The theory of Peak Oil is named after the findings of the late Shell Oil geologist Dr. M. King Hubbard, where he discovered that the production of individual oil wells, fields and entire countries follow a bell-shaped curve, which eventually peaks, then enters a permanent decline, until the remaining oil is no longer cost-effective to recover (Savinar). However, the investment being made in developing Russian Siberia and the Athabasca tar sands of Canada seem to indicate that the current price per barrel of oil is making these expenditures profitable.

For instance, US petroleum reserve discoveries peaked in the early 1930’s; with the actual production peak having occurred in 1971 (This includes the production resulting from the North Slope of Alaska coming on-line. The US now produces approximately what it once produced in 1940. Any reference to American energy independence is therefore a myth). Global petroleum reserve discoveries peaked in the early 1960’s, with global peak production predicted by most estimates to occur around 2010, assuming the current global production of roughly 85 million barrels per day does not represent the actual peak in global petroleum production (the oil financier T. Boone Pickens has publicly stated that global production will never exceed this number) (Savinar).

The implications of declining petroleum production in a world of ever-growing demand is staggering when one considers that since being removed from the gold standard in 1972, the US Dollar’s value is now only relative to the price per barrel of oil, due to an arrangement between the US and OPEC, dictating that oil can only be purchased by countries paying in US Dollars, in return for military protection of the Persian Gulf states (Stewart).

Declining petroleum production would also affect all food production and the cost of all synthetic materials used on the planet. The entire scope of economic and sociological implications for modern human civilization are too numerous to include in this paper (Savinar).

The modern Intelligence Community’s relationship with the oil industry began with Iran in 1953. Operation Ajax was the covert operation by Great Britain and the United States to remove the democratically elected Iranian Prime Minister Mohammed Mossadeq from power. The idea of overthrowing Mossadeq was originally conceived by the British. They had asked President Truman for assistance, which he refused. When Eisenhower became president in 1953, the British proposed the idea once again, and this time, the Americans agreed to help. The reason for the intervention included Mossadeq’s socialist political views and his nationalization without compensation, of the oil industry which was previously operated by the Anglo-Iranian Oil Company (now British Petroleum). One particular point was the refusal of the Anglo-Iranian Oil Company to allow an audit of the accounts to determine whether the Iranian government received the royalties it was due.

Apart from interfering with sovereign democracies over oil, in January, 2001 in response to a Freedom of Information Act (FOIA) request, a declassified CIA document has cast a new light on some of the most significant geopolitical events of the past quarter century. This document, an Intelligence Memorandum titled The Impending Soviet Oil Crisis (ER 77-10147) was issued in March, 1977 by the Office of Economic Research and classified SECRET until its public release. Until the more recent concerns over global oil depletion, this document has prompted little discussion (Heinberg).

The memorandum predicts an impending peak in Soviet oil production "not later than the early 1980s" (the actual peak occurred in 1987 at 12.6 Mb/d (million barrels per day), following a preliminary peak in 1983 of 12.5 Mb/d). "During the next decade," the unnamed authors of the document conclude, "the USSR may well find itself not only unable to supply oil to Eastern Europe and the West on the present scale, but also having to compete for OPEC oil for its own use." The memorandum predicts that the oil peak will have important economic impacts: "When oil production stops growing, and perhaps even before, profound repercussions will be felt on the domestic economy of the USSR and on its international economic relations." (Heinberg)

The American oil peak signaled the end of an era. From that point on, the US would become increasingly dependent on imports, and this dependence would entail serious costs. The Arab OPEC oil embargo of 1973 had sent the US economy into a tailspin. Clearly, CIA analysts in 1977 understood the importance of the American oil peak and believed that a peak of petroleum production in the USSR would have similar or even graver consequences for that nation.

What is not clear is what was done with the information. Soon after assuming office in 1981, the Reagan Administration abandoned the established policy of pursuing détente with the Soviet Union and instead instituted a massive arms buildup; it also fomented proxy wars in areas of Soviet influence, while denying the Soviets desperately needed oil equipment and technology. Then, in the mid-1980s, Washington persuaded Saudi Arabia to flood the world market with cheap oil. Throughout the last decade of its existence, the USSR pumped and sold its oil at the maximum possible rate in order to earn foreign exchange income with which to keep up in the arms race and prosecute its war in Afghanistan. Yet with markets awash with cheap Saudi oil, the Soviets were earning less even as they pumped more. Two years after their oil production peaked, the economy of the USSR crumbled and its government collapsed (Heinberg).

The 1977 CIA document shows clear and detailed awareness of oil issues, including depletion, extraction technologies, pipelines, areas of likely new discovery, the quality of existing reserves, and the dynamics of the global oil market. The CIA has obviously been studying oil very carefully for some time and must therefore understand the issue of global oil peak (Heinberg).

The US Department of Energy has its own Office of Intelligence, which contains an Energy Assessments Division. This division actually focuses on international developments that could affect the overall US energy posture and the Strategic Petroleum Reserve, and is known to have conducted studies of Russia (Richelson). Was the CIA report in any way shared with the US Department of Energy? It would be logical to assume that the Energy Assessments Division would have been very interested in that report.

In 2004, The US Department of Energy was concerned about the possibility of declining oil supplies. The Hirsch Report was a report done for the US Department of Energy and published in February 2005. It discussed the likelihood of peak oil occurring and how soon we need to take mitigating action. It was prepared by Robert Hirsch, a senior energy program adviser for Science Applications International Corporation.

Science Applications International Corporation (SAIC) is the largest employee-owned research and engineering firm in the United States. As of 2006, SAIC employed over 43,000 employees and reported $7.8 billion in revenue, making it number 285 on the Fortune 500 list (Williams). Although SAIC is a large technology firm with numerous federal, state, and private sector clients, its traditional expertise has been supporting the United States Department of Defense and the Intelligence Community, including the National Security Agency. In fiscal year 2003, SAIC did over $2.6 billion in business with the United States Department of Defense, making it the ninth largest defense contractor in the United States.

As for the Hirsch Report itself, its main conclusions were the following:

1. World Oil Peaking is Going to Happen.
2. Oil Peaking Could Cost the U.S. Economy Dearly.
3. Oil Peaking Presents a Unique Challenge (“it will be abrupt and revolutionary”).
4. The Problem is Liquid Fuels (growth in demand mainly from the transportation sector).
5. Mitigation Efforts Will Require Substantial Time.

1. 20 years is required to transition without substantial impacts.

2. A 10 year rush transition with moderate impacts is possible with extraordinary efforts from governments, industry, and consumers.

3. Late initiation of mitigation may result in severe consequences.

These Governmental concerns over energy have manifested themselves with regards to the invasion of Iraq. The Bush administration apparently made plans for war and for Iraq's oil before the 9/11 attacks, sparking a policy battle between neo-cons and “Big Oil”, BBC's Newsnight has revealed. According to a March 2005 article by Greg Palast, there were two conflicting plans, setting off a hidden policy war between neo-conservatives at the Pentagon and a combination of "Big Oil" executives and US State Department "pragmatists". According to the article, "Big Oil" appears to have won. Insiders told Palast that planning began "within weeks" of Bush's first taking office in 2001, long before the September 11th attack on the US.

An Iraqi-born oil industry consultant, Falah Aljibury, claims he took part in the secret meetings in California, Washington and the Middle East. He described a State Department plan for a forced coup d'etat. Aljibury claims that he had interviewed potential successors to Saddam Hussein on behalf of the Bush administration.

The industry-favored plan was pushed aside by a secret plan, drafted just before the invasion in 2003. This plan called for the sell-off of all of Iraq's oil fields. The new plan was crafted by neo-conservatives intent on using Iraq's oil to destroy the OPEC cartel through massive increases in production above OPEC quotas. The sell-off was given the green light in a secret meeting in London headed by Fadhil Chalabi shortly after the US entered Baghdad, according to Robert Ebel, a former Energy and CIA oil analyst (Palast). Iraq’s proven oil reserves, third only to Saudi Arabia and Iran and just as easily accessible geographically, would have made this very possible.

Robert Ebel is currently a fellow at the Center for Strategic and International Studies in Washington. Ebel told the BBC he flew to the London meeting at the request of the State Department (Palast).

Falah Aljibury, once Ronald Reagan's "back-channel" to Saddam, claims that plans to sell off Iraq's oil, pushed by the US-installed Governing Council in 2003, helped instigate the insurgency and attacks on US and British occupying forces. "Insurgents used this, saying, 'Look, you're losing your country, you're losing your resources to a bunch of wealthy billionaires who want to take you over and make your life miserable,'" said Aljibury from his home near San Francisco. "We saw an increase in the bombing of oil facilities and pipelines, built on the premise that privatization is coming (Palast)."

Philip Carroll, the former CEO of Shell Oil USA who took control of Iraq's oil production for the US Government a month after the invasion, stalled the sell-off scheme. According to Palast, Carroll told him he made it clear to Paul Bremer, the US occupation chief who arrived in Iraq in May 2003, that: "There was to be no privatization of Iraqi oil resources or facilities while I was involved (Palast)."

Ariel Cohen, of the neo-conservative Heritage Foundation, told Palast that an opportunity had been missed to privatize Iraq's oil fields. He advocated the plan as a means to help the US defeat OPEC, and said America should have gone ahead with what he called a "no-brainer" decision. Carroll responded, telling the BBC, "I would agree with that statement. To privatize would be a no-brainer. It would only be thought about by someone with no brain."

Plans obtained from the State Department by the BBC and Harper's Magazine under the US Freedom of Information Act, called for creation of a state-owned oil company favored by the US oil industry. It was completed in January 2004 under the guidance of Amy Jaffe of the James Baker Institute in Texas (Palast).

In Conclusion, the Intelligence Community has known for decades about current and potential declines in oil production around the world, and has informed US Presidents. The Carter Administration during the 1970’s was the most responsive to the threat of global oil depletion by setting standards for the US automotive industry, encouraging rationing, and even leading by example with placing solar panels on the roof of the White House. However, with oil production having come on-line in Alaska, the North Sea and other minor discoveries by the early 1980’s, the fears of an “Energy Crisis” subsided, as oil became much cheaper. Since then however, countries such as Indonesia have very recently gone from being oil exporters to net oil importers. Indonesia’s membership in OPEC is now in question.

The Intelligence Community will continue to provide intelligence exclusively in this area, as the global demand for relatively cheap oil (as in Iraq, minus the insurgency) is driving the foreign policy of the United States. What is not known is what currently classified recommendations are being made by the CIA to current presidential administrations. The author of this paper can only speculate on the predictive analysis that has been given to the Bush Administration. This could range from economic recommendations, to more invasions of other oil-rich countries, to martial law-type recommendations (i.e., “Homeland Security,” and the USAPATRIOT Act) for the US government, which could experience balkanization, or outright secession of individual states as a result of the socio-economic anarchy created by massive oil shocks (as the example of Russia illustrates), which would make the oil shocks of the 1970’s pale in comparison.

Works Cited

Central Intelligence Agency. The Impending Soviet Oil Crisis (ER 77-10147). 01 Mar. 1977. <http://www.foia.cia.gov <er 77-10147>>.

Heinberg, Richard. “Smoking Gun: The CIA's Interest in Peak Oil.” From the Wilderness Publications. 2004. <www.fromthewilderness.com>.

Hirsch, Robert L, Bezdek, Roger & Wendling, Robert. Peaking of World Oil Production: Impacts, Mitigation & Risk Management. Feb. 2005. <http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf.>

Palast, Greg. “Secret US Plans for Iraq's oil” BBC News. 17 Mar. 2005.

<http://news.bbc.co.uk/1/hi/programmes/newsnight/4354269.stm>

Richelson, Jeffery T. The U.S. Intelligence Community. 4th Ed. New York: Westview, 1999.

Savinar, Matthew. The Oil Age is Over: What to Expect as the World Runs Out of Cheap Oil 2005-2050. 20 August 2005. Life after the Oil Crash. <http://www.lifeaftertheoilcrash.net/Index.html>.

Stewart, William. “Understanding Your World: Oil, Iraq and the US.” The Santa Fe New Mexican. 20 August 2005. Global Policy Forum. <http://www.globalpolicy.org/security/oil/2002/ 0909oil.html>.

Williams, Bob. “Windfalls of War: Science Applications International Corp.” The Center for Public Integrity. 18 Dec. 2003. <http://www.publicintegrity.org/wow/bio.aspx?act=pro&ddlC=51>