Current Events: Oil Price Yo-Yo now Walking the Dog

Once they have the basic down-then-up motion mastered, one of the very first tricks novice yo-yo practitioners attempt is called "Walking the Dog". This is where the down motion is followed by the yo-yo continuing to spin while staying down (called a "Sleeper") and is then allowed to roll across the floor a bit. With practice, a prolonged "walk" will end with a subtle wrist flick that sends the yo yo flying back up to return to the hand from which it came. Very predictable once you get the hang of it.

Translation: oil's at $59 a barrel tonight and showing no sign of returning to $100, let alone its recent high of $145 anytime soon. And attending the oil price fall, US gasoline prices have dropped for the 17th straight week and are now under $2 a gallon in some locations. In fact, it's not clear that the oil price yo-yo is even in "walk" phase yet.

At the same time, anemic US auto manufacturers are indicating that they're on the verge of collapsing if they don't get a Federal infusion pretty soon. They've already been lent billions to retool to build cars that get far better mileage. Left to their own devices, they weren't ready for this summer's price spike, and they're not ready for the economic downturn now. Lessons for those steering the US economy and industrial base are many, not the least of which is that in a peak oil climate, whatever the price of oil is today, that's what it's least likely to be tomorrow. Ditto for 1, 5, 10, 20 years down the road. Future DOD planning needs to take this volatility as a given and not let it get in the way of specifying systems that are far less impacted by this highly volatile commodity.

DNI Mike McConnell Sees Global Trouble Ahead ...

... and oil is right in the middle of it. Iraq and Afghanistan have been no walk in the park, and both will demand serious attention and consume substantial DOD resources for years. But if DNI is correct, things may only get busier for DOD in the coming two decades:

Territorial expansion and military rivalries are not likely, but cannot be ruled out, and the perception that oil is scarce could trigger conflicts between states.

I think he's being overly conservative using the term "the perception." In the 20th century we saw oil play a strategic role in economic and military success. In the 21st century there are already clear sigals that oil and gas price and availability are key leverage points for Russia and OPEC.  The pressure will come not just from the supply side, but from countries jockeying for what they see as their rightful part of the supply. As we move further into this century, McConnell sees that:

By 2025, China is likely to have the world's second largest economy and to have emerged as a major military power, the largest importer of natural resources and the largest contributor to world pollution.

It's all about energy security: the more we can move DOD and the rest of the economy off the oil standard, the less vulnerabile the US will be to the turmoil McConnell and many others see coming. Those working the problem today know it's a tough, tough problem. They need all the help we can give them.

Image courtesy of Wikimedia Commons

Russia and Venezuela Teaming on Weapons and Energy

There's no good news here, just bad and ugly. But it pays to know what's going on elsewhere in the world when pondering DOD's next energy steps. Recent reports are that Putin and Chavez are getting very cozy, and formulating agreements on oil for Gazprom in Venezuela and nuclear tech transfer too. For energy purposes only, of course. 

As with a previous post on Russian actions in Georgia, these moves not only affect DOD by potentially altering global energy markets, they also put Venezuela further in the crosshairs of DOD warfighting planners. Russia is pulling our strings because it knows US forces are spread mighty thin, and it's newfound oil and gas wealth is making it feel like a superpower again. This is getting pretty close to home.

Mandatory for DOD Energy Practicioners: Global Current Events

Thanks to Peak Oil and the jump global demand and the advent of the Russian-Chinese-Indian "strategic triangle," the price of oil and other energy resources is plenty volatile these days.  To mitigate the volatility somewhat, senior leaders and everyday managers need to arm themselves with as much relevent current energy affairs knowledge as possible. For those not already paying attention to the recent mini-war between Russia and Georgia, Business Week has a nice, brief primer on what Russia's been up to in the Caspian region, the effects of which ripple around the world to reach to us and our allies.  

If an until we achieve 100% independence from the rest of the world, the US has a huge strategic interest in what's going on in every oil rich region of the world.  For more info on the long history of US geopolitics and oil, Daniel Yergin's The Prize is essential reading.

Georgian - South Ossetian Fallout

The Telegraph article by Rafael Kandiyoti linked here begins:

There are increasing reports from Georgia that Russian troops are systematically destroying oil transportation links. If confirmed, the tales of destruction may provide the best evidence that they do indeed intend to withdraw. From the beginning, oil and gas transmission has been at the centre of this conflict.

Once again, military actions, which appear at first motivated by purely political concerns, reveal their true energy-based objectives. Europe is in greater peril from the current Georgian crisis, but all of this factors into DOD (and in this case, NATO) thinking about energy protection missions, as well as energy efficiency and alternative energy gains ... gains that will eventually reduce Russia's economic and political, if not military, clout. But don't hold your breath.

Map from CIA World Factbook