Across the globe, oil and gas supply at risk

updated 2:00 p.m. ET May 5, 2006

VIENNA, Austria - Unrest in Africa. Mideast insurgency and terrorism. Iran’s nuclear brinkmanship. Russian pressure politics. South American resource nationalism.

Piece by piece, the global energy puzzle reveals a bleak horizon for a world frantically searching for secure oil and gas supplies.

Concerns over Iran — the world’s fourth-largest oil producer — have been the prime factor recently in driving crude prices to record levels and, combined with tight global refining capacity, for pushing U.S. gasoline pump prices above $3 a gallon in many places.

With the U.N. Security Council deadlocked and Tehran refusing to cease uranium enrichment, there is no end in sight to the struggle or the upward price spiral.

A barrel of crude was trading around $70 a barrel Friday. But Iranian officials this week predicted prices as high as $120 — a forecast some experts share.

“I don’t think that’s far-fetched, assuming that the crisis with Iran will escalate,” said Michael Klare, author of “Blood and Oil: The Dangers and Consequences of America’s Growing Petroleum Dependency.”

And there is also plenty of gloom elsewhere on the energy map.

Tensions across the globe
In Africa, violence roils Nigeria, Chad and Sudan. In the Middle East, there’s insurrection and terrorism in Iraq. Ethnic and geopolitical tensions persist in the Caspian Sea region. Russia’s government is using its energy clout for political ends. In Asia, conflicting claims to the energy-rich South China Sea are sharpening Sino-Japanese tensions. And energy nationalism by South American nations is spooking markets.

Unusually tough rhetoric reflects the rising frustrations. U.S. Vice President Dick Cheney accused Russia on Thursday of using its energy reserves as “tools of intimidation or blackmail” — some of the American administration’s harshest criticism of Moscow to date.

By even the most conservative estimate, more than a quarter of the 80 million barrels of oil pumped a day worldwide comes from regions or countries where security of supply is in some way at risk. The situation is even more dire for natural gas, with close to half of global supplies potentially affected.

With daily crude supply already barely keeping pace with demand — and producers stretched — any major disruption would send a shock ripple across the world. A decision by Iran alone to withhold its 2.5 million barrels a day earmarked for export would soon force consuming nations to dip into emergency stockpiles.

Daniel Yergin, head of Cambridge Energy Research Associates, told the U.S. House of Representatives Committee on Energy & Commerce on Thursday that the present oil market is “fueled by the threat of terrorism, instability in some exporting nations, a nationalist backlash, fears of a scramble for supplies, geopolitical rivalries, and countries’ fundamental need for energy to power their economic growth.”

It’s no wonder the race for secure energy has moved to the top of government agendas.

European leaders are pushing to reduce their gas dependency on Russia, while through their state-controlled companies, China and India are outbidding big commercial oil companies for drilling and exploration rights and cozying up to Iran. President Bush, meanwhile, made lessened reliance on foreign energy a cornerstone of his State of the Union speech in February.

Klare says success in securing energy supplies could be key to the survival of many regimes.

“I do think it could lead to the fall of governments and the rise of new governments,” he says. “It’s already shaking the foundation of the Bush administration.”

Concern over energy security appears here to stay.

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