Fwd: Former Officials Fail to Prevent Recession in Mock Energy Crisis

"When the exercise's planners first met last year, oil was in the
$40-a-barrel range. As they fantasized where oil prices would be for
the war
game's start in an imagined late 2005, they said, they set them at $58
but
worried they were being absurdly pessimistic. Yesterday, the closing
price
for a barrel of oil was $59.42."

http://www.washingtonpost.com/wp-dyn/content/article/2005/06/23/
AR2005062301896.html

Begin forwarded message:
>
> Former Officials Fail to Prevent Recession in Mock Energy Crisis
>
> By John Mintz
> Washington Post Staff Writer
> Friday, June 24, 2005; Page A19
>
> The United States would be all but powerless to protect the American
> economy
> in the face of a catastrophic disruption of oil markets, high-level
> participants in a war game concluded yesterday.
>
> The exercise, called "Oil Shockwave" and played out in a Washington
> hotel
> ballroom, had real-life former top U.S. officials taking on the role of
> members of the president's Cabinet convening to respond to escalating
> energy
> crises, culminating in $5.32-a-gallon gasoline and a world wobbling
> into
> recession.
>
> Former CIA director R. James Woolsey and former EPA administrator Carol
> Browner said the United States needs to reduce dependence on overseas
> oil.
> (Michael Williamson - The Washington Post)
>
> "The American people are going to pay a terrible price for not having
> had an
> energy strategy," said former CIA director Robert M. Gates, who took
> on the
> role of national security adviser. Stepping out of character, he added
> that
> "the scenarios portrayed were absolutely not alarmist; they're
> realistic."
>
> The exercise began with ethnic unrest in Nigeria, leading to the
> collapse of
> the oil industry in that west African nation. Then al Qaeda launched
> crippling attacks on key energy facilities in Valdez, Alaska, and Saudi
> Arabia.
>
> But the war game's participants – including former CIA director R.
> James
> Woolsey, former Marine Corps commandant Gen. P.X. Kelley and former EPA
> administrator Carol Browner, soon realized the U.S. government had few
> options in the short term to prevent an economic crash in this country
> and
> worldwide.
>
> When the exercise's planners first met last year, oil was in the
> $40-a-barrel range. As they fantasized where oil prices would be for
> the war
> game's start in an imagined late 2005, they said, they set them at $58
> but
> worried they were being absurdly pessimistic. Yesterday, the closing
> price
> for a barrel of oil was $59.42.
>
> The war game players also referred several times to other real-life
> events
> of today. A major feature of the exercise was how China's voracious
> appetite
> for oil is driving up world prices, and only yesterday it was
> announced the
> Beijing government, in a bold and unprecedented act, is bidding to buy
> the
> U.S. oil company Unocal.
>
> The exercise was organized by two nonprofit groups that focus on the
> national security implications of U.S. dependence on foreign oil: the
> National Commission on Energy Policy and Securing America's Future
> Energy
> (SAFE). The scenarios were dreamed up by a team of former oil industry
> executives and government officials, including Rand Beers, a White
> House
> counterterrorism official who quit in 2003 to protest the Iraq war.
>
> The underlying situation dramatized in the exercise – and accepted by
> most
> energy analysts – is that tolerances are so tight between supply and
> demand, that even small disruptions in the delivery of oil and natural
> gas
> can cause cascades of unpleasant developments.
>
> The war game contemplated that when oil prices spiked and the Cabinet
> met to
> consider its options, it realized it had almost no clout to influence
> events.
>
> The standard response, drawing on the Strategic Petroleum Reserve, was
> symbolic at best. The president should not give in to Saudi offers
> that the
> kingdom would lower prices if he stopped pressing for Saudi democracy,
> the
> participants agreed. Within weeks conditions were worsening – the
> Valdez
> oil terminal was on fire, as was a major Saudi oil port, and Western
> technicians were being killed there.
>
> Foreign oil firms soon pulled tens of thousands of workers out of Saudi
> Arabia. Suddenly lacking technical expertise, Saudi facilities could no
> longer play their decades-long role of guaranteed "swing" provider of
> oil in
> response to disruptions elsewhere. As the global recession deepened,
> there
> was no "central banker" of oil to smooth out temporary dislocations.
>
> The participants concluded almost unanimously that they must press the
> president to invest quickly in promising technologies to reduce
> dependence
> on overseas oil, such as hybrid cars powered by gasoline and plug-in
> electricity; and cars that run on fuels derived from prairie grasses,
> animal
> waste and other products. They all agreed these projects would take
> years to
> yield any benefit but should not wait for the kind of crisis they were
> dramatizing.
>
> "If you want to put a frown on the face of [Saudi] Wahhabis, talk about
> 100-mile-per-gallon vehicles," Woolsey said. "We don't need a Manhattan
> Project to do it."
>
>