After Iraq, no one should bank on cheap oil

OIL is the fuel that, by powering the industrial revolution, changed the world. The global economy’s need for a secure oil supply is so obvious that former US central bank chief Alan Greenspan has expressed exasperation in his new memoir that “it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil”. He does not mean an outright grab for Iraq’s oil. Instead, he writes that Saddam Hussein could have brought “the industrial world to its knees” had he gained control of the Strait of Hormuz and thus of oil shipments out of the Gulf. “I cannot understand why we don’t name what is evident and indeed a wholly defensible pre-emptive position,” he told The Guardian.


In July, Defence Minister Brendan Nelson admitted the obvious link between the war and oil, before making a hasty retreat, and Prime Minister John Howard also cited “energy demand” as one of the strategic reasons for stabilising Iraq. The resulting controversy explained the politics of denying the oil link, but this denial has unfortunately extended to public neglect of the broader and increasingly urgent issue of energy security.

The rise in the crude oil price last week to a record $US80 a barrel, even after OPEC agreed to increase production, reflects concern that skyrocketing demand will exhaust accessible reserves of oil, as well as other energy sources such as gas and uranium. A state of the region survey released at this month’s APEC forum found high energy prices were seen as the greatest threat to growth. Energy security was rated a more urgent priority than climate change.

The Age