June 6, 2011

Canadian Oil Sands and Geopolitical Perplexities

Michael Levi’s analysis of the Canadian oil sands, sponsored by the Council on Foreign Relations in 2009, has something to upset just about everybody, but is also somehow (weirdly) the voice of the establishment. He thinks that the “potential climate damages and energy security advantages of oil sands development are both widely overblown.” I would say, on the contrary, that the potential environmental damages and energy security advantages of oil sands development are insufficiently appreciated.

Actually, there is considerable evidence for “insufficient appreciation” in Levi’s study itself: he notes that exploitation of the oil sands entails the destruction of forests and the pollution of water, over and above additional carbon emissions. “Large projected increases in mining projects could significantly strain freshwater resources. . . . The oil sands’ environmental impacts extend beyond climate and water: mining developments, in particular, require substantial forest clearing and generate large ‘tailings ponds’ in which toxic wastes from the oil sands operations are stored.”

So far as energy security is concerned, he notes in his 2009 study that “the energy security benefits of robust Canadian oil sands production are real. . . . Perhaps the greatest impact of expanded oil sands exploitation would be a diversion of revenues away from adversarial governments—an important outcome—though this benefit would exist regardless of whether the United States was the ultimate consumer. In addition, the United States would benefit from buying oil from a country that would spend more of the proceeds on U.S. goods, and world oil markets would also gain from shifting to supply chains that are less vulnerable to terrorism.”

Having established these substantial advantages, Levi goes on to warn that they are “not as large as some might intuitively assume.” Oil “is traded on a global market . . . Oil sands exploitation will not fundamentally change the global oil picture. . . . U.S. vulnerability to oil price volatility and to price manipulation by OPEC or any large individual producer will not be significantly diminished by shifting imports to the oil sands.”

Those are reasonable caveats, but it turns out that the number one reason the energy security argument has been exaggerated is that it wouldn’t affect military deployments in the region. The “need for U.S. military commitments in the Middle East” will not decline even if oil sands are exploited to the hilt. “While U.S. commitments in the Middle East may have strong historical ties to oil, current U.S. commitments are anchored in other fundamental problems. In particular, the long-term challenges posed by transnational terrorism, by Iran’s pursuit of nuclear weapons, and by threats to Israel’s security will require strong U.S. security commitments in the Middle East regardless of whether oil is also a major regional concern.”

In effect, Levi is saying that the real contribution oil makes to military expenditures in the Middle East is insignificant, as we would want to rule the region anyway.

I find this argument dubious: 

First, we should be looking to limit our “strong U.S. security commitments in the Middle East,” to reconsider the war on terrorism, to have a different policy toward Iran and Israel. If you are looking to do those things, it makes sense to limit your (otherwise growing) dependence on the world oil market and develop resources closer to home.

Second, the “historical ties to oil” evident in US policy should not be so readily dismissed as operative factors in a speculative argument about what will sustain, in the future, US military commitments in the region. It has been a conditioning factor in our past relations, and so should not be so cavalierly taken off the analytical table.

Somewhat paradoxically, it may also make sense, if you want to maintain rather than limit US military involvement in that arc of crisis, that you should seek to limit the pricing power of the oil producing countries. Many among the imperial hawks and neoconservatives have certainly seen this point and have sought to fashion US energy policy around that belief.

For both non-interventionists and (some) interventionists, it would seem, reducing U.S. dependence on the world oil market in general, and on the Persian Gulf in particular, is a good thing. For the world as a whole, however, even cautious projections of supply growth rely on substantial increases in Saudi Arabia and Iraq. The world's dependence on Persian Gulf oil is not going away in the next generation.


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