The bombs started to fall yesterday in Afghanistan. Despite the fact that it must - and should - be done, it is a sad conclusion to an even sadder attack. We have had nearly a month to prepare ourselves for what we are assured will be a protracted conflict. But since this is the most unconventional of wars, declared not on a nation but on a group, we attempt a difficult task - to prepare for the unknown.
One group that offers a bit of guidance in that area is Cambridge Energy Research Associates (CERA), which recently released a white paper titled "Aftermath: The Economic and Energy Impact of Sept. 11."
In the energy markets, the outlook for crude prices is revised downward by CERA based on curtailed spending and poor economic performance in the wake of the attack and a previous, looming recession that should reduce demand. That scenario pertains unless Opec limits production - something increasingly likely - to support prices.
In the upstream sector, CERA expects ongoing investment programs in deep water, heavy oil and other areas considered politically stable will continue unchanged. "However," the report noted, "a slowing global economy, exacerbated by widening economic repercussions from the attacks, will make production growth targets difficult to reach, especially for companies pressed to meet the increases announced previously under more favorable circumstances." The report also pointed to the increased importance and role of non-Middle East exploration and production hot spots in contributing to global production capacity growth.
The paper also predicted a marked warming in US-Russian relations over a common enemy. But, the report warned, the new climate might only be "superficial rapprochement" that does little to solve fundamental divergences, including a possible thaw in US-Iranian relations that "could radically change the map of Caspian energy flows by allowing oil and gas to be moved through Iran rather than through the Russian pipeline system."
What remains unsaid in the report is the very real danger of the destabilization of major oil-producing regions in the Middle East as various regimes strive to cope with burgeoning religious radicalism within their boundaries. Anti-American and anti-Western demonstrations already have taken place in some areas. That these might escalate into a serious threat is not idle speculation. At risk are millions of barrels of production, the disruption of which would push oil prices to exorbitant levels and stimulate the dive toward recession.
Perhaps these doom-and-gloom scenarios are overdone. One can only hope so. But it is hard to imagine they are totally without basis. That is why vigilance and counter-attack are only two of the cornerstones upon which any solution must be built. Another cornerstone, equally important, is a renewed emphasis on energy supply balancing, on getting supply and demand figures somewhere near right, on planning for energy security and on diversifying supply points. This applies to us all, Muslim, Christian, Jew, Hindu and Taoist alike. Terrorists don't come in predetermined colors, ethnicities or religions. If they did, this would be ever so much easier. Everyone is at risk, and everyone has a vested interest in getting it right. None of us will go forward without a stable energy supply, and none of us will achieve a stable energy supply without planning and cooperation.

Comments