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By Robert Rapier on Oct 6, 2010 with 20 responses

Oil Infrastructure and Terrorism – Part II

Yesterday’s New York Times contained a story that depicts the vulnerability of the U.S. military’s fuel supply chain:

U.S. Military Orders Less Dependence on Fossil Fuels

In Iraq and Afghanistan, the huge truck convoys that haul fuel to bases have been sitting ducks for enemy fighters — in the latest attack, oil tankers carrying fuel for NATO troops in Afghanistan were set on fire in Rawalpindi, Pakistan, early Monday. In Iraq and Afghanistan, one Army study found, for every 24 fuel convoys that set out, one soldier or civilian engaged in fuel transport was killed. In the past three months, six Marines have been wounded guarding fuel runs in Afghanistan.

Also, as an update to the link I posted leading off Part I of this series, 25 tankers transporting fuel to NATO forces in Afghanistan were attacked today in Pakistan, killing one of the drivers. This is the sixth attack on Afghan-bound supply convoys in just the past week.

Just as the fuel convoys are vulnerable, so are the pipelines and tankers that move oil around the world. Part II of this week’s three-part series on oil infrastructure and terrorism continues to explore the vulnerability of oil infrastructure to terrorism. The report below was written by Donald J. Evans, a Senior Research Fellow at the International Strategic Studies Association, and was originally published in the Global Intelligence Report.

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Is Hydrocarbon Man the Next Terrorist Target? – Part II of III

Guest Essay by Dr. Donald J. Evans

(For Part I of the series, click here)

Target Selection

When will terrorist cells attack Middle East pipelines? Attacks will begin when the petroleum infrastructure satisfies target criteria. The process of target selection is complicated and constantly undergoing change. Target selection in an armed conflict between states is a science and an art, and it is equally true for terrorist groups who select their targets on the basis of many factors. While it is relatively easy to imagine and theorize about factors that enter into target selection, the dynamics among and between non-state actors and selection factors is complicated, fast moving, and stealthy like terrorists themselves.

Contrary to popular opinion, terrorists are not free to do anything they want. Every potential target is not available to every terrorist cell, and these cells face a number of constraints. Pipelines themselves are complicated systems. Terrorists may simply lack resources to attack pipelines, although given the technical sophistication of today’s transnational terrorists, the resource criterion does not appear to be much of an impediment to action.

Furthermore, protection of pipelines has high priority among oil-producing and oil-consuming countries, and damage is quickly repaired. Also, other targets, such as civilians, may be of more interest to terrorists than are pipelines. Media impact is frequently crucial in the thinking of terrorists. Destruction of remote pipelines may not make the evening news on CNN for any number of reasons. Terrorists with the objective of making a statement to the world would probably not want to risk not having their activities reported, especially in countries where state control of media exists. Other constraints with examples are international opinion (UN, OPEC), security environment (Saudi Arabia National Guard-SANG, NATO), protective measures (electronic, number of control valves), current situation (FBI teams, diplomacy of sponsoring state), and leadership (planning and organization).

Oil pipelines in the Middle East may not be targets for terrorists because they are selected out during the target selection process.

Global Target Incidents

Of the five categories of transnational threats — transnational crime, transnational terrorism, international migration flows, disease and international pandemics, and global environmental degradation and climate change — the focus here is on terrorism. It is not as though terrorists avoided pipelines elsewhere around the world. In the year 2000, Latin America alone experienced 193 attacks, up from 121 the previous year. There were 10 oil related, significant, terrorist incidents: Colombia, four; Indonesia, one; and Nigeria, five. The four pipeline incidents were all in Colombia. What lies behind the four “incidents” in Colombia is the fact that Colombia’s second-largest crude oil pipeline, the Cano-Limon Covenas, was attacked 152 times. This record number of attacks was blamed on the National Liberation Army, one of two large guerrilla groups. As a result, Occidental Petroleum halted exports through most of August and September. Terrorists in these oil-related attacks attempted to obtain funds through extortion and ransom.

All acts of violence have an element of terrorism. For this reason, the terrorist label attached to acts of violence may cloud our understanding of transnational terrorism. Aggressive acts in wartime are often termed terrorism. For example, Iraq is said to be guilty of ecological terrorism in Kuwait, when in 1991 it deliberately torched or sabotaged more than 500 Kuwaiti oil wells, storage tanks, and refineries. It dumped an estimated six-million barrels of oil into the Persian Gulf, the largest oil spill ever. The oil fires were the worst ever: three- to six-million barrels of oil daily went up in smoke and flames during peak times. After visiting the area, the head of the US Environmental Protection Agency said, “If hell had a national park, it would be those burning oil fires.” Whether caused by a government leader or a terrorist, pipeline destruction is the same no matter what terminology is used to describe the perpetrator.

Pipeline Security

One or a combination of agents protects oil pipelines: (1) the oil-producing state, (2) a foreign state, (3) a multinational oil corporation, (4) a non-state armed actor, and (5) a private contractor. Non-state actors include religious movements, revolutionary insurgents, warlords, guerrilla groups, drug cartels, international criminal organizations, and mercenary forces.

Military Forces. Armed forces and public safety officials of oil producing states are the first line of defense against terrorism, but many of the Middle East countries do not have the forces to effectively protect their pipelines from terrorists or aggressor states. In such situations, the United States or another strong nation-state is relied upon to protect the economic assets of weaker oil-producing states. Protection of oil production in the Middle East is clearly within national and global security interests of the US.

The emerging tendency, if not established trend, is for nation-states to turn to military forces to deal with security threats that are transnational and not state-centered. Previously, nations in modern times deployed armed forces directly against one another, and states were expected to handle their own internal problems, such as terrorism. The recent trend will likely continue in the coming decades and is expected, if terrorist should attack oil targets in the Persian Gulf states, e.g., in Kuwait or Qatar. The US military exercise, Operation CENTRAZBAT 97, sent a message to all states in the Caspian Sea region that the US is prepared to assist the oil states of Kazakhstan, Kyrgyzstan and Uzbekistan against invasion or terrorism.

Middle East states are reluctant to have the US involved directly in their internal security affairs. One exception is US assistance to the Saudi Arabia National Guard. For some time the US has been advising and training the Guard in infantry tactics and the use of up-to-date NATO equipment. The original objective of US help was to develop Guard forces capable of handling urban disorders, border problems with Yemen, and oil field security. The Guard’s effectiveness in its oil field security mission is enhanced with airborne assets and C3I links. US policy and practice leave little doubt that United States does and will continue to assist friendly Middle East states in fighting oil pipeline terrorism.

An analysis of the threat parameters for operations other than war identified five categories of threat forces: government forces, insurgent or factional forces, terrorists, criminal organization and armed populace. What is striking about the correlation of threats with mission activities is that a large number of activities across all threat categories are or could be identified as terrorist activities and could cause massive destruction to oil pipelines. One study of energy security risks concluded that the oil logistical system in the Middle East is “indefensible by conventional military means and that the United States and its allies must find another strategy for lowering the risks of politically inspired attacks on key oil operations.”

Private Security. There are forces other than national armies to protect pipelines. Public or governmental security in the world is becoming increasingly privatized in part because of globalization and the inability of weak states to provide state security structures that protect citizens and properties. A new security paradigm is said to be emerging. These private security groups are categorized as mercenaries, private military companies, and private security companies. In many instances these categories tend to be mixed. Users of private security groups are non-state actors, governments in conflict regions and supplier countries, multilateral peacekeeping organization, humanitarian agencies, and corporations in extractive industries, for example, oil and gas. Oil corporations hire private contractors to secure their pipelines.

Financial Incentives. The financing of terror is widespread in the Middle East. In so doing, oil producing Arab states receive various degrees of protection from attacks on oil infrastructures. All terrorists must acquire income, buy arms, and achieve international recognition. They must find safe havens where they may escape and store arms and cash. “The countries of the Middle East have contributed most of the cash and arms that are given to the different terrorist groups and have ensured their growth.” Oil wealth finds its way to terrorists through a variety of practices: governmental corruption, contract offsets, bribes, blackmail, direct payments, indirect purchases, and any number of other ways. Terrorists realize oil monies are sponsoring many of their activities. The reason nation-states sponsor terrorism is not solely for protecting pipelines:

“Terrorism-sponsoring states have interests ranging from ideological and theological aspirations to pragmatic and practical strategic and economic goals. They commit to terrorism sponsorship to further these interests. States use terrorism in order to attain objectives they cannot and/or would not attain through regular and conventional instruments of international relations, from negotiations to economic disputes to waging major wars. And as the potential costs and price of war grows, so does the penchant to use terrorists in war-by-proxies in order to solve national problems and/or realize national aspirations through the use of force but without much of the risk entailed.”

Private oil companies are accused of yielding to demands for oil dollars to fund terrorists’ activities; therefore, retaliation is thought to be less likely against these companies that also have the further incentive of keeping governments from interfering with daily operations. The extent of this practice is unknown but is suspected in the Middle East because of the private/governmental ownership of companies supplying oil. Although strenuously denied in public, industry-related bribery by Western oil giants in major energy deals appears to be frequent. “Show me the money” is a major theme between Arab nations, big oil, and producers of terrorism.

Casualty Insurance. Pipelines are secure if they may be reconstructed rapidly. The speed of reconstruction increases rapidly if funds are available to repair damage to facilities. Governmental and private insurance agencies are in the business of covering risks to the Middle East oil infrastructure and providing the dollars to pay for reconstruction. An outstanding example of a governmental agency that underwrites damage done by political violence is the Overseas Private Investment Corporation (OPIC) in the United States.

The mission of OPIC is to facilitate the investment of private capital from the US to emerging markets as part of US foreign policy. It carries out this mission by selling political risk insurance and long-term financing to US businesses. It invests in projects in over 140 developing countries. OPIC claims to operate on a self-sustaining basis with no net cost to the taxpayer. Over its thirty-year history, OPIC has supported US$138-billion worth of investments. Interestingly, OPIC insurance is backed by the full faith and credit of the US Government. Oil and gas coverage is one of eight special insurance programs of the agency. Political violence coverage compensates for property and income losses caused by violence undertaken for political purposes.

OPIC also can provide financing for construction, ownership and operation of oil and gas pipeline, and other large and small energy and non-energy related projects. The Caspian Office of OPIC has facilitated development of energy projects such as the Baku-Ceyhan main export oil pipeline and the Trans-Caspian gas pipeline. To date, OPIC has provided more than US$2-billion in project finance and political risk insurance support in Turkey, the Caucasus, and Central Asia.

Oil companies with billions in net revenue and the assistance of OPIC, Export-Import Bank, and the US Trade and Development Agency are insulated in varying degrees from short-term and long-term destruction due to political violence. The terrorist’s events of September 11, 2001, did not deter oil firms from moving ahead with new construction. One energy analyst affirmed after the attacks, “They [terrorists] could delay (the projects), but in general, there’s no inclination to change their [international oil companies] investment outlook based on political changes.” A spokesman for BP said it was not scaling back on a US$15-billion natural gas project in Saudi Arabia’s South Ghawar region in partnership with ExxonMobil, Shell, and Phillips.

The resiliency of oil companies to move forward may also be seen in the action of shareholders of Shell Pakistan who three days after the terrorist attacks of September 11 approved investment of US$3-million in the Pak Arab Pipeline Co. which plans to build a US$480-million, 817-km pipeline oil pipeline that will carry five-million tons of oil a year from northern Pakistan. The managing director of Air Security International, a Houston-based security and intelligence firms, has confidently gone on record with the statement that radical fundamentalists who oppose oil companies being in their countries do not care what happens to these oil projects and international relationships.

Repair of Pipelines. The amount and timeliness of funds to repair broken pipelines and other facilities are not the only factors to consider in estimating the time when oil will again flow. Pipelines are constructed and maintained with only little regard to their vulnerability to terrorism, and they are vulnerable at several points. An estimate of the time to repair a US pipeline system, for example, gives some indication of the time required to repair the Middle East system.

“The time required to repair damage to any pipeline varies, depending on the size of the damage, its complexity, weather conditions during repair, required safety measures, and the availability of skilled repair crews. For example, damage to a Tapline [The Alaskan Pipeline System: TAPS] pump station could take nine months to fix. Some booster pumps are constructed to each system’s specifications and might require six months to a year to replace. Damage to pump stations or to the automated control facilities could result in as much as a one-third reduction in throughput.”

The Trans-Alaska Pipeline System (TAPS).

The TAPS is a four-foot pipe running 800 miles between Prudhoe Bay to Port Valdiz, Alaska. It is estimated that attacks along the pipeline would require over a year to clean up. On October 4, 2001 a single rifle bullet entered the Tapline near Livengood, Alaska. The “terrorist” was a single drunken hunter with a .338-caliber rifle. Pressure spewed 286,000 gallons of oil 75 feet into the air. The pipeline shut down for three days before workers of the Alyeska Pipeline Service Co. fixed the leak. Vulnerability to oil pipeline attack is reduced by having skilled repair and operating personnel and easily obtainable critical spare parts.

Worldwide data over a 10-year period shows that oil and gas pipelines are the fourth most popular energy targets for terrorists, but that damages are only temporary. Even with more than 150 attacks on the Cano-Limon Covenas pipeline in Colombia, terrorists were unable to seriously disrupt the energy supply. However, under certain conditions, damage can be significant and long-term. Multiple attacks on the Beira-Mutare pipeline in Zimbabwe were highly significant, because it was the sole conduit for refined petroleum products to Mozambique and Zimbabwe. Consequences to peoples of the two countries were compounded because of a stressed economy.

Terminals: Oil loading terminals in the Middle East, and by inference oil drilling platforms, are “sitting ducks” for an air attack. “The exposure of oil loading terminals in the Persian Gulf suggests that the most effective way to cripple oil trade from the Middle East would be aerial attack on the principal oil ports and offshore loading terminals up and down the Gulf.” Terminal repairs range from upwards of one year or more. Pipelines may be repaired relatively quickly, but destruction of pumping stations could put the entire system out of action for weeks or months depending on the factors mentioned above.

Loss of oil supplies may be offset because of the ease of handling oil, the ability of producers and consumer states to swap oil, and the use of alternative pipelines. Loss of gas supplies is another matter. Reconnection and restoration of gas supply after a terrorist disruption is far more complex than for oil.

If the length of repair time on land is uppermost in a terrorist’s mind, would he/she select pipelines, pumping stations, storage tanks, or oil terminals? Probably, none of the above, for if he/she has good, oil system intelligence he/she would more likely target key points in the electrical control systems for petroleum and water pumping stations. Such a choice and follow-through would affect most other facilities. The best way to cripple Hydrocarbon Man is to pull the plug on Kilowatt Man.

  1. By Benny BND Cole on October 6, 2010 at 1:07 pm

    Let me see. Iraq, a nation-state with an occupying army, purposely destroyed every oil well and all oil infrastructure it could find in Kuwait. They destroyed 500 wells, left them burning.

    We easily survived.

    So now we are supposed to quake at the thought that few punk terrorists might–and that is only might–attack an oil installation or pipeline somewhere?

    Please, this is scare-mongering, probably by elements that want federal money spend on them. We have created a full-blown terrorism industry in the Western world, and they survive by stoking fears.

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  2. By Wendell Mercantile on October 6, 2010 at 1:32 pm

    So now we are supposed to quake at the thought that few punk terrorists might–and that is only might–attack an oil installation or pipeline somewhere?

    “Quake” is what would happen, even though the physical effect might be small. The psychological effect is what would create problems — and the effect terrorists seek. (And our political leaders have yet to figure out they have the power to control the nation’s psychological reaction as Winston Churchill did in WW II. In fact, many of our current political leaders feed off psychological fear.)

    Look at the September 11th attacks: Tragic? Sure, but actually relatively small in terms of actual physical damage and loss of life. Compare that to what London and many German cities went through in WW II. Compare September 11th to what happened to Tokyo, Nagasaki, and Hiroshima.

    Ten years after we flattened many German cities, they were rebuilt and the German economy was on a miraculous rise. In New York City, it’s now almost ten years after September 11th and that site is still not rebuilt, and we are still throwing billions of dollars at the security-political-industrial complex and still making people remove their shoes before they get on an airliner.

    The psychological effect of a pipeline attack is what to fear, not the physical damage. And unfortunately, since September 11th we have proved we are no longer as well prepared to handle attacks as were the people and leaders who lived during WW II.

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  3. By Optimist on October 6, 2010 at 1:45 pm

    Terrorism-sponsoring states have interests ranging from ideological and theological aspirations to pragmatic and practical strategic and economic goals. They commit to terrorism sponsorship to further these interests. States use terrorism in order to attain objectives they cannot and/or would not attain through regular and conventional instruments of international relations, from negotiations to economic disputes to waging major wars. And as the potential costs and price of war grows, so does the penchant to use terrorists in war-by-proxies in order to solve national problems and/or realize national aspirations through the use of force but without much of the risk entailed.

    Ouch! That cuts a bit close to the bone. It sounds a lot like a certain big country’s actions in Afganistan in the 80s. All very well intentioned, of course. All with the great good in mind, you understand…
     

    The best way to cripple Hydrocarbon Man is to pull the plug on Kilowatt Man.

    What? These guys don’t have generators? Seriously?

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  4. By Optimist on October 6, 2010 at 1:51 pm

    Wendell, I certainly agree that today’s prostitutians aren’t worth tying Winston Churchill’s shoes. But, as I stated under Part I, I don’t see an attack on oil infrastructure causing the same panic as an attack on downtown Manhattan.

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  5. By Benny BND Cole on October 6, 2010 at 1:55 pm

    Wendall Mercantile:

    Exactly–we have a political leadership class that is fear-mongering terrorism, and a terrorism industry.

    Sheesh, we used to have real enemies, as you point out. We even lived for decades alongside the hostile Soviet Union, they with a two-million man military, blue water navy, supersonic air force, ICBMs, KGB, etc etc.

    Terrorists? Yes, they are awful heinous cretins. They may kill thousands in the next 10 years.

    Meanwhile, in the next 10 years 300,000 American will die in auto accidents and 180,000 in gunshots. Terrorists are like knats.

    Our gas-guzzling automobiles are 1000 times the threat to our national security and economic welfare and envionment than any terrorists.

    This is just pathetic.

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  6. By Wendell Mercantile on October 6, 2010 at 2:03 pm

    I don’t see an attack on oil infrastructure causing the same panic as an attack on downtown Manhattan.

    Ah, but it would. If ten or more oil pipelines around the world were suddenly cut, the media would go crazy with irresponsible 24/7 coverage; oil prices would start to soar; people would begin hoarding gas; all our politicians would be calling for action; and people the local militia-movements would arm themselves and go out to guard the pipelines. It would go viral fed by the media and the Internet.

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  7. By paul-n on October 6, 2010 at 4:06 pm

    Wendell,

    your scenario would do more to reduce US oil consumption than any amount of electric cars!

    Part of the problem for modern government is certainly the “instant” media, that has also found that fear mongering is good for business, and so government often has to over react to minor, but well publicised things, and then often under reacts to others that get less attention.  Churchill had the advantage of being able to control the media of the day, to some extent, and the media not influencing the people of the day, as much as it does now.

     

    I will agree with Benny, again, that these “sky is falling” scenarios are distracting attention and resources from many other less exciting but more important, domestic issues.

     

     

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  8. By perry on October 6, 2010 at 5:11 pm

    Benny BND Cole said:

     

    Our gas-guzzling automobiles are 1000 times the threat to our national security and economic welfare and envionment than any terrorists.


     

    It’s that dependence that makes us vulnerable. There’s a reason we invaded Iraq, instead of Saudi Arabia, after a bunch of Saudi’s brought down the twin towers. It’s the same reason heroin junkees don’t piss off their dealer. Saudi Arabia was providing our daily fix. Iraq wasn’t even trying. So King Abdullah got a kiss and Saddam Hussein got hung. KSA is still spreading its poison, but oil companies are venturing into Iraq at last. The junkee lives to fight another day.

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  9. By Benny BND Cole on October 6, 2010 at 5:26 pm

    Perry wrote: “So King Abdullah got a kiss and Saddam Hussein got hung.”
    Oooh, not bad writing.

    Also like, “So Bush kissed King Abudullah and hung Saddam Hussein.”

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  10. By savro on October 6, 2010 at 5:40 pm

    Wendell Mercantile said:

    I don’t see an attack on oil infrastructure causing the same panic as an attack on downtown Manhattan.

    Ah, but it would. If ten or more oil pipelines around the world were suddenly cut, the media would go crazy with irresponsible 24/7 coverage; oil prices would start to soar; people would begin hoarding gas; all our politicians would be calling for action; and people the local militia-movements would arm themselves and go out to guard the pipelines. It would go viral fed by the media and the Internet.


     

    I’m with Wendell on this.

    As much as we may not like it, the world is very reactionary and would begin to panic if oil pipelines, storage depots and tankers were cut or blown up. If a handful of attacks took place within a short time frame, just picture how the 24/7/365/366 cable news networks would be all over it. Anderson Cooper will be reporting from outside Riyadh in his bullet proof vest on a green nightvision camera every night, giving blow by blow reports of how much worse it can get. The networks will all have Situation Rooms competing for the more fearful coverage.

    I believe that the public would panic and prices would go skyrocketing…

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  11. By Benny BND Cole on October 6, 2010 at 6:16 pm

    Sam-

    There were massive attacks on Kuwaiti oil wells and infrastructure. We did not panic. Indeed, we prospered mightily in the 1990s.

    Sure, there would be an oil spike following a terrorist strike on an oil facility. Then knowledable people would explain that 1 percent of the global supply was wrecked for several months. The terrorists are rather small in numbers, perhaps just dozens.

    I concede that such attacks would give fodder to scare-mongers in the US, and they would call for invasions, more military spending, etc. Our coprolitic federal military bureaucracy would grow even more. We might go to 5 percent of GDP on “defense” (real patronage, ossified lard and some real defense) up from the current 4.7 percent.

    The terrorists have shown no ability to sustain offensives. They have one punch–a 9/11, the Mumbai attack–and then they peter out. Their attacks almost appear to be terrorism for terrorism’s sake–or PR stunts. Terrorists may be collections of sadistic sociopaths, and they enjoy the heinous acts, and this some sort of sustained planning or religous platform is beyond them.

    I think we should put terrorism in perspective, not hype it up.

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  12. By savro on October 6, 2010 at 6:32 pm

    Benny BND Cole said:

    Sam-

    There were massive attacks on Kuwaiti oil wells and infrastructure. We did not panic. Indeed, we prospered mightily in the 1990s.

    Sure, there would be an oil spike following a terrorist strike on an oil facility. Then knowledable people would explain that 1 percent of the global supply was wrecked for several months.


     

    I’m not just talking about an oil facility, or even a few oil facilities. If terrorists can effectively disrupt transport on a large scale by attacking pipelines and shipping from the region we’d be in real trouble.

    But I think Wendell’s point is, and I agree with him, that even if it wasn’t done on a major scale, the physchology factor would be enough to cause major mayhem in the energy markets. All they’d need to do is maintain the physchology factor by showing that the attacks are going to be a long term problem and not just a one time event.

    The terrorists are rather small in numbers, perhaps just dozens.

    Militant terrorists may consist of a fairly small number in comparison to the populations, but only dozens? Come on.

    The terrorists have shown no ability to sustain offensives. They have one punch–a 9/11, the Mumbai attack–and then they peter out. Their attacks almost appear to be terrorism for terrorism’s sake–or PR stunts. Terrorists may be collections of sadistic sociopaths, and they enjoy the heinous acts, and this some sort of sustained planning or religous platform is beyond them.

    That’s certainly a fair point, although I would counter that they have shown their ability to sustain offensives in war zones like Iraq and Afghanistan. If they would focus their efforts on interdicting energy shipping lanes and pipelines I think we’d be in trouble. They consist of a lot more than just “dozens” – do you think it’ll be easy (and cheap) to defeat them if they went on a serious offensive against oil transport?

    I think we should put terrorism in perspective, not hype it up.

    This we can agree on. The hype is bad, and just makes what they do a thousand times more effective. But at the same time, I think it’s prudent to understand that we are vulnerable if they choose to target oil supplies and transport.

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  13. By Wendell Mercantile on October 6, 2010 at 11:45 pm

    There were massive attacks on Kuwaiti oil wells and infrastructure. We did not panic

    Benny~

    Big difference between the Kuwait oil well fires of 1991 and now. That was almost 20 years ago when we had just won the Cold War; we were the undisputed world’s Super Power; people had confidence in the the ability of the U.S. to control any situation; we had a huge “peace dividend” to spend; and perhaps most importantly, the Internet just barely existed — connecting the computer labs of only a few research labs and universities.

    If the Kuwait oil well fires were to happen now, the results would be vastly different.

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  14. By OD on October 7, 2010 at 12:09 am

    I agree Wendell. Just look at the gulf oil spill. People were saying it was never going to be stopped and eventually would contaminate all of the world’s oceans, and people actually believed it! People that should have known better latched onto the hysteria.

    I also agree with Benny though. There are many threats out there, but we really need to keep some perspective.

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  15. By armchair261 on October 7, 2010 at 12:21 am

    Big difference between the Kuwait oil well fires of 1991 and now.

    Another difference: oil prices were weak in 1991 and had been so since the mid-1980′s, and high prices were on no one’s radar.

    A major attack on oil infrastructure when oil is weak might not have as large an impact as we think. An attack in 1991 had little price impact. An attack in the depths of economic despair in early 2009 might not have had too much price impact (or even sent oil down on deeper gloom?). But an attack in summer 2008 would probably have sent prices into the stratosphere. So a terrorist attack might be more likely when oil prices are climbing on improving fundamentals.

    What’s interesting is that there WAS a $17 spike when the Iraqis first invaded Kuwait. The price dropped back to its $15-$20 baseline after the first day or two of Desert Storm and mostly stayed in a narrow range around that baseline until about 2002. So there was market apprehension about a supply loss at the scale of a Kuwait, and perhaps possible future fallout from the Iraqi invasion, but not at the scale of the damaged wells.

    A one-off oil attack might then not have that much of an impact unless there is a perception that it’s only the first salvo. We can probably assume that the press will foster that perception, rather than point out that there is in fact a glut of oil on the market.

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  16. By paul-n on October 7, 2010 at 12:29 am

    Armchair, I think the real problem is that there is a glut of “the press” !  The dangers from too much press far outweigh the dangers from not enough oil.

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  17. By armchair261 on October 7, 2010 at 2:11 pm

    there is a glut of “the press”

    Isn’t that the truth! And now compounded by the pseudo-news and dilettante commentary that circulates so widely on the internet. When it comes to oil, there is also a serious glut of “experts!”

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  18. By Optimist on October 7, 2010 at 5:12 pm

    I’m with Wendell on this.

    &

    The terrorists have shown no ability to sustain offensives. They have one punch–a 9/11, the Mumbai attack–and then they peter out. Their attacks almost appear to be terrorism for terrorism’s sake–or PR stunts. Terrorists may be collections of sadistic sociopaths, and they enjoy the heinous acts, and this some sort of sustained planning or religous platform is beyond them.

    I’m with Benny: the bad guys don’t have the staying power to follow through and execute 10 attacks (big enough to make a difference) in a short period of time.

    And even if they did: oil prices would jump perhaps $50/bbl. That would give the owners of said damaged infrastructure all the incentive they need to bring it back online, like yesterday. That would be the end of it, IMHO. I don’t even see it topping the previous records.

    To cause a sustained shortage is way beyond what current terrorist groups seem capable of. They would need a state government’s support to do that. And I don’t think even Amadinejoke is crazy enough (or has the gonads) to volunteer for that mission.

    I agree Wendell. Just look at the gulf oil spill. People were saying it was never going to be stopped and eventually would contaminate all of the world’s oceans, and people actually believed it! People that should have known better latched onto the hysteria.

    OK. And the real damage? Any lasting economic damage? Other than perhaps the eventual end of BP. The most serious damage was to the credibility (of some fools, IMHO).

    Big difference between the Kuwait oil well fires of 1991 and now. That was almost 20 years ago when we had just won the Cold War; we were the undisputed world’s Super Power; people had confidence in the the ability of the U.S. to control any situation; we had a huge “peace dividend” to spend; and perhaps most importantly, the Internet just barely existed — connecting the computer labs of only a few research labs and universities.

    Oh the Halcyon days of Bush 41, eh? Three stooges later, things are looking desparate…

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  19. By paul-n on October 7, 2010 at 5:31 pm

    Oh the Halcyon days of Bush 41, eh? Three stooges later, things are looking desparate…

    So what has happened to America?  You won WW2, won the cold war, survived real crises like the cuban missile crisis, spent years in Vietnam, etc etc.  All sorts of real (and maybe some percieved) threats to the country, but now, everyone thinks that an increase in the price of oil will bring this country down.

    Say it ain’t so!  Ask a WW2 veteran if they think   high oil prices are even in the same ballpark as a threat (I did ask one that exact question last year, and got quite an earful on this topic)

    Yes, it will be inconvenient, expensive even, but, if pushed, the country will improvise, adapt and survive.  It’s been done before and it can be done again.

    The $50 jump would indeed make that country get the oil flowing again, but more importantly it might make this country use less of it.  If that happens, then what have the terrorists achieved, and how much influence (and funding)will they have in the future?

    An oil supply/price shock is just the kick in the pants that is needed.  Until then, there will be this constant walking on thin ice, worrying about potential supply/price shocks, and who/where they will come from – let’s get on with it and get over it.  Cut the oil use and imports enough to tell them where they put their oil.

    Going cold turkey on imported oil may be short term painful, but at least the dependence will be over.  

    We will, of course, have lots of unemployed oil analysts, but no one will lose sleep over that.

     

     

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  20. By Optimist on October 7, 2010 at 8:44 pm

    All sorts of real (and maybe some percieved) threats to the country, but now, everyone thinks that an increase in the price of oil will bring this country down.

    Thanks, Paul. My sentiments exactly, even if that particular quote didn’t reflect it.

    You are exactly right. Humans (even Americans) are quite adaptable. Shockingly high oil prices will not mean the end of civilization, even if it does induce some idiotic utterances from elected “leaders”. Gas tax holiday, anybody? Hang the speculators? Super profit taxes somehow remains popular.

    Anderson Cooper will be reporting from outside Riyadh in his bullet proof vest on a green nightvision camera every night, giving blow by blow reports of how much worse it can get.

    Sure he will. My question is this: Will anybody be watching?

    If terrorists can effectively disrupt transport on a large scale by attacking pipelines and shipping from the region we’d be in real trouble.

    Attacking enough pipelines, as well as the right ones, to make a dent will require a lot of information, skill, planning and good luck. I don’t think the bad guys are there (yet).

    Attacking the shipping on a sustained basis automatically brings the US Navy into the fight. In spite of all the advantages the little guy has in asymmetric warfare, I’m willing to bet the navy wins this particular round. Resoundingly so.

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