Each oil crisis spells a new energy future

The latest international row over oil is just one more episode in the black stuff's long and continuing entanglement with power politics.

The internationally recognized Greek Cypriot-ruled Cyprus Republic, a European Union member, is taking bids from multinational energy firms to drill for oil and natural gas offshore. Large, though still unproven reserves, are believed to be at stake.

Turkey and its dependent "Turkish Republic of Northern Cyprus" (which is recognized only by Ankara since invading Turkish troops created it in 1974) object. They insist that both the Nicosia Cypriot regime and its ally, the Greek government in Athens, should desist until final settlement of the 33-year-old partition of Cyprus. The Turkish side insists it will drill in the same locations, and even implies possible military backup for its own efforts.

It's another major obstacle in Turkey's delayed negotiations to join the EU. It's also a classic example of how oil and politics constantly interact.

Middle East turmoil and the severe Gulf of Mexico storms in 2005 helped drive up crude-oil prices from about $37 a barrel in January 2005 to more than $70 by May 2006. Although prices have dropped to the $50-$60 range, long-term factors suggest that oil will remain pricey for years to come.

That's why more enlightened and courageous energy policies, especially in the United States, are so crucial today.

The world now uses almost all produced oil (and a lesser proportion of gas). Refineries and pipelines are hard hit by factors such as hurricanes in the US, and by accidents, sabotage, and hostage-taking in oil-rich countries such as Iraq and Nigeria. In many countries, especially the US, supply isn't keeping up with galloping demand for gasoline and other refined-petroleum products.

To remedy this problem, big-oil states and energy companies should expand refineries and pipelines. They also need to invest much more in both production and exploration. A major factor keeping Iraq's output well under the 3 million-plus barrels per day of the Saddam-Hussein era, is that old Iraq partners, such as ExxonMobil and France's Total, won't put new money into the building and repair of wells, pipelines, and refineries that insurgents repeatedly blow up. The sooner Iraq is stabilized, the sooner oil companies may invest in expanding the country's production.

Meanwhile, global demand for gas and oil soars. This gives big producers such as Russia – now No. 1 in the world – leverage over their markets. Western Europe has become dependent on Russia's giant Gasprom firm for about half of its rising gas needs.

Some scientists assert that world oil resources are near their peak and may soon decline. However, reports of the US Geological Survey point out that peak oil production may not be as close as some have previously thought: Oil reserves are still about 42 times annual production levels. Long-term, alternative petroleum resources, such as the nearly 1 million barrels per day of crude oil that Canada now produces from oil sands and Venezuela's Orinoco tar sands, are promising.

Meanwhile, Venezuela's populist president, Hugo Chávez, seems bent on nationalizing all energy resources and directing exports to like-minded friends such as Fidel Castro's Cuba. Mr. Chávez's ideological cousins, such as Bolivia's Evo Morales, may follow his example by restricting needed foreign investments.

President Bush raised eyebrows in the Middle East by declaring in his 2006 State of the Union address that the US is "addicted" to foreign oil. Arabian Peninsula nations have fairly regularly boosted their sales to the US. Long ago, they stopped threatening 1973-type supply disruptions linked to US support for Israel, and US dependency on Arab oil grows year by year.

Crucially, neither Mr. Bush nor Congress does anything serious about US oil "addiction." Though China and India are beginning to catch up, the US is still the biggest user and importer of oil.

Although boosted by environmentalist concern over global warming, experimentation with noncarbon fuels such as ethanol and hydrogen, and energy sources such as wind power, lags far behind what could be called ideal progress.

What the US needs is what Europe and Japan are already successfully using to reduce carbon-fuel consumption: a hefty energy tax. A truly imaginative US initiative would be to devise ways to channel some of any such tax money into needed investments in energy infrastructure at home and abroad.

Sure, it's difficult and unpopular to tax energy. But failing such a drastic solution (and better US diplomacy), American oil consumers, as well as those in Europe and Asia, may experience new crosswinds of geopolitics and war.

The 2008 presidential hopefuls – Republican and Democrat – must be brave enough to bring big energy issues into their campaign platforms and debate them in public. That will be an uphill battle, but we all have a right to keep raising the subject and to hope that a principled politician will step up to the plate.

• John K. Cooley, a former Middle East and Pentagon Monitor correspondent published "An Alliance Against Babylon, the US, Israel and Iraq" and other books on the area.