Center for a New American Security: More Palliatives from Policy Wonks

A friend at the Pentagon recently sent me a copy of this article from Jim Thomas of the Center for a New American Security entitled "Sustainable Security: Developing a Security Strategy for the Long Haul." CNAS seems to be something of a democratic alternative to PNAC (Project for the New American Century--the incubator for "NeoCon" thinkers in the Bush administration). Its approach, while somewhat different from PNAC (well, radically different if you only consider the highly constrained spectrum of "conventional" options), is equally, disappointingly misguided. Thomas's policy proposals in "Sustainable Security" are particularly misguided. He essentially suggests that we pour more concrete on the Maginot line, and his "solutions" are equally "sustainable." Saddly, CNAS is likely to play a role in any upcoming democratic administration similar to that of PNAC from 2000-2008 (here's Hillary Clinton speaking along these same lines while giving a keynote address at a PNAS event).

First, Thomas fails completely to understand the constitutional basis of our Nation-State system, and why it is breaking down: increasing discontinuity between a State and its constituent Nation, and the simultaneously increasing failure of the Nation to justify the Nation-State order by actually ensuring the ongoing welfare of its component Nation. The Author clearly hasn't read (or absorbed) Phillip Bobbitt, who's "Shield of Achilles" is the seminal work in this area. Then, the author proposes to solve a problem the genesis of which he fails to comprehend. That's a tall order...

2. After assuming that A) the viability of the Nation-State system is a prerequisite to our security, and B) we can prevent its decline without addressing the increasing discontinuity between State and Nation (both inaccurate assumptions, in my opinion), the author proceeds to offer a number of palliatives about how we can shore up that system and create effective partners for cooperative action through simple (to articulate, not necessarily to implement) policy means. And they'll greet us with flowers on the streets of Baghdad--this has failure written all over it.

The mess in Iraq is a classic example of how the post-Colonial Nation-State fiction rests on a fundamentally rocky (and worsening) foundation (there, when the French and British draw nice lines in the sand pursuant to the Sykes-Picot accord and then assume that this haphazard jumble of disparate national groups can form the "Nation" to underly a "Nation-State"). One maxim: a suggested solution that clearly demonstrates a lack of comprehension of the cause of the problem is highly unlikely to be successful.

Of course, it wouldn't do for me to simply critique another's solution without offering one of my own. Here's a link to my paper, "The New Map: Terrorism and the Decline of the Nation-State in a Post-Cartesian World" (also now available in German). I presented it at the 2006 Yale Journal of International Law symposium, and developed it further with feedback from Ved Nanda (of the Nanda Center for International Law). It discusses the genesis of the declining Nation-State system, the forces that are currently exacerbating that trend, how the Nation-State system is not our end goal per se but rather an outdated means to achieve our end goals, and how, in light of the inevitability of its decline, our policy position should be to support the development of an alternative paradigm to the Nation-State system (among the many alternatives currently in competition) the supports our end goals. Specifically, develop networked nodes of localized self-reliance. Radical solution, I know, but interestingly another theorist out of USAFA, John Robb, has recently shifted to saying much of these same things in his new "resilient community" set of briefs and is grabbing the ear of many Pentagon insiders. I think that the institutional inertia is, frankly, too great to adapt such a radical (but I think fundamentally necessary) change, and that current leadership would rather take the safe route of pedaling just another set of palliatives as if it were substantive policy change, but maybe I'm wrong...

...either way, you heard it here first: Judging by the buzz inside the Pentagon and the list of email addresses that are enthusiastically forwarding this article to friends (note: my source was not among the enthusiasts), CNAS is an acronym that we will hear much more of, especially when it is time to for the party out of power to start apportioning blame for our next round of failed energy/security policy.

Interesting Times for Saudi Oil Production

Two interesting developments in Saudi Arabia this week. First, sources tell us that their oil production has decreased from9.2 million barrels per day to 9.0 million barrels per day. Second, and more interesting, the Saudi king is now publicly stating that they are delaying the development of some new oil finds because "our children need it."

While this may seem fairly innocuous, a bit of analysis leads to some very interesting possible motivations.

Let's look first at the decrease in oil production. A 200,000 bpd decline is pretty significant. The source quoted by Gulf Daily News claims that this decline in production "reflects the demand from our customers." Well, maybe at $110/barrel. But compare this to President Bush's recent request to the Saudi king to ease prices by increasing demand. It's a bit disingenuous to say that you're pumping 200k bpd less because that reflects demand at $110+/barrel, when putting an additional 200k barrels on the market each day would invariably decrease prices and increase that demand. If they offered those 200k barrels each day at $80/barrel, I'm pretty sure there would be buyers! So it seems apparent, at least to me, that IF the Saudis are voluntarily cutting back production, it is because they want to increase prices, or at least they want to keep prices at present levels, not because they can't find buyers.

This begs the question, of course, of whether this cut-back in production is voluntary. Consider the interesting timing with the claimed start of production from their Khursaniyah field. Saudi Arabia claims that production from that field will reach 300k barrels per day within a month, and eventually 500k barrels per day. In combination with the planned addition of an additional 250k bpd from Shaybah field set to come online later this year, the timing of the current production decline is odd. Some possibilities:

1. They're shutting in more expensive production (e.g. very high and increasing water cut) to make way for Khursaniyah without driving down oil prices.
2. They're shutting in quickly depleting fields, or fields at risk of advancing water flood stranding oil pockets, in favor of the more technically sound Khursaniyah and Shaybah.
3. The timing of Khursaniyah is a ploy--the field has "been coming on line soon" for years now, yet hasn't produced any significant oil to date, and this latest round of Khursaniyah press releases provides cover for them to either a) cut production to continue to increase oil prices, or b) cover the decline from aging fields (as in "we still have 2mbpd of spare production potential, but we didn't anticipate this latest round of Khursaniyah delays, so we're temporarily behind...").

We simply don't know which--if any--of these motivations led to the cut of 200k bpd of production.

Now consider the statement by the Saudi king that they are also intentionally holding back on the development of new oil production capacity. No details are provided about which fields, which discoveries have been mothballed to provide for posterity. Instead, it sounds to me like a PR move to explain why they can't ramp up production right now to bring down oil prices, despite their claim that they have plenty of spare production capacity. It's one thing to ask them to put on line more production to ease oil prices and help America out of economic troubles. It's an entirely less reasonable request to ask them to sacrifice their children's future to help us now! More troubling, to me, is that this is exactly the kind of PR move that would also precede a voluntary reduction intended to maximize near-term revenue, or to conceal the near-term onset of oil production declines. After all, if the Saudi king really cared so much about posterity, he would be well advised to reduce current spectacular levels of conspicuous consumption by the royalty and consider addressing the kingdom's population explosion that is creating a demographic tidal wave that will soon overwhelm their economy--even IF oil production remains steady.

The revenue curve for oil production for a producer like Saudi Arabia is an unusual animal. Because of the current tight global markets, and the high inelasticity of demand for oil, cutting production probably increases prices enough to maintain stable total revenue. There is probably some sweet spot where a cut in production will actually increase revenue. Either way, these are certainly interesting times for Saudi oil production. We simply don't have enough reliable information to know whether this is the onset of irreversible oil production declines, whether this is a new phase of self-interested revenue maximization, whether this is a natural part of the transition from aging fields to new production coming on line, or some combination. Maybe we will get sufficient information in the next few months to better understand where Saudi production is going. The greatest problem is that the Saudis have no motivation to be forthright with their disclosures, and attempts (like this one) to read between the lines will almost invariably result in the conclusions that "it's some combination of factors." Most likely we won't have a definitive answer until it is provided by a clear historical record. The problem with this is that it will be much more difficult to sell the necessary economic adaptations necessary to compensate for a significant decline in Saudi production AFTER that decline has already happened. The Saudis are possibly the only people who could, with a unified shift in policy, quickly convince the majority of skeptics that the world is facing an ongoing 5%-10% annual decline in oil production beginning very soon. They also appear to be one of the last groups that will come out and say this...

Peak "Surge Success"

NOTE: Early post this week as I'll be traveling for the next few days. Next post will be Monday, April 7th.

The much hailed success of the “Surge” of American forces in Iraq, led by Gen. David Petraeus, is beginning to fall apart. It’s important to understand why it worked (temporarily), why it’s falling apart now, why this will be a gradual disintegration, and why this was inevitable all along.

The surge provided impressive initial results. Why? While many cite the shiny new & improved counterinsurgency approach implemented by Gen. Petraeus, which did manage to seize upon a period where Shi’a groups were temporarily electing cease fire over insurrection for reasons discussed below, there is a potentially more significant trend behind the (until recently) reduction in violence. What has often been termed the “Sunni Awakening,” where Sunni insurgents miraculously decided that violence is counter-productive and that they should join with the Americans and fight al-Qa’ida, is probably more accurately understood as the “short-sighted Sunni pay-off.” The Americans, acting both independently and through the Iraqi government, leveraged Sunni tribal leaders, provincial officials, and existing militia leaders by offering them a deal they couldn’t refuse: stop fighting us, put up at least a convincing guise of “fighting al-Qa’ida,” and we’ll pay you huge sums of money, arm you, and give you legitimacy. This worked great, especially considering that the Shi’a militas that had been conducting what was essentially ethnic cleansing against Sunni neighborhoods had either 1) finished successfully, or 2) declared self-imposed cease fires to improve their political position within the Shi’a political block. Absent the ongoing catalyst for tit-for-tat sectarian attacks, the Sunni seized upon a huge opportunity. Seizing upon America’s inability to sacrifice without payoff for more than two to four years (as driven by domestic political cycles), the Sunnis knew that they could use America’s desire for some kind of positive news about Iraq now to arm and prepare themselves for the inevitable conflict with the Shi’a down the road. As long as the sectarian violence remains in the background, the Sunnis will continue to take all the arms and funding they can get, and are happy to temporarily refrain from violence against Americans in the mean time. This is, of course, a generalization, as many Sunni groups, to include al-Qa’ida in Iraq, haven’t bought into this program, but to the extend that the Surge has produced results, this has been the main drive.

The success of the surge is falling apart now, in part, because Moqtada al-Sadr is seizing a political opportunity presented by the weakened Prime Minister Maliki. Maliki is either greedy or simply short-sighted in his quest to please his imperial overlords, hoping to show that his government was capable of taking charge of its own security just in time for the Petraeus report to the US Congress. Sadr’s Mahdi Army recently extended its self-imposed cease fire, but thanks to Maliki’s misstep can now claim more legitimate self-defense. So Sadr is using this opportunity to “justly” demonstrate his capability to drag Iraq into chaos and quite possibly remove Maliki from power by resisting the government from Baghdad south to Basra.

What is Sadr’s plan? I haven’t spoken to the man recently, but my guess is that he plans to demonstrate his ability to destroy the semblance of order recently prevailing in Iraq, and then just as quickly to demonstrate his ability to restore that order. This serves twin purposes. First, it allows Petraeus to testify to Congress that the surge continues to work without getting laughed out of the room. This ensures the ongoing reduction in American forces, which continues to increase Sadr’s relative strength and freedom of operation. Second, and most important, it creates a very powerful negotiating platform for Sadr. The Maliki government is holding on by a string as it is, and will not be completely dependent on Sadr not exercising his demonstrated capability to bring it down. This fits with Sadr’s past behavior—he is a politician, not a warrior, at heart, and uses his military force to expressly political ends. He has learned from his mistakes in the past where he pressed for pitched battles with superior forces that he could not win. This time he is walking away from a prolonged fight he quite possibly could win in Basra and the South because he realizes that the viable threat of re-starting that battle at any time has more political weight than actual victory in that battle.

What does Sadr hope to achieve with this political maneuvering? There are many possibilities, but I think that he wants to keep the central government weak, teetering on the brink of collapse, dependent on him for support, until he can get his plan for Southern Iraq through the assembly: create one “super federation” of southern Shi’a provinces rather than the alternate plan of creating several individual Shi’a federations, each comprising only one or two provinces. This is critical for two reasons: 1) while Sadr relies on Iran for support, he needs a single Shi’a federation of sufficient size to effectively stand up to Iran, as well as to effectively stand up to the remnant central government in Baghdad. It’s easy to play divide and conquer against many smaller southern federations, and it also enhances the relative position of the central government. 2) Sadr needs to unify Iraq’s southern oil infrastructure inside a single federated region to bring it truly under the control of that region, otherwise the central government will retain effective control of export revenues by virtue of being the intermediary in balancing the separable interests of the various southern federations through which the oil must run. It’s worth noting here that Sadr will gain significant support for this approach to a de-facto oil law from the Kurds, who have already formed just such a super-federation of provinces for the purpose of unifying control of the northern oil resources, and will support any plan that validates their hold rather than supports the central government’s claims. With Sadr in a position of power in the current central government (where he will likely accept a “Sunni awakening” style “fund and legitimize my militias in exchange for peace” deal of his own design), and in a future position of power in the southern super federation, Sadr’s Mahdi Militia will gain the same funding and legitimization of the Kurdish Peshmerga, and with it the ability to forcibly control the southern super-federation and its oil revenue.

If this strategy is what Sadr has in mind, then it makes sense to me to demonstrate (at least to internal audiences) that he can cause great chaos in the South, but then to quickly call a cease fire and cash in his political capital. It makes sense to me to push this cease fire a few days past Maliki’s Saturday (March 29, 2008) deadline to clarify who is in charge, but probably not to wait far into April before ending the uprising.

All of which brings me to why the surge was doomed to failure in the first place. While Petraeus’s updated counterinsurgency strategy was elegant and interesting, it never stood a chance because it does not address (or comprehend) the foundational problem of mutually exclusive overlap. I’ve been writing about this since immediately after I returned home from the Persian Gulf in 2004 as it creates the post-colonial terrain upon which everything else in Iraq must be surveyed. Mutually exclusive overlap is the result of the ebb and flow of empire over time, and must be seen as a four-dimensional problem. Since the Sykes-Picot Accord of 1918 arbitrarily drew lines in the Middle-Eastern sand and created notional “Nation-States” where none had been before, colonial powers (as well as those later powers practicing economic colonialism) have pitted one ethnic group against another to most effectively control their far-flung empires. This is what I call the “exploitation model,” and typically involves empowering a minority group to rule a territory with the implicit understanding that the minority group must act according to the will of the colonial power or be abandoned to the mercy (or lack thereof) of the majority. In Iraq, this took the form of long-standing British and then American support for a Sunni minority government in a Shi’a majority territory. The problem of mutually exclusive overlap arises with the development of Iraq’s vast oil potential. The Sunni majority enjoyed several decades of wealth and prosperity, subsidized entirely by their disproportionate share of oil export revenue. Now that the Shi’a are in power, they expect at a minimum a proportionate share of Iraq’s oil revenue (60%), which is virtually all of Iraq’s southern oil production as the Kurds have geographic and de-facto control over Iraq’s northern oil reserves which make up about a third of Iraq’s pre-war oil production potential. So this creates a situation where the Sunni society, economy, and psyche in Iraq is predicated on the subsidy of more than half of Iraq’s oil production, because they have enjoyed exactly this for decades. Likewise, the newly empowered Shi’a have an expectation of more than half of oil production. For both groups this is a non-negotiable minimum, and they will fight for what they consider their birthright. Unfortunately, this represents mutually exclusive overlap—with both groups expecting, at a minimum, essentially all the oil production available outside the Kurdish zone, they cannot both be satisfied. This cannot be solved by increasing Iraq’s oil production because the expectations are proportional, not empirical, and will only suffice to provide a relative advantage, not actual wealth, even if Iraq’s production were to reach 8 million barrels per day (a wildly optimistic figure four time current production) due to their growing population and dire economic problems. There is no nice way to put it: this problem will not be solved, and will result in conflict—the only question is when.

The Petraeus surge worked, either through happenstance or devious planning, by scheduling simultaneously the period when the Sunni factions realized they should pause and take advantage of an American-provided opportunity to re-arm for this coming conflict, and the time when the Shi’a factions realized they should pause to consolidate for the same. The surge is now disintegrating because the value to both sides of further “strategic pause” is winding down. Moqtada al-Sadr’s maneuvering in the South, combined with a gradual increase in Sunni violence around Baghdad, signal the transition to the next phase. This next phase may be remarkably contained, or it may bring Saudi Arabia and Iran into much more direct involvement. What is relatively certain is that neither 45,000 nor 145,000 American troops on the ground will be able to keep the peace. We entered this conflict with an almost awe-inspiring naïveté, and I have little confidence that we’ll figure out how to exit any more gracefully.

Further Reading: See John Robb's post on Moqtada al-Sadr's strategy in Iraq HERE. Also see my suggestion for solving Iraq's problem with mutually exclusive overlap (yes, gardening *is* the solution...)

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The Iranian Gambit Opening

Chess analogies are overdone, but chess is a good way to explain the narrative fallacy--the tendency of humans to be able to explain things in hindsight much better than understand them as they unfold. So I'll explain in hindsight how two current events led to our bombing Iran:

Trying to invade and hold Iran is a fool's errand. OK, so was bombing Iran, but it seems that the we didn't understand that at the time. Rather, we opted for a strategy of bombing key sites, and holding and occupying a few other key areas (Khuzestan, Bandar-e-Abbas, etc.), without attempting to occupy the entire country. In order to do that, we needed to address a force problem: all of our ground forces were tied up on the ground in Iraq. Specifically, the US Marines, the force most capable of larger expeditionary actions, was spread thin in a counter insurgency and peacekeeping role. We needed to make a significant chunk of Marine Corps manpower available for use against Iran. The problem was that the American people (before that rather effective PR blitz and those statements by Hillary) were quite opposed to attacking Iran. We couldn't just pull back an entire expeditionary force into a staging area in some Gulf Emirate airbase without raising several red flags. And anything originating out of the Vice President's office would look suspect, as well. BUT, if we got the Commandant of the Marine Corps to say that the Marines are meant to operate in an expeditionary role, and that they should leave Iraq and go to Afghanistan, that would have exactly the same effect, but seem quite legitimate. Suddenly, the Marines would be nicely staged for aerial redeployment within theater when they would be unexpectedly re-tasked (from their trans-shipment point conveniently near Bandar-e-Abbas) before they were actually spread thin on the ground in Afghanistan. It's easy to explain these kind of set-up moves on the chess board eight moves later, but understanding how today's move is intended to set up an attack eight moves down the road is much more difficult.

Of course, we needed more than just ready-to-deploy Marines. There was that sticky issue of American public opinion that was, at the time, against attacking Iran. Discussions of their nuclear ambitions were too speculative after the WMD debacle, we needed something more tangible. We had been issuing press releases to everyone who would listen that Iran was supplying the weaponry used by Shi'a insurgents against our forces in Iraq for months, but it really hadn't galvanized American behind attacking Iran. However, sometimes your enemy is your friend. The insurgency in Iraq had been operating under a model of open-source innovation for quite some time. They had tried many indirect fire attacks against US bases with mortars and rockets, and on occasion had minor success. It was natural to expect them to learn and improve over time. But this time, their tactical improvements (combined with a re-entry of certain Shi'a militias into a more active role) allowed us to point the finger at Iran. Beginning with the relatively minor but accurate attack on Camp Victory that killed 2 and injured 40, and escalating into the string of more deadly attacks that followed, we were able to spin this increase in accuracy to point the finger not at the expected improvements of an open-source enemy, but as a result of training and improved guidance systems and munitions provided directly by Iran. It was surprising, even to the most cynical among us, how quickly the American people rallied around the flag.

The rest, as the saying goes, is history...

Mexico Collapse?

My article on the Decline of the Mexican Nation-State is now up at The Oil Drum. This comes, as promised, as an update to my New Years prediction that 2007 would see the collapse of the Mexican economy. This article comes on the heels of a very significant--and largely ignored by the MSM--event: a string of rebel attacks on oil infrastructure in Mexico. Significantly, these attacks shut down production at several "just-in-time" production facilities of major international companies such as Honda, Kellogg's, Hershey's, and Nissan. It is not yet clear whether this was the goal of a highly advanced, effects-based targeting plan by these guerrillas, or just luck on their part. However, as the effects from these shut-downs ripple through the logistics chains of these multinationals, the ultimate economic impact of this attack will likely be enormous. The greatest danger is that the rebel group's own evaluation of this new targeting focus drives them to continue a campaign of attacks against oil infrastructure--the significant, if partially unintended, impact of these first attacks will strongly support exactly that conclusion.

The discussion on my article at The Oil Drum is already proving quite interesting, with some particularly important graphs courtesy of Khebab:





From the looks of things, unless something miraculous happens with production out of Chincopec and Ku-Maloob-Zaap fields in the next two years to offset decline in Cantarell, the situation is about to get much worse...

Geopolitical Vocabulary: Cabinda

Energy Intelligence Note: 12 May, 2007

A recent trend at Energy Intelligence has been assessing the geopolitical impacts of Peak Oil. While it is easy to discern these impacts today in places like Nigeria and Iraq, it may not be long before we must add a new term to our collective geopolitical vocabulary: Cabinda.

Cabinda is a small ethnic exclave of Angola. It is where most of Angola's oil is produced, and where most of Angola's future production increases will come from. It is also the only Angolan province with an active insurgency and independence movement. In my opinion, Cabinda--and Angola's oil production along with it--may be the next geopolitical casualty of Peak Oil. There haven't been any attacks on the oil infrastructure yet (unless Thursday's "suspicious fire" at a Total platform in next-door Congo turns out to be the first such incident), but the situation is the perfect tinder-box.

For more information on Cabinda, and on the potential for an "Oil Insurgency," see my article in today's Oil Drum: Cabinda: Prospects for an Oil Insurgency in the Angolan Exclave.

Five Geopolitical Feedback-Loops in Peak Oil

Energy Intelligence Note: April 23, 2007

It is quite common to hear “experts” explain that the current tight oil markets are due to “above-ground factors,” and not a result of a global peaking in oil production. It seems more likely that it is geological peaking that is driving the geopolitical events that constitute the most significant “above-ground factors” such as the chaos in Iraq and Nigeria, the nationalization in Venezuela and Bolivia, etc. Geological peaking spawns positive feedback loops within the geopolitical system. Critically, these loops are not separable from the geological events—they are part of the broader “system” of Peak Oil.

Existing peaking models are based on the logistics curves demonstrated by past peaking in individual fields or oil producing regions. Global peaking is an entirely different phenomenon—the geology behind the logistics curves is the same, but global peaking will create far greater geopolitical side-effects, even in regions with stable or rising oil production. As a result, these geopolitical side-effects of peaking global production will accelerate the rate of production decline, as well as increase the impact of that production decline by simultaneously increasing marginal demand pressures. The result: the right side of the global oil production curve will not look like the left…whatever logistics curve is fit to the left side of the curve (where historical production increased), actual declines in the future will be sharper than that curve would predict.

Here are five geopolitical processes, each a positive-feedback loop, and each an accelerant of declining oil production:

1. Return on Investment: Increased scarcity of energy, as well as increased prices, increase the return on investment for attacks that target energy infrastructure. Whether the actor is an ideologically driven group (al-Qa’ida), or a privateer (youth gangs in the Niger Delta), the geologically-driven declines increase the ROI for attacks on energy, which will drive both decisions to act, as well as targeting decisions for that action. This is a positive feedback-loop because attacks on energy infrastructure and supply drive up the price, which further increases the ROI for such attacks. John Robb's analysis of the September attacks on Mexican oil and natural gas pipelines suggest an ROI as high as 1.4 million percent.

2. Mercantilism: To avoid the dawning “bidding cycles” between crude oil price increases and demand destruction, Nation-States are increasingly returning to a mercantilist paradigm on energy. This is the attitude of “there isn’t enough of it to go around, and we can’t afford to pay the market price, so we need to lock up our own supply.” Whether it’s the direction of a pipeline flow out of Central Asia, defending only specified sea lanes, or influencing an occupied nation’s laws on Production Sharing Agreements, there are signs of a “new energy mercantilism” all around us. This is a positive feedback-loop because, like an iterated “prisoner’s dilemma” game, once one power adopts or intensifies a mercantilist attitude all others must follow suit or lose energy share. It will act to accelerate oil production declines because mercantilism prevents the most economically efficient production of a resource, accelerating the underlying problem of diminishing marginal returns. The rise of mercantilism is highlighted by the recent coverage of the race to control the Arctic, and its potentially vast hydrocarbon reserves.

3. “Export-Land” Model: Jeffrey Brown, a commentator at The Oil Drum, has proposed a geopolitical feedback loop that he calls the “export-land” model. In a regime of high or rising prices, a state’s existing oil exports brings in great revenues, which trickles into the state’s economy, and leads to increasing domestic oil consumption. This is exactly what is happening in most oil exporting states. The result, however, is that growth in domestic consumption reduces oil available for export. In states, such as Mexico, where oil production is also in decline, the “export-land” model predicts that oil exports will decline much faster than oil production—and this is exactly what is happening, with the latest PEMEX report showing 5% production decline year-on-year, but 11% export decline. Ultimately, the effects of the “export-land” model itself suffers from diminishing marginal returns—when exports shrink sufficiently, the oil-export revenue per capita will actually begin to decline (eventually reaching zero, no matter how fast prices rise), at which time the force behind rising domestic consumption will be eliminated. The likely unwillingness of governments to allow their valued oil export revenues to be totally consumed by rising domestic consumption will create pressure for domestic rationing, price-hikes, or uneven distribution of oil and gas domestically. We are already seeing this as many oil exporting countries are scaling back the subsidized pricing of domestic gasoline. The inequalities that will arise out of domestic rationing will act as a catalyst and accelerant to the last two feedback loops...

4. Nationalism: Because our Westphalian system is fundamentally broken, the territories of nations and states are rarely contiguous. As a result, it is often the case that a nation is cut out of the benefits from its host state’s oil exports. This will be especially apparent when the “export-land” effect reduces the total size of the pie to be divided, or as domestic rationing is introduced to maintain export revenues. As a result, nations or sectarian groups within states will increasingly agitate for a larger share of the pie. We see this already within Iraq, Iran (Khuzestan), Nigeria (Delta State), Bolivia (indigenous groups), etc. This process will develop local variants on the tactics of infrastructure disruption, as well as desensitize energy firms to ever greater rents for the security of their facilities and personnel—both of which will drive the next loop…

5. Privateering: Nationalist insurgencies and economies ruined by the downslide of the “export-land” effect will leave huge populations with no conventional economic prospects. High oil prices, and the willingness to make high protection payments, will drive those people to become energy privateers. We are seeing exactly this effect in Nigeria, where a substantial portion of the infrastructure disruption is no longer carried out by politically-motivated insurgents, but by profit-motivated gangs. This is the ultimate positive feedback-loop: infrastructure disruption further degrades any remnants of a legitimate economy, increasing the incentive to engage in energy Privateering, and compensating for any diminishing marginal returns in Privateering caused by enhanced security or competition from other privateers.

We may see some or all of these effects in any given area, and are already seeing this in some trouble spots. Some states, like Iraq, have been thrown into full-fledged “Nationalism” and “Privateering”-driven geopolitical disruption by the actions of an outside power—in this case, the US invasion was itself largely the byproduct of a shift towards energy mercantilism. This is just one illustration of the synergistic interrelationship among these feedback loops. The important take-aways are these:

1. So-called “above-ground factors” are driven by the geological reality

2. These geopolitical processes are positive feedback-loops

3. They will accelerate the decline in global oil production beyond that predicted by models derived from logistics curves.

Geologically driven decline follows a classic logistics curve, with a "long tail" of declining production continuing indefinitely. Geopolitical positive feedback-loops not only have the potential to accellerate that rate of decline, but can potentially drive it to zero in short order. Oil production requires certain threshold levels of economic functioning, security, and rule of law to proceed. These positive feedback-loops have the potential to cut off the "long tail" of declining production abruptly. It practically dogma in peak oil circles that peak oil doesn't mean the end of oil production, just the beginning of inexorable declines. In light of the potential impact of geopolitical feedback-loops, it may be time to reassess that idea, at least on a regional basis.