Monday, August 4, 2008

Oil warfare

The only time in history where energy (oil or coal) was a strategic asset, or by cutting it off, a strategic liability, was near the end of World War II. The bombing of German refineries and the capture of key oil producing areas in 1944 significantly reduced German capacity to wage war effectively in 1945. The blockade of Japan in 1944 and 1945 through submarine and air warfare was almost complete. Just the lack of oil alone crippled Japanese efforts to wage war effectively in 1945. Mechanized warfare demands oil products like we need air to breathe.

Today, the most likely threat to the worlds supply of oil is in the Middle East. Either the destruction of the oil fields or a blocking of the straight of Hormuz would prevent a significant percentage of the world’s supply of oil from reaching the economies of the world. The effect would be a serious, if not a catastrophic blow to the world economies. However, unless this event was in the context of a large, regional war or of World War III, it is unlikely the effect would be long in duration.

In the event of a large war, or World War III, the blocking of oil shipments from the Middle East would trigger negative long-term economic effects. The demands for oil by the combatants would diminish the already limited supplies. If a major war were not occurring, the effect would be limited in nature.

The recovery from blocking of oil shipments would be more rapid than many believe. Unless a major war was going on, it is likely that the blockage would be removed within a short period of time. Also, the ability to shift production to meet demand in capitalist economies is much better than any other economic system. During World War II, Japan overran much of the world’s supply of rubber. The United States invented a synthetic rubber. Not that oil would be easily replaced, but without the severe demands placed upon the supplies by a major war, the economies of the world would be far better positioned to shift it’s reliance away from oil based products. Many alternatives are already available. It would not be pleasant, and it would be expensive in terms of standard of living, but the world would recover within relatively short period of time.

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