Windhoek — - The looming serious world-wide dangers of the creeping 3rd oil crisis - imminent global economic recession.

A few days ago, CNN announced that the price of petrol skyrocketed exponentially. The price of crude oil went up to US$120 per barrel, compared to US$20 per barrel in September 2001. This is an incredible price increase of 500% in about 7 years.

The impact of this is currently being felt worldwide. For instance, the price of fuel in Namibia was increased to N$8 per litre (Namibian 10th April, 2008) and electricity went up by 18% (Namibian 16th April, 2008).

According to the CNN, the food prices have, on average, also gone up by 45% world-wide. In Africa, there have been demonstrations against food price increase in Egypt, Cöte D'Ivoire and South Africa.

Clearly, these indicators and many more, are the effects of the 3rd OIL CRISIS that has set in.

An oil crisis brings with it a dramatic price increase in petrol, food items and other essential commodities and services.

Furthermore, it is also accompanied by immense hardships and suffering to the majority of the people. Let us briefly review the global oil crises experienced so far.

Brief review of earlier oil crises

An oil crisis can be regarded as a stress exerted on an equilibrium flow of oil to the world economy. Such a stress disrupts the smooth‚ flow of oil resulting in a relative sudden jump in the oil price. Such a crisis creates a shortage in the oil supply, giving rise to a high demand and an increase in the hoarding of oil by high consumers.

Before the first oil crisis

For almost a quarter of a century the price of oil hardly changed numerically. The following figures underpin this statement. In 1948, the oil price was US$2.50 per barrel.

Nine years later, 1957, the price was around US$3 per barrel. Fifteen years after that in 1972, the price was still around US$3 per barrel.

In this period of 1948-1972 when the oil price was miraculously stable, many countries derived immense economic, social and political benefits.

With the exception of United States, many colonialist super powers were recovering from the negative destructive effects of the Second World War.

Indeed, it was during this period that many colonized countries agitated for political independence and truly nearly 40 African countries attained their political independence, namely Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Democratic Republic of Congo, Côte D'Ivoire, Djibouti, Equatorial Guinea, Gabon, Gambia, Ghana, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritania, Mauritius, Morocco, Niger, Nigeria, Rwanda, Senegal, Somalia, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda and Zambia.

The last African colonies Mozambique, Zimbabwe, Namibia and South Africa had to wage bloody protracted liberation wars before achieving their political freedoms. The main reason for this is that the colonial powers could no longer continue and sustain more wars overseas as they were just recuperating from the devastating effects of the Second World War.

In general, there was economic prosperity world-wide. The independent African countries began economic reconstruction in areas such as education, health and transport, just to mention a few.

Imperialist countries such as Britain, France, Italy, Spain, Germany, and Japan fully recovered from the war effects. The spin-offs of this recovery impacted on the creative arts such as music and the film industry.

The Hollywood industry mushroomed. Science and technology underwent tremendous revolution never experienced before in centuries by its heavy emphasis on research and development (R+D) efforts. The imperialist countries realized that supremacy in science and technology was directly linked to military supremacy and hence greater chances of leverage to control world strategic resources.

With the devastating effects of the two atomic bombs that were dropped onto Japan still fresh in their mind, the colonial powers intensified their military research with the heaviest possible funding. This resulted in modern submarines, tanks, military jet fighters, pilotless jetfighters, warships, satellite technology, computer technology, space exploration, star war machinery, etc. That period (1948-1972) laid the strong foundation for today's common scientific utilities such as colour TV, laptops and mobile phones.

The First Oil Crisis, 1972 -1974: Oil price increase of 300%

The Yom Kippur War

On October 06, 1973, Egypt and Syria attacked Israel. The United States and Western Allies as well as Japan supported Israel. Members of the OPEC countries at the time, namely Saudi Arabia, Iran, Iraq, Abu Dhabi, Kuwait, and Qatar imposed an oil embargo (limited or comprehensive) on the USA, Netherlands, Portugal, Rhodesia, South Africa, France, Japan and the UK.

In addition, the oil price was increased by 17% to US$3.65 per barrel by the OPEC countries. This gave rise to the first oil crisis, of 1972 to 1974 when the oil price rose from around US$3 to about US$12 per barrel. This was a price increase of about 300% within a period of approximately three years.

The price continued increasing from 1972 and reached its peak in 1974 and went to a minimum of about US$33 per barrel in 1978. This is a period of about seven years.

From the web search, the reason for this increase is stated as being due to the war between Israel on the one hand and Egypt and Syria on the other. This war is also known as Yom Kippur war - named after the Yom Kippur religious holiday of Israel on which Egypt and Syria simultaneously attacked Israel.

While this brought an enormous boom to the net-oil producing nations, it incurred immense untold misery to many other countries. For instance, in the US the New York Stock Exchange lost US$97 billion and, and USA oil imports dropped from 1.2 million barrels per day to 19 000 barrels per day.

Inflation followed by recession hit the USA.

The inflation rate rose from average 4.27% in 1972 to average 10.19% in 1974 in the USA.

Oil rationing became the order of the day. Immense economic hardships gripped the unemployed, marginalized social groups, aging and some young workers.

Schools and offices were forced to close down in order to save on heating oil. Some factories closed or cut down production resulting in laying off workers.

France which had a record of 30 successive high economic growths was halted, giving away to ensuing decades of unemployment.

Second Oil Crisis, 1978-1980: Oil price increase of 490%

The Iraq-Kuwait War (1st Gulf War)

During the beginning of the second oil crisis the oil price rose from about US$13.55 in 1978 to about US$80 per barrel in 1980 giving rise to an increase of approximately 490%.

The oil price continued climbing and reached a maximum of more than US$80 per barrel in 1981 and then it started going down until 1986 - a period of about seven years. There are two reasons implicated for this, namely, the Iranian revolution (1979) and the Iran-Iraq war (1980-1988).

Like the first oil crisis, the 2nd oil crisis also brought tremendous suffering to many countries including the USA.

Oil and energy rationing were also done in the USA. The auto industry had to modify car model manufacturing to meet the demands of fuel shortage.

The inflation rates in Africa rose steeply. For instance, in Zambia the inflation was 18% in 1981 and it rose to 80% in 1990 and again further to 120% in 1991.

In Britain, the number of people unemployed stood at 3.1 million in 1882. The unemployment rates in Australia were 6% in 1980, 9% in 1984 and 6% in 1986.

The unemployment rates in France were 4.2% during 1971-1980 and it rose to 9.3% during 1981-1990. Germany was similarly affected 2.7%(1971-1980) and 7.3% (1981-1990) and Germany 4.5% (1971-1980) and 6.9% (1981-1990).

2nd Gulf War, 1990-1991: Oil price increase of about 8%

The 2nd Gulf War (2nd August 1990 to 28th February 1991) had to be brief as it was one-sided with Iraq versus the coalition of 34 countries led by the Allied Forces.

This Iraq-Kuwait war lasted only 7 months and hence had a minor impact on the oil flow and its price. The oil price rose from about US$26 to US$28 per barrel - an increase of about 8%. This was not regarded as an oil crisis. This war had a minor negative impact mainly on the economies of the developing countries.

Oil equilibrium and its life span

Blood is to a human body as oil is to a modern economy. Just as the blood circulation carries oxygen and vital nutrients to every cell of different organs of the body, so does the oil flow carry the vital economic nutrients‚ to every sector of a modern economy.

Just as a slight disruption to the flow of blood causes serious consequences to the well being of a human body, so does any slight disruption to the flow of oil inflict severe economic hardships and suffering to society. Therefore, it is extremely important that the equilibrium of the oil flow is maintained and safeguarded.

Those global fountains and sources of oil are of extremely great importance to a modern economy. Behind the scenes, top think-tanks of giant economies comprising of all types of specialists have estimated that the lifespan of oil which is a non-renewable resource is about 30 years. This revelation has caused a lot of political panic and immense economic rivalry for oil among the economic giants of the world.

Therefore, it is not a coincidence that most of the world's economic giants are well represented in the Allied Forces in Iraq and Afghanistan. You very well know that not a long time ago, Afghanistan was under the armpit of the Soviet Union. Why is Afghanistan so important in this equation of rivalry?

A look at the map shows that it is a major border nation next to another region with vast reservoirs of oil and gas - the Caspian Sea region.

This region is the equivalent of the Gulf region of Northern Europe.

In addition, it borders two important countries - Iran and Pakistan. Hence, Afghanistan is strategically important both in a military sense and as a major transit route for oil and gas. Moreover, as a neighbouring nation to the Caspian Sea region, Afghanistan could be sitting on top of major geological veins and arteries of oil and gas flow beneath its soil. Many of us may recall that during the Iraq-Kuwait war of 190-1991(to be mentioned below) the flow of oil underground between the two countries became a hot issue.

Economic rivalry

Bitter rivalry among big powers for key resources is nothing new. The Berlin Conference of 1884 is a testimony to this. It was about the sharing of territories and the economic spheres of influence peacefully.

Furthermore, a deeper analysis of the main causes of world wars I and II reveals that it was about control of vital economic resources. Thus, the colonies and the so-called protected countries (protectorates) were just pawns in the economic game of rivalry.

The historical developments of former colonies and protectorates have had to endure the bitter legacy of such rivalry. There is a famous saying that, "When two elephants fight, it is the grass that suffers" with a recent addition that even "when the two elephants make love, the grass suffers as well".

The current developments and international focus in Zimbabwe, among other factors, have a direct link to this historical legacy of continued global rivalry for economic spheres of influence.

Alternative sources of energy

Namibian uranium case

As the rivalry for the limited oil resource wages on, a feverish search for new sources of energy is intensified. Hence, the conversion of coal into petrol becomes extremely critical. This is what South Africa did during the oil embargo days. As a result, Sasol is now a giant multi-billion US dollar enterprise. The next vitally important limited energy resource is uranium.

Namibia is ranked third producer of uranium in the world by some websites. Whatever ranking Namibia has, she is clearly ranked among top uranium world producers.

Apart from its potential for energy production, uranium is a critically important element for military purposes. Being in possession of uranium and having the capability to produce an atomic weapon may cause hysteria and even heart attacks in some quarters. Hence, Namibia is or will be highly marked as a country of great strategic importance in the same way as Afghanistan or Iraq, now and in future in view of the dwindling oil reserves measured on the time scale.

It is very likely that whatever Namibia does with her uranium is closely being monitored by the superpowers.

Current oil crisis (3rd oil crisis): Oil price increase of 500%

The CNN announcement of April 23, 2008 gave the price of crude oil as US$120 per barrel. A quick look at the website gave me the price of oil as US$20 per barrel in September 2001. This means that in approximately 7 years, the oil price has increased by 500%! While this price may go down at a later date, its economic destructive shock waves around the globe are very likely to remain for many years to come.

This is principally because the price has to reach its peak and then gradually decline to a stable‚ minimum over a couple of years.

The main factors implicated for the continued oil price increase are the attack on the US economy on 11th September 2001, the continued war in Iraq that has disrupted the smooth oil flow, and the relatively recent strikes in Nigeria coupled with an ongoing mini guerrilla warfare which have affected Nigerian oil flow.

In addition, the war in Afghanistan has had some impact. Another major factor cited is the significant economic growth of Asian countries particularly China and India which have greatly influenced the high demand for oil.

While these factors and many more may be cited, it is in the opinion of the author, that the single major factor affecting the continued oil price is the current Iraq War.

This war has immensely disrupted the oil equilibrium. This has and will continue to cause hardships to many countries worldwide.

Imminent economic hardships of the creeping 3rd oil crisis

As already stated, the economic hardships of the continued extremely high oil price are beginning to bite hard. In addition, these effects are influencing both the political and economical situations in the USA and the Great Britain, the key allies in the unpopular war in Iraq.

In the USA, both bank credit which is linked to mortgages and the New York Stock Exchange are now experiencing a lot of hardships. Thousands of home owners in the US have been badly affected.

This is likely to be accompanied by an increased high unemployment rate. The immediate impact will be felt by the greatest consumers of oil, namely USA (25 barrels per person per annum = 25 bppa), Japan (Japan (14.0 bppa) and Spain (13.8 bppa) and so on.

Similar or worse effects will be experienced in many other countries especially the developing world and will continue to do so for some time to come.

It is the view of the author that for now all these are directly linked to the impact of war in Iraq that has disrupted the oil flow equilibrium.

Conclusion

The Iraq War (2003 - present) was considered to last for a very brief period of a few months as was the case with the 2nd Gulf War. The assumption was that this would cause minimal or no oil crisis at all. But the war has dragged on for more than five years resulting in the just started third oil crisis.

The hardships caused by this crisis are gathering momentum day by day. As we all know, the major underlying force driving the trend of world history today is energy. Since oil is the vital ingredient in the production and provision of the world's energy of today, it will continue to influence the dynamics of world history for many years to come.

The present war in Iraq or Afghanistan is not about communism or terrorism, weapons of mass destruction, chemical or biological weapons, nuclear weapons, Bin Laden, Saddam Hussein, democracy or human rights. It is simply a war about oil whose life span is exceedingly short.

The war in Afghanistan is about the access and control of the oil-rich Gulf North region‚ around the Caspian Sea. The Iraq War is about the control of the Gulf South region‚ of the Middle East.

These regions are of tremendous strategic importance to modern economies particularly those of heavily industrialized countries which consume vast quantities of oil resulting in the greatest atmospheric pollution.

The potential of oil producing countries in Africa such as Nigeria and Angola are of great strategic importance to the heavily industrialized economies.

That a vital economic resource should be a principal driving force of world history, is nothing new. The ivory and spice trade led to the discovery and colonization of many countries. The gold and slave trade influenced the course of world history.

A country like Sudan which has a substantial reservoir of oil is highly marked. The ongoing world focus on the Darfur humanitarian crisis situation versus China's human rights abuse (China has strong oil trade ties with Sudan) with world-wide demonstrations against China's hosting the Olympics may be viewed in this light.

China poses a great threat the developed world as it is potentially a future super power. Similarly, the intervention of the allied forces in the Iraq-Kuwait war, the Iraq-Iran war, and the Yom Kippur war should be viewed under the same microscope.

It is interesting to note that not a long time ago, the Apartheid system was condemned by the developed world. Yet there were no effective sanctions imposed onto the system. In fact, for some countries, it was business as usual. Both apartheid South Africa and Rhodesia had immense human rights records.

Uganda's Idi Amin and Mobutu's Zaire tremendously violated human rights but these were not major international issues with major embargoes resulting in the crippling of their economies. Rwanda's genocide was just supervised but not stopped.

On the other hand, the Zimbabwean situation is a major international issue with all the possible sanctions (that have facilitated the precipitation of one of the worst inflations in human history) put in place.

In order for us to fully understand and appreciate the current global politics, we have to revisit what the late highly respected statesman and intellectual Dr Kwame Nkrumah termed Neocolonialism.

The author is of the view that world politics are entering the highest and most sophisticated level of the neocolonialist phase coupled with the renewed severe scramble for critical and strategic resources as heavy industrialization of the 21st century sets in.

As the scramble for oil (a limited resource) rages on, the eyes are now widely focused onto the alternative sources of energy. Hence, the techniques such as the Fischer-Tropsch method of converting coal into petrol and the use of ethanol as fuel will be important in future.

The use of solar energy will play a fundamental role. Likewise, the use of nuclear energy will be extremely important for both energy provision and military purposes. Namibia which has a good reservoir of uranium will become a centre of attraction.

While the countries of the North continue to play their competitive and fierce game of energy, the Southerners should not sit and watch. We must adequately invest in scientific research and development (R+D) and explore ways and means of finding other sources and alternative supplies of energy.

Since the modern world economy heavily depends on oil and will continue to do so for several decades ahead, it is extremely important that as much as possible, significant disruption of its flow must be avoided as much as possible.

- Prof. Enos M.R. Kiremire is the Dean, Faculty of Science, University of Namibia.