Global oil supply is severely disrupted by a crippling attack on a key Saudi oil processing facility. Crude oil prices spike to $160/barrel. Economic recovery efforts in the United States face severe setbacks as gas prices near $6/gallon and pressures to address the growing national debt continue to be heard from around the world. Shock and confusion consume global financial markets, and the threat of further attacks is looming.
How do the US government and global markets respond? One can only speculate. But at today’s National Summit on Energy Security in DC, industry leaders and former government officials weighed in, participating in a realistic, war-game simulation of the above scenario.
Titled Oil ShockWave, the intense simulation featured several high-level former cabinet members and energy industry leaders, including former national security advisor Stephen J. Hadley, former Director of National Intelligence John Negroponte, and former Shell Oil CEO John Hofmeister. Playing the parts of top current cabinet-members, the participants offered their opinions and debated as to the best course of action to take to best preserve both the nation’s security and its already-fragile economy. The simulation was complex and realistic, as even the participants were not briefed beforehand.
Needless to say, the event made for an exciting morning. Watching high-ranking officials skillfully respond in “real time” to a crisis of this magnitude was encouraging, while the shocking but realistic facts of the scenario provided a subtle reminder that there is only so much government can do when faced with a crisis of such magnitude.
But by far the most significant take-away from the morning was the brief but mortifying glimpse of the truly fragile place the United States occupies in regards to energy security.
According to the Securing America’s Future Energy (SAFE), the United States is the world’s largest oil consumer at 19.1 million barrels per day (compared to runner-up China’s 9.1 MBD). The US transportation sector alone consumes more than the total consumption of any other single country in the world, and total global consumption is only increasing as demand in emerging market economies is growing rapidly. Couple all of this with today’s oil price volatility and the fact that the United States imports about half of the oil it consumes, and the security of America’s energy future looks very grim indeed.