,
the world's leading producer of oil, supplying its own needs while
generating a healthy surplus for export.
Oil was the basis for the rise of the first giant multinational
corporations in the U.S., notably John D. Rockefeller's Standard Oil
Company (now reconstituted as Exxon Mobil, the world's wealthiest
publicly-traded corporation). Abundant, exceedingly affordable
petroleum was also responsible for the emergence of the American
automotive and trucking industries, the flourishing of the domestic
airline industry, the development of the petrochemical and plastics
industries, the suburbanization of America, and the mechanizationof
its agriculture. Without cheap and abundant oil, the United States
would neverhave experienced the historic economic expansion of the
post-World War II era.
No less important was the role of abundant petroleum in fueling the
global reach of U.S. military power. For all the talk of America's
growing reliance on computers, advanced sensors, and stealth
technology to prevail in warfare, it has been oil above all that gave
the U.S. military its capacity to "project power" onto distant
battlefields like Iraq and Afghanistan. EveryHumvee, tank, helicopter,
and jet fighter requires its daily ration of petroleum, without which
America's technology-driven military would be forced to abandon the
battlefield. No surprise, then, that the U.S. Department of Defense is
the world's single biggest consumer of petroleum, using more of it
every day than the entire nation of Sweden.
From the end of World War II through the height of the Cold War, the
U.S. claim to superpower status rested on a vast sea of oil. As long
as most ofour oil came from domestic sources and the price remained
reasonably low, the American economy thrived and the annual cost of
deploying vast armies abroad was relatively manageable. But that sea
has been shrinking since the 1950s. Domestic oil production reached a
peak in 1970 and has been in decline ever since -- with a growing
dependency on imported oil as the result. When it came to reliance on
imports, the United States crossed the 50% threshold in 1998 and now
has passed 65%.
Though few fully realized it, this represented a significant erosion
of sovereign independence even before the price of a barrel of crude
soared above $110. By now, we are transferring such staggering sums
yearly to foreign oil producers, who are using it to gobble up
valuable American assets, that, whether we know it or not, we have
essentially abandoned our claim to superpowerdom.
According to the latest data from the U.S. Department of Energy, the
United States is importing 12-14 million barrels of oil per day. At a
current price of about $115 per barrel, that's $1.5 billion per day,
or $548 billion per year. This represents the single largest
contribution to America's balance-of-payments deficit, and is a
leading cause for the dollar's ongoing drop in value. If oil prices
rise any higher -- in response, perhaps, to a new crisis in the Middle
East (as might be occasioned by U.S. air strikes on Iran) -- our
annual import bill could quickly approach three-quarters of a trillion
dollars or more per year.
While our economy is being depleted of these funds, at a moment when
credit is scarce and economic growth has screeched to a halt, the oil
regimes on which we depend for our daily fix are depositing their
mountains of accumulating petrodollars in "sovereign wealth funds"
(SWFs) -- state-controlled investment accounts that buy up prized
foreign assets in order to secure non-oil-dependent sources of wealth.
At present, these funds are already believed to hold in excess of
several trillion dollars; the richest, the Abu Dhabi Investment
Authority (ADIA), alone holds $875 billion.
The ADIA first made headlines in November 2007 when it acquired a $7.5
billion stake in Citigroup, America's largest bank holding
company. The fund has also made substantial investments in Advanced
Micro Systems, a major chip maker, and the Carlyle Group, the private
equity giant. Another big SWF, the Kuwait Investment Authority, also
acquired a multibillion-dollar stake in Citigroup, along with a $6.6
billion chunk of Merrill Lynch. And these arebut the first of a series
of major SWF moves that will be aimed at acquiring stakes in top
American banks and corporations.
The managers of these funds naturally insist that they have no
intention of using their ownership of prime American properties to
influence U.S. policy. In time, however, a transfer of economic power
of this magnitude cannot help but translate into a transfer of
political power as well. Indeed, this prospect has already stirred
deep misgivings in Congress. "In the short run, that they [the Middle
Eastern SWFs] are investing here is good," Senator Evan Bayh
(D-Indiana) recently observed. "But in the long run it is
unsustainable. Our power and authority is eroding because of the
amounts we are sending abroad for energy=80¦."
No Summer Tax Holiday for the Pentagon
Foreign ownership of key nodes of our economy is only one sign of
fading American superpower status. Oil's impact on the military is
another.
Every day, the average G.I. in Iraq uses approximately 27 gallons of
petroleum-based fuels. With some 160,000 American troops in Iraq, that
amounts to 4.37 million gallons in daily oil usage, including gasoline
for vans and light vehicles, diesel for trucks and armored vehicles,
and aviation fuel for helicopters, drones, and fixed-wing
aircraft. With U.S. forces paying, as of late April, an average of
$3.23 per gallon for these fuels, the Pentagon is already spending
approximately $14 million per day on oil ($98 million perweek, $5.1
billion per year) to stay in Iraq. Meanwhile, our Iraqi allies, who
are expected to receive a windfall of $70 billion this year from the
rising price of their oil exports, charge their citizens $1.36 per
gallon for gasoline.
When questioned about why Iraqis are paying almost a third less for
oil than American forces in their country, senior Iraqi government
officials scoff at any suggestion of impropriety. "America has hardly
even begun to repay its debt to Iraq," said Abdul Basit, the head of
Iraq's Supreme Board of Audit, an independent body that oversees Iraqi
governmental expenditures. "This is an immoral request because we
didn't ask them to come to Iraq, and before they came in 2003 we
didn't have all these needs."
Needless to say, this is not exactly the way grateful clients are
supposed to address superpower patrons. "It's totally unacceptable to
me that we are spending tens of billions of dollars on rebuilding Iraq
while they are putting tens of billions of dollars in banks around the
world from oil revenues," said Senator Carl Levin (D-Michigan),
chairman of the Armed Services Committee. "It doesn't compute as far
as I'm concerned."
Certainly, however, our allies in the region, especially the Sunni
kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates (UAE)
that presumably look to Washington to stabilize Iraq and curb the
growing power of Shiite Iran, are willing to help the Pentagon out by
supplying U.S. troops with free or deeply-discounted petroleum. No
such luck. Except for some partially subsidized oil supplied by
Kuwait, all oil-producing U.S. allies in the region charge us the
market rate for petroleum. Take that as a striking reflection of how
little credence even countries whose ruling elites have traditionally
looked to the U.S. for protection now attach to our supposed
superpower status.
Think of this as a strikingly clear-eyed assessment of American
power. As far as they're concerned, we're now just another of those
hopeless oil addicts driving a monster gas-guzzler up to the pump --
and they're perfectly happy to collect our cash which they can then
use to cherry-pick our prime assets. So expect no summer tax holidays
for the Pentagon, not in the Middle East, anyway.
Worse yet, the U.S. military will need even more oil for the future
wars on which the Pentagon is now doing the planning. In this way, the
U.S. experience in Iraq has especially worrisome implications. Under
the military "transformation" initiated by Secretary of Defense Donald
Rumsfeld in 2001,the future U.S. war machine will rely less on "boots
on the ground" and ever more on technology. But technology entails an
ever-greater requirement for oil, as the newer weapons sought by
Rumsfeld (and now Secretary of Defense Robert Gates) all consume many
times more fuel than those they will replace. To put thisin
perspective: The average G.I in Iraq now uses about seven times as
much oil per day as G.I.s did in the first Gulf War less than two
decades ago. And every sign indicates that the same ratio of increase
will apply to coming conflicts; that the daily cost of fighting will
skyrocket; and that the Pentagon's capacity to shoulder multiple
foreign military burdens will unravel. Thus are superpowers undone.
...................
* Michael Klare is a professor of peace and world security studies at
Hampshire College and author of the just-released Rising Powers,
ShrinkingPlanet: The New Geopolitics of Energy (Metropolitan Books). A
documentary film based on his previous book, Blood and Oil, is
available from the Media Education Foundation and can be ordered at
bloodandoilmovie.com. A brief video of Klare discussing key subjects
in his new book can be viewed by clicking here.
© Copyright 2008 Michael T. Klare
ALARAB ONLINE
Portrait of an Oil-Addicted Former Superpower
How Rising Oil Prices Are Obliterating America's Superpower Status
By Michael T. Klare*
Nineteen years ago, the fall of the Berlin Wall effectively eliminated
the Soviet Union as the world's other superpower. Yes, the USSR as a
political entity stumbled on for another two years, but it was clearly
an ex-superpower from the moment it lost control over its satellites
in Eastern Europe.
Less than a month ago, the United States similarly lost its claim to
superpower status when a barrel crude oil roared past $110 on the
international market, gasoline prices crossed the $3.50 threshold at
American pumps, anddiesel fuel topped $4.00. As was true of the USSR
following the dismantling of the Berlin Wall, the USA will no doubt
continue to stumble on like the superpower it once was; but as the
nation's economy continues to be eviscerated to pay for its daily oil
fix, it, too, will be seen by increasing numbers of savvy observers as
an ex-superpower-in-the-making.
That the fall of the Berlin Wall spelled the erasure of the Soviet
Union's superpower status was obvious to international observers at
the time. After all, the USSR visibly ceased to exercise dominion over
an empire (and an associated military-industrial complex) encompassing
nearly half of Europeand much of Central Asia. The relationship
between rising oil prices and the obliteration of America's superpower
status is, however, hardly as self-evident. So let's consider the
connection.
Dry Hole Superpower
The fact is, America's wealth and power has long rested on the
abundance of cheap petroleum. The United States was, for a long time,
the world's leading producer of oil, supplying its own needs while
generating a healthy surplus for export.
Oil was the basis for the rise of the first giant multinational
corporations in the U.S., notably John D. Rockefeller's Standard Oil
Company (now reconstituted as Exxon Mobil, the world's wealthiest
publicly-traded corporation). Abundant, exceedingly affordable
petroleum was also responsible for the emergence of the American
automotive and trucking industries, the flourishing of the domestic
airline industry, the development of the petrochemical and plastics
industries, the suburbanization of America, and the mechanizationof
its agriculture. Without cheap and abundant oil, the United States
would neverhave experienced the historic economic expansion of the
post-World War II era.
No less important was the role of abundant petroleum in fueling the
global reach of U.S. military power. For all the talk of America's
growing reliance on computers, advanced sensors, and stealth
technology to prevail in warfare, it has been oil above all that gave
the U.S. military its capacity to "project power" onto distant
battlefields like Iraq and Afghanistan. EveryHumvee, tank, helicopter,
and jet fighter requires its daily ration of petroleum, without which
America's technology-driven military would be forced to abandon the
battlefield. No surprise, then, that the U.S. Department of Defense is
the world's single biggest consumer of petroleum, using more of it
every day than the entire nation of Sweden.
From the end of World War II through the height of the Cold War, the
U.S. claim to superpower status rested on a vast sea of oil. As long
as most ofour oil came from domestic sources and the price remained
reasonably low, the American economy thrived and the annual cost of
deploying vast armies abroad was relatively manageable. But that sea
has been shrinking since the 1950s. Domestic oil production reached a
peak in 1970 and has been in decline ever since -- with a growing
dependency on imported oil as the result. When it came to reliance on
imports, the United States crossed the 50% threshold in 1998 and now
has passed 65%.
Though few fully realized it, this represented a significant erosion
of sovereign independence even before the price of a barrel of crude
soared above $110. By now, we are transferring such staggering sums
yearly to foreign oil producers, who are using it to gobble up
valuable American assets, that, whether we know it or not, we have
essentially abandoned our claim to superpowerdom.
According to the latest data from the U.S. Department of Energy, the
United States is importing 12-14 million barrels of oil per day. At a
current price of about $115 per barrel, that's $1.5 billion per day,
or $548 billion per year. This represents the single largest
contribution to America's balance-of-payments deficit, and is a
leading cause for the dollar's ongoing drop in value. If oil prices
rise any higher -- in response, perhaps, to a new crisis in the Middle
East (as might be occasioned by U.S. air strikes on Iran) -- our
annual import bill could quickly approach three-quarters of a trillion
dollars or more per year.
While our economy is being depleted of these funds, at a moment when
credit is scarce and economic growth has screeched to a halt, the oil
regimes on which we depend for our daily fix are depositing their
mountains of accumulating petrodollars in "sovereign wealth funds"
(SWFs) -- state-controlled investment accounts that buy up prized
foreign assets in order to secure non-oil-dependent sources of wealth.
At present, these funds are already believed to hold in excess of
several trillion dollars; the richest, the Abu Dhabi Investment
Authority (ADIA), alone holds $875 billion.
The ADIA first made headlines in November 2007 when it acquired a $7.5
billion stake in Citigroup, America's largest bank holding
company. The fund has also made substantial investments in Advanced
Micro Systems, a major chip maker, and the Carlyle Group, the private
equity giant. Another big SWF, the Kuwait Investment Authority, also
acquired a multibillion-dollar stake in Citigroup, along with a $6.6
billion chunk of Merrill Lynch. And these arebut the first of a series
of major SWF moves that will be aimed at acquiring stakes in top
American banks and corporations.
The managers of these funds naturally insist that they have no
intention of using their ownership of prime American properties to
influence U.S. policy. In time, however, a transfer of economic power
of this magnitude cannot help but translate into a transfer of
political power as well. Indeed, this prospect has already stirred
deep misgivings in Congress. "In the short run, that they [the Middle
Eastern SWFs] are investing here is good," Senator Evan Bayh
(D-Indiana) recently observed. "But in the long run it is
unsustainable. Our power and authority is eroding because of the
amounts we are sending abroad for energy=80¦."
No Summer Tax Holiday for the Pentagon
Foreign ownership of key nodes of our economy is only one sign of
fading American superpower status. Oil's impact on the military is
another.
Every day, the average G.I. in Iraq uses approximately 27 gallons of
petroleum-based fuels. With some 160,000 American troops in Iraq, that
amounts to 4.37 million gallons in daily oil usage, including gasoline
for vans and light vehicles, diesel for trucks and armored vehicles,
and aviation fuel for helicopters, drones, and fixed-wing
aircraft. With U.S. forces paying, as of late April, an average of
$3.23 per gallon for these fuels, the Pentagon is already spending
approximately $14 million per day on oil ($98 million perweek, $5.1
billion per year) to stay in Iraq. Meanwhile, our Iraqi allies, who
are expected to receive a windfall of $70 billion this year from the
rising price of their oil exports, charge their citizens $1.36 per
gallon for gasoline.
When questioned about why Iraqis are paying almost a third less for
oil than American forces in their country, senior Iraqi government
officials scoff at any suggestion of impropriety. "America has hardly
even begun to repay its debt to Iraq," said Abdul Basit, the head of
Iraq's Supreme Board of Audit, an independent body that oversees Iraqi
governmental expenditures. "This is an immoral request because we
didn't ask them to come to Iraq, and before they came in 2003 we
didn't have all these needs."
Needless to say, this is not exactly the way grateful clients are
supposed to address superpower patrons. "It's totally unacceptable to
me that we are spending tens of billions of dollars on rebuilding Iraq
while they are putting tens of billions of dollars in banks around the
world from oil revenues," said Senator Carl Levin (D-Michigan),
chairman of the Armed Services Committee. "It doesn't compute as far
as I'm concerned."
Certainly, however, our allies in the region, especially the Sunni
kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates (UAE)
that presumably look to Washington to stabilize Iraq and curb the
growing power of Shiite Iran, are willing to help the Pentagon out by
supplying U.S. troops with free or deeply-discounted petroleum. No
such luck. Except for some partially subsidized oil supplied by
Kuwait, all oil-producing U.S. allies in the region charge us the
market rate for petroleum. Take that as a striking reflection of how
little credence even countries whose ruling elites have traditionally
looked to the U.S. for protection now attach to our supposed
superpower status.
Think of this as a strikingly clear-eyed assessment of American
power. As far as they're concerned, we're now just another of those
hopeless oil addicts driving a monster gas-guzzler up to the pump --
and they're perfectly happy to collect our cash which they can then
use to cherry-pick our prime assets. So expect no summer tax holidays
for the Pentagon, not in the Middle East, anyway.
Worse yet, the U.S. military will need even more oil for the future
wars on which the Pentagon is now doing the planning. In this way, the
U.S. experience in Iraq has especially worrisome implications. Under
the military "transformation" initiated by Secretary of Defense Donald
Rumsfeld in 2001,the future U.S. war machine will rely less on "boots
on the ground" and ever more on technology. But technology entails an
ever-greater requirement for oil, as the newer weapons sought by
Rumsfeld (and now Secretary of Defense Robert Gates) all consume many
times more fuel than those they will replace. To put thisin
perspective: The average G.I in Iraq now uses about seven times as
much oil per day as G.I.s did in the first Gulf War less than two
decades ago. And every sign indicates that the same ratio of increase
will apply to coming conflicts; that the daily cost of fighting will
skyrocket; and that the Pentagon's capacity to shoulder multiple
foreign military burdens will unravel. Thus are superpowers undone.
...................
* Michael Klare is a professor of peace and world security studies at
Hampshire College and author of the just-released Rising Powers,
ShrinkingPlanet: The New Geopolitics of Energy (Metropolitan Books). A
documentary film based on his previous book, Blood and Oil, is
available from the Media Education Foundation and can be ordered at
bloodandoilmovie.com. A brief video of Klare discussing key subjects
in his new book can be viewed by clicking here.
© Copyright 2008 Michael T. Klare
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