A flock of black swans

The geopolitics of energy has rarely seen such a crowding of potentially disruptive events at the same time -- the Texas shale-gas breakthrough; the Qatari liquefied natural gas behemoth; the global push for electric cars; and Iraq's ambitions to multiply its oil production. What separates these from research into renewable fuels such as algae is that they are not notional -- they are really happening. Should they reach their potential and converge, they will shake up the geopolitical order as we know it.

But will they do so? As regular readers of this blog know, I think that these shifts are changing geopolitics as we speak, the most visible evidence being Russia's much-reduced fear factor in Europe. But it's useful to heed cautionary voices -- though even there, dispassionate doesn't always mean unemotional.

Case in point: Nobuo Tanaka, head of the Paris-based International Energy Agency, yesterday noted the outcome should Iraq actually double, triple or quintuple its oil production from the current 2.5 million barrels a day in the next few years, as it plans to do with foreign help."Iraq is one of the largest game-changers (for the oil market)," he told energy thinkers gathered in London this week at the Oil & Money Conference. But Issam al-Chalabi, Iraqi oil minister from 1987 to 1990, poured cold water on his country's current aspirations. "I will cut off my hands if Iraq can provide 12 million barrels per day in export facilities," he said. "Six million barrels per day? Yes, maybe, but 12? It's totally impossible."

Okay, so let's say six. Is that still a game-changer? It depends on depletion elsewhere -- how much does everyone else produce? -- in addition to whether Iran settles its international troubles, and continues to supply global oil. But the long-term direction of events, after some burps in the middle years of this decade because of relatively low field investment by the majors, is an oil supply glut, fed to a large degree by Iraq. Consider the eighth and ninth slides in this presentation by Lucian Pugliaresi of the Energy Policy Research Foundation. In addition, in an Oct. 4 note to clients titled "The Mother of All Oil Stories," Deutsche Bank said Iraq's oil won't tip the market, but rather keep it about where it is now. That in itself is a comparative game-changer, in that there are currently 4 to 6 million barrels a day of spare capacity, so that, unlike in the 2004-2008 period, a Nigerian kidnapping can't send oil and gasoline prices through the roof.

Meanwhile, over at the Financial Times, John Dizard weighs in with a cautionary note on shale gas. It's an exposition on the so-called "b exponent," on which experts rely to judge how much oil or gas will actually come out of a reservoir (or a bit of shale rock in this case). Dizard notes that the b exponent is at the center of a ferocious industry debate: Some say that production from shale gas operations drops precipitously and permanently after awhile, while others say that, no, production declines, but then recovers and flattens out. At which point, all civility falls away, says Dizard: One side "will break a long neck beer bottle on the bar, and a fight will start."

So it is as well in the other aspects of energy geopolitics. In Washington, for example, that beer bottle can come out not because one disagrees with a statement, but just out of whose mouth it is coming. On the side of equilibrium, Michael Levi has some sober thinking today on the role that energy innovation can play.

Dean Mouhtaropoulos/Getty Images

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