Dwindling Oil Reserves Are a Sign of Energy Insecurity

NO CAPTION A June article in The Wall Street Journal about the war in Iran opened with a very interesting line: 'Iran's closure of the Strait of Hormuz showed how a country can weaponize an economic pinch point to seismic effect.' As I read through the article, I realized that almost anywhere in the article the word 'economy' or 'economic' was used, I could swap in the word 'energy': 'Iran's closure of the Strait of Hormuz showed how a country can weaponize an energy pinch point to seismic effect.' The article quotes NATO's top military commander, Adm. Giuseppe Cavo Dragone, using the phrase 'the weaponization of economic interdependence.' This could easily be, 'the weaponization of energy interdependence'—pointing to how any natural resource could be weaponized by any country, including the U.S. 'Reducing the world's reliance on the energy that transits a channel that could be closed again by Iran will require big investments in new pipelines and export routes,' the article points out. 'Importers will need to rebuild depleted crude-oil reserves and stockpile more naphtha, jet fuel and other oil-derived products to prepare for another shock. They may need to consider hefty layouts on renewables and nuclear power to ensure steadier energy supplies ahead of any new disruption.' As the war in Iran continues and the Strait of Hormuz continues to be restricted, additional disruptions are compounding the crisis. Yemen has attacked shipping vessels in the Red Sea. Major oil exporters like Saudi Arabia are attempting to reroute their shipping through increasingly restricted routes. As The Wall Street Journal reports, 'The stakes for the global economy are high: Persistent risks to regional shipping could push oil well above $100 a barrel, analysts say, stoking inflation and straining an already fragile global economy.' Meanwhile, the war in Ukraine has been disrupting oil refining in Russia as Ukraine attacks Russian refineries, disabling a claimed 42.74% of Russia's oil refining capacity. This will further exacerbate the global shortages of oil distillates, diesel and gas at the pumps. There appears to be a perfect storm brewing. Continued record drawdowns from the Strategic Petroleum Reserves (SPR) will impact shortages and price volatility. Every major news outlet has been covering the potential global economic devastation this may cause. While oil executives have been sounding the alarm about dwindling oil reserves, so far, the Trump administration has been attempting to 'put lipstick on a pig,' to borrow a political phrase that became popular in the 2008 presidential elections. The idiom was used for a long time, many of us remember when stock analysts were caught favorably recommending stocks they otherwise called 'dogs'. I believe the oil executives have greater knowledge and understanding of their industry. Another recent Wall Street Journal explained that 'Even if the Strait of Hormuz soon reopens, it would likely take months for the U.S. to replenish its depleted oil inventories, keeping prices elevated,' while 'energy executives say without an influx of more oil, prices will have to surge to stop the run on supplies.' As of mid-June, the U.S. had drawn 'about 66 million barrels of oil from its Strategic Petroleum Reserve… [and] The Trump administration authorized the release of 172 million barrels—and if drawdowns continue at the current pace, that allotment could dry up in early September. … Drawing further from the stocks after that would limit the U.S.'s ability to respond to new oil disruptions on the world's stage, or natural disasters such as hurricanes that can damage fuel supply chains.' As of August 21, the SPR fell below 300 million barrels for the first time since January 1983, hitting its lowest level since April 1983. Drawdowns on the SPR are a sign of insufficient energy security. At the same time, these drawdowns are keeping the price at the pump stable, giving the American consumer a false sense of security and leaving them unaware of future troubles. There is one difference between today and the last time we faced a global energy crisis, in the 1970s: the world's supply of fuel is much more diversified. 'The turmoil has made clear how much has been learned about energy security over the past half century, mitigating what could have been a catastrophic energy shock,' a recent Wall Street Journal article stated, continuing: 'Winston Churchill laid down the axiom of energy security on the eve of World War I: 'Safety and certainty in oil,' he said, 'lie in variety and variety alone.' In other words, diversification of supply.' But for true energy security, we need to go beyond simply diversifying how oil and gas is supplied. We need to diversify beyond oil and gas into other sources of energy. Some countries are already doing this; in recent articles, I've written about China's advancements in renewable energy and energy independence. Now, other nations are taking advantage of China's momentum. For example, Cuba is trying to mitigate its severe energy crisis by installing large swaths of solar panels supplied by China. As The Wall Street Journal reports, 'The new solar parks could generate around 1,000 megawatts of capacity when operating at peak output, nearly five times what was previously installed and almost one-third of the country's typical peak demand of about 3,200 megawatts.' While this has not eliminated Cuba's frequently recurring blackouts, the issue would be even worse without this additional energy source. To paraphrase Winston Churchill's quote, safety and certainty in energy lie in variety and variety alone. Without expanding beyond oil and gas, we will never have true energy security—nationally or globally. Frank Dalene Frank Dalene, an Amazon Best Selling Author in Green Business & Environmental Economics titled, Decarbonize The World: Solving The Climate Crisis While Increasing Profits In Your Business, and Founder of the Hamptons Green Alliance, a 501(c)(3) Public Charity. Learn more at