369
Mr. Duncan Brown
Tonight I am going to talk about economic and energy security
and its impact on maritime forces. Before I get into the details, I
would like to provide a quick overview of the U.S. maritime missions.
U.S. Maritime Missions
Although our nation’s maritime missions are described well in
the Navy’s Maritime Strategy, I think a brief review will be helpful:
Mr. Duncan Brown is a National Security Studies Fellow at JHU/APL
and an Adjunct Professor in The Johns Hopkins University’s Global
Security Studies Graduate Program. Most recently, he was the Director
of the Strategic Assessments Office at JHU/APL, where he was responsible for the conduct of assessments of national security strategy,
policy, and technology trends. Mr. Brown has been a participant on
National Academy of Sciences, Naval Research Advisory Committee,
and Naval Studies Board panels. Mr. Brown served on the Navy staff
in the Pentagon as the Science Advisor to the Deputy Chief of Naval
Operations, in the Pacific as the Science Advisor to the Commander in
Chief Pacific Fleet, and in the Pentagon as the Director for Submarine
Technology. He also headed the Hydrodynamics Branch at the
Naval Undersea Warfare Center (NUWC) in Newport, Rhode Island.
Mr. Brown received an M.S. degree from The Johns Hopkins University
in technical management, an M.S. degree in ocean engineering from
the University of Rhode Island, and a B.S. degree in engineering science from Hofstra University. His professional education includes the
Massachusetts Institute of Technology’s Seminar XXI Foreign Politics and
International Relations in the National Interest Program and Harvard’s
Program for Senior Executives in National and International Security.
Mr. Brown is currently a Board Member of the Baltimore Chapter of the
American Society of Mechanical Engineers and a member of the Board
of Trustees for the Baltimore Council on Foreign Affairs.
370
Climate and Energy Proceedings 2011
• Sea control and power projection (maritime supremacy)
–– But, change is required to go from a fleet that delivers power from a safe sanctuary to a fleet that will be
attacked in Pacific or Indian Ocean waters
• Area defense
–– Think Aegis ballistic missile defense both ashore and at
sea
• Nuclear deterrence
–– Think SSBNs on patrol
• Transport of personnel and materials in war time
• Maritime defense of the homeland
• Intelligence, surveillance, and reconnaissance (ISR)
• Forward presence and support to free market economies
and democracies
• Maintaining open “sea lanes of commerce”
–– Protecting safe transit of raw materials and manufactured goods
• Anti-terrorism, disaster relief, non-combatant evacuation,
peace enforcement, counter-drug and counter-human
smuggling, and search and rescue
–– Humanitarian missions: 2011, Japan; 2010, Haiti; 2004,
Indonesia
–– 1970–2000, U.S. forces involved in 366 humanitarian
and 22 combat missions
Among the key missions of the Navy, Marine Corps, and Coast
Guard are sea control and power projection—two tasks that are
often referred to as maritime supremacy. But as we all know,
changes will be required to go from a power projection fleet that
can operate from a safe sanctuary to one that has to deal with
cruise and ballistic missile threats, over-the-horizon radars, and
command and control assets, whether it is in East Asia or in the
Persian Gulf. Those challenges are coming.
Chapter 11 Economic and Energy Security and Its Impact
371
Navy also conducts area defense, for example, protection of
our Japanese allies in East Asia from air and missile attacks. Aegis
ships are deployed in Northeast Asia, and ground-based Aegis systems will soon be deployed ashore in Europe. The Navy also has
SSBNs on patrol, providing nuclear deterrence. Our maritime forces
also transport personnel and material in times of war. Maritime
defense of the homeland is mostly a Coast Guard effort, sometimes combined with other forces. ISR is a major mission focus, as
are forward presence and support of free market economies and
democracies. At any one time, the U.S. Navy is deployed around
the world in lots of different ports and in lots of different places.
The Navy also works to maintain open sea lanes—or what I
call “sea lanes of commerce.” While “sea lanes of communication”
is the standard definition for SLOC, in today’s world, these lanes
are devoted primarily to commerce. The Navy protects the safe
transit of raw materials and manufactured goods around the world.
At the bottom of the list are some other important tasks: antipiracy
efforts such as those off the Horn of Africa and disaster relief activities such as the recent response to the Japanese tsunami, along
with a host of others.
Interestingly, if you look at the data, you see that while the
Navy has focused on training and equipping its forces for combat
missions, they have typically been asked to do lots of other tasks.
Between 1970 and 2000, for example, the Navy was involved in
366 humanitarian missions but only 22 combat missions. So what
the Navy gears up for—what it spends money on—and what it
actually does are very often two different things.
Another way to look at the breadth of maritime missions is to
take a quick look at what our maritime forces were doing during one
single month. I have chosen March 2011 as an example (Figure 1).
Early in the month, the Navy helped provide humanitarian
assistance to the victims of the tsunami off Japan. Several weeks
later, Navy aircraft flew strikes and conducted electronic warfare
(EW) and combat search and rescue (CSAR) missions over Libya.
The Navy and Marine Corps were also supporting ongoing operations in Afghanistan and Iraq. The Navy was conducting antipiracy
372
Climate and Energy Proceedings 2011
operations off of Africa. SSBNs were on patrol conducting the
nuclear deterrence mission. And, the Navy was providing presence
in many areas around the world. While all of this was going on, the
Coast Guard was helping to secure our harbors and waterways. So
if you look in detail over a relatively short time period, you see U.S.
maritime forces providing support in a lot of different areas.
Figure 1. U.S. Naval Forces Employment—March 2011
Economic Considerations
What I want to delve into now is the relationship between economics and energy and security and the role of maritime forces
relative to that relationship. I will start with economics. I like to
look at the information shown in Figure 2 as a depiction of “the
United States, Inc.” While a lot of people are somewhat down
on America, if you look at the data, you see we are not doing
too badly in the overall scheme of things. In 2010, the U.S. gross
domestic product (GDP)—the market value of all final goods produced in the country—totaled $14.6 trillion. By contrast, China’s
GDP was about $5.7 trillion. While we can argue, of course, about
purchasing power parity and about whether the renminbi is properly pegged to the dollar, just looking at the raw numbers tells us
that the U.S. economy is about three times the size of China’s.
Chapter 11 Economic and Energy Security and Its Impact
373
Figure 2. United States, Inc.
Interestingly, the United States still accounts for 19.5% of world
manufacturing, despite the frequent complaints that U.S. manufacturing is going down. While it is true that U.S. manufacturing jobs
are declining, U.S. manufacturing output continues to rise. China’s
share of global manufacturing is roughly the same as ours, 19.7%.
But they are doing it with 100 million people while we are doing
it with about 11 million. In short, Americans are very productive.
The United States is also home to the vast majority of the
world’s 500 largest companies. The dollar still represents 60% of
the world’s reserves, the next largest being the Euro. And, we are
still the largest trading nation in the world, as you can see by the
numbers for exports and imports. So we are still doing pretty well.
Let us take a more detailed look at our GDP, which is defined
as the sum of private consumption, investment, and government
spending, plus the difference between exports and imports. From
Figure 3, you can see that private consumption is about two-thirds
of the U.S. GDP and that investments run about $1.8 trillion per
year, while government spending was about $3 trillion last year.
Unfortunately, U.S. exports have tended to lag behind imports in
recent years, but having said that, we still had about $4 trillion in
exports and imports last year.
374
Climate and Energy Proceedings 2011
Figure 3. GDP of United States, Inc.
So the bottom line is that the American way of life does depend
upon the global economy. When we talk about globalization and
trade, what we are talking about is a set of interdependent production systems and tremendous growth in trade of intermediate
goods. An intermediate good is a part, for example, that goes into
a larger system or a larger thing that we produce, for example,
chips going into computers or parts coming out of Japan going to
factories to produce Nissans in this country. Because intermediate
goods yield reduced costs because of efficiencies and economies
of scale, you are able to trade more goods and you can leverage
comparative advantages. All of this is fueled by intermodal transportation—a fancy name for containers. The list below, provided
by Steve Carmel (Maersk), summarizes these main points regarding
globalization and trade:
• Interdependent production systems
• Growth in trade in intermediate goods
• Reduced cost, more goods traded
• Leveraging comparative advantage and exploiting economies of scale
• Enabled by intermodal transportation (containers) [1]
Chapter 11 Economic and Energy Security and Its Impact
375
In reality, globalization consists of three important pieces—
information, finance, and the actual physical movement of material
goods. So when I wanted to buy a new Apple laptop last year, the
first thing I did was order what I wanted via the Internet. The next
thing I did was to give them my credit card number. After that, a
message went around the world to China that basically said to take
the chips that you got from Taiwan, take the mother boards, take
the hard drive, stick it all together, build exactly what I want, put
it in a container, and ship it to me. Then, within 4 or 5 days of my
placing that order, the laptop showed up at my door having traveled via containers on ships and via UPS delivery trucks. All three
pieces to globalization and trade are essential. Without all three,
you cannot have globalization.
Figure 4. Worldwide Trade at a Glance
Now let us look at containers—the ubiquitous means for
moving materials around the globe (Figure 4). The worldwide traffic in containers essentially tripled over the period from 1995 to
2008. Container experts like to talk in terms of 20-foot equivalent
units or TEUs. Thus, using this measure, the 40 × 8 × 8 foot container that shows up at the front of your house when you have
376
Climate and Energy Proceedings 2011
to move overseas is two TEUs. As you can see, the number of
containers shipped worldwide is immense—90% by value of all
imports into the United States arrive in containers. Oil is not our
dominant import; it is goods coming in containers. In 2008, tremendous amounts of goods were coming into and going out of
U.S. ports.
Figure 5. Supply Chains
So what does this all mean? It is important to supply chains
(Figure 5). If you are a good company and you are operating efficiently and have your logistics under control, you worry about the
supply chain, you worry about just-in-time logistics. Several years
ago, AMR looked at the top 25 supply chain companies in the
United States and determined that the average rate of return for
those companies in 2007 was almost 18% per year compared to
the Dow Jones industrial average of about 6.5%. [2]
Now the flip side to that is if you have problems with the
supply chain, and we are seeing that right now with Japan, you can
have problems with your shareholders. The producers of Nissan
parts, which are located in northeastern Japan, are having problems because they cannot run their plants because they do not
have electricity. As a result, we are seeing glitches in the supply
chain and in the production of Nissan automobiles in this country.
Chapter 11 Economic and Energy Security and Its Impact
377
Such problems can lead to a big hit to the value of shareholder
equity in the affected company. In fact, studies have shown that
companies that have supply chain problems can lose as much as
25% of shareholder value. It is a big deal. The reason Dell does so
well is that they built a very, very efficient supply chain; according
to their management, it is the biggest leverage point they have.
Figure 6 provides an overall look at global trade routes, based
on the automated information system data collected from all merchant ships. To put it simply, when a ship is traversing someplace,
this system says: “I am this ship, I am going to this particular port,
here are my coordinates, and here are the speed and direction that
I am going.” If you take all that data and you sum it up for a month,
you get a chart that looks like this. The black lines are the high traffic routes and the blue lines are the lesser traffic routes.
Figure 6. Trade Routes
Some areas appear as white even though they still carry a lot
of traffic. The Mississippi River, for example, appears white on the
chart, even though there is a lot of shipping traffic going up and
down the Mississippi. Thus, although not all important traffic is
shown on the chart, you can still see a tremendous amount of
traffic out of the East and West coasts of the United States going
378
Climate and Energy Proceedings 2011
to Europe and to East Asia and a lot of traffic coming out of the
Middle East, principally oil.
Now the question is: what happens if there is a port disruption?
The problem is, and this is true of most industries, the shipping
industry does not have a lot of excess space and capacity that can
take up the load when one portion of the overall network fails,
for whatever reason. We see something similar when we conduct
infrastructure assessments and look, for example, at whether the
medical infrastructure in any given city could cope with a major
disaster. In such cases, we invariably find that the answer is no,
they do not have a lot of extra hospital beds. As it turns out, the
same outcome holds for rail capacity and port capacity. In each
instance, the reason for the lack of excess capacity is that providing it is expensive and there is not a good return on investment. So
when people talk about providing extra infrastructure capacity, the
question is always going to be how much in which sector and who
pays for it. There are no easy answers to that question.
But having said that, the problem is we do not have a lot of
excess capacity in our ports. Thus, if an attack or disruption occurs,
we are going to have a problem; things are going to pile up, and
that disruption can persist and propagate (Figure 7). The lack of
excess capacity is likely to cause cascading effects that can lead to
all kinds of problems.
Figure 7. Port Disruptions [1]
Chapter 11 Economic and Energy Security and Its Impact
379
A 2006 Congressional Budget Office study basically said that
if the Long Beach facilities near Los Angeles were shut down, the
U.S. economy would suffer damage on the scale of $125–150 million per day. [3] A Booz Allen study concluded that a 12-day shutdown of all ports in this country would entail an economic loss of
about $60 billion. [4]
As this point, I would like to briefly recap the economic portion of my presentation. I have tried to show you that the United
States is part of the globalized world; we rely heavily on trade, we
rely heavily on our ports, and we rely heavily on shipping. Now,
I am going to turn to considerations of energy, and then I will talk
about what happens if energy supplies get disrupted. I will conclude by looking at what economics and energy imply about the
potential roles for the DoD’s maritime forces.
Energy Considerations
Figure 8 shows the world’s oil producers in million barrels per
day (MBD) in 2008; the Energy Information Agency’s 2010 report,
which will show data for 2009, has not yet been released. [5] What
you see on the left-hand side of the curve is that Russia, Saudi
Arabia, and the United States are actually the three biggest producers of petroleum.
Figure 8. World Oil Producers (MBD in 2008) [5]
380
Climate and Energy Proceedings 2011
On the consumption side, the United States appears as the
largest consumer; China and Japan are the two next largest consumers (Figure 9).
Figure 9. World Oil Consumers (MBD in 2008) [5]
Figure 10. World Oil Importers (MBD in 2008) [5]
In terms of oil imports, the United States uses about 18–20 million barrels per day (Figure 10). Because we are producing about
Chapter 11 Economic and Energy Security and Its Impact
381
10 million barrels per day, we have to import roughly 8–10 million
barrels per day. Japan and China are the other two big importers.
On the export side, the two major exporters are Saudi Arabia
and Russia (Figure 11).
Figure 11. World Oil Exporters (MBD in 2008) [5]
Figure 12. World Oil Flows
Figure 12 shows that a lot of oil comes out of the Middle East
and goes to Western Europe and that a lot of oil comes out of the
Middle East to go to East Asia, principally through the Indonesian
382
Climate and Energy Proceedings 2011
straits to Southeast Asia, India, China, and Japan. A lot of oil also
comes to the United States, but from very, very disparate sources.
We import oil from Canada, Mexico, South America, and Africa,
as well as from the Middle East.
Now let us look at the choke points that this oil has to flow
through (Figure 13). The thing with choke points, with the exception of the Strait of Hormuz, is that you can usually go around. A
CNA study done a few years ago looked at what would happen
in you closed the Strait of Malacca or the Sunda Strait—all the
Indonesian straits, in fact. [6] That study showed that you can still
sail around Australia. It is going to take a little bit longer, it is going
to add to the cost, and it will probably result in an approximately
1% hit to the world economy, but you can get away with it; it is
not the end of the world. Having said that, if you close the Strait of
Hormuz, it is the equivalent of closing a port because there is no
way around. There are no pipelines that cross Saudi Arabia to take
an equivalent amount of oil down to the Red Sea. There is just no
way around it, and that is why we care so much about it.
Figure 13. Major Oil Shipment Routes
Now let us look at how the United States uses energy (Figure 14).
From an overall perspective, petroleum accounts for about onethird of total U.S. energy consumption. We primarily use it for
transportation purposes and for industrial purposes—chemicals,
Chapter 11 Economic and Energy Security and Its Impact
383
fertilizers, and other things. We do not, however, use oil to make
electricity. We are not, by the way, going to solve our Mideast oil
problem by producing more electricity from nuclear energy or by
using clean coal.
Figure 14. Sources of U.S. Energy Consumption
Two-thirds of all oil in the U.S. is used for transportation, with
heavy trucks and aircraft accounting for roughly one-third of the
two-thirds and cars, light trucks, and SUVs making up the other
two-thirds of the two-thirds (Figure 15).
Figure 15. U.S. Oil Usage
In March 2008, then-President George W. Bush spoke about
our addiction to petroleum and the fact that it presents a target for
terrorists like Osama bin Laden (Figure 16). Similar concerns were
raised in the National Defense Strategy for 2008, which declares
that the well-being of the global economy is contingent upon
384
Climate and Energy Proceedings 2011
access to energy resources—read that as oil. [7] As we are well
aware, current trends indicate an increasing reliance on petroleum.
Figure 16. Oil As a Strategic Issue
If you look at the Energy Information Agency (EIA) numbers
heading out to 2035, for example, you will see that those numbers
really do not change much. The amount of oil that is going to be
used worldwide is not expected to change markedly. Renewables
are projected to grow a little, and other things will also grow, but
the total amount of oil used in the world, at least according to the
EIA, is not expected to change by much. So the bottom line, at
least according to the National Defense Strategy, is that the United
States is going to have to continue to foster access to and the flow
of energy resources viable to the world economy.
A couple of years ago, JHU/APL did an internal study that
asked the following questions (Figure 17): (1) What if a few major
Mideast oil processing facilities were successfully attacked and had
to be taken offline? (2) What if 5–10% of the world’s oil were taken
off the market for 6 months at a time when supplies were tight
and demand was high? It is unlikely that either of these events
would have the same level of impact today, since global supplies
are actually in pretty good shape and global demand is actually
down compared to 2007. However, if events such as these had
Chapter 11 Economic and Energy Security and Its Impact
385
happened shortly before the onset of the recent recession, it would
have been a big problem.
Figure 17. An Attack on Oil and the Economy?
The next question we asked was: What if such an event were
followed by the threat of additional attacks, including strikes against
ports and choke points? What is the role of maritime forces at that
point? A lot of people will say that this will never happen. However,
Osama bin Laden had said that this is something he was interested
in doing. In his view, the U.S. invasion of Iraq was simply an effort
to dominate Iraq’s energy resources. He clearly understood that
a steady and affordable oil supply was crucial to the well-being
of the United States and the global economy. He believed that
prices should be between $100 and $150 a barrel and that anything less than that was stealing from Muslims in the Mideast. He
also believed that the Mideast resources, the oil resources, were
the treasure for current and future generations of Muslims and thus
should be protected and preserved for their benefit. Given that, he
was faced with the following dilemma: how do you attack oil and
the flow of oil to the United States or Western Europe yet preserve
that wealth? Osama’s solution to that was to rule out attack on
wells and reserves and instead to focus on tankers, oil processing
facilities, ports, and pipelines, because those things can be rebuilt.
386
Climate and Energy Proceedings 2011
You do not want to permanently contaminate a reserve, but it is
okay to take out something that is part of the transportation or
refining infrastructure.
Such attacks have been carried out in the past. The French
oil tanker Limburg was attacked in 2002; it is shown smoking in
Figure 18. A lethal attack was made on an oil company executive in Bahrain in 2004. The world’s largest oil production facility
at Abqaiq in Saudi Arabia was attacked, albeit unsuccessfully, in
2006. The Abqaiq facility processes two-thirds of the 9.5–10 million barrels of oil that the Saudis produce each day. It is no wonder
that terrorists struck this facility. Fortunately, in this instance, Saudi
security forces were able to thwart the attack.
Figure 18. Past Attacks
One might ask whether or not the intentional diversification in
U.S. petroleum imports would help us weather such an event. If a
particular facility in Saudi Arabia gets taken down, does that really
matter to us since the United States does not import that much oil
from Saudi Arabia? Unfortunately, the answer is the oil market does
not work like that. It is like cows at the trough; everyone is drinking
from the same water source. Oil is a worldwide commodity, and
Chapter 11 Economic and Energy Security and Its Impact
387
its price is determined in a global market. If one suffers, everyone
else suffers as well.
A number of recent oil import and choke point disruptions are
listed in Figure 19.
Figure 19. Past Oil Disruptions
In 1956, Egyptian leader Gamal Abdel Nassar seized control
of the Suez Canal and temporarily closed it. The Suez was closed
again in 1967 as a result of the Six-Day War; the impact appears
in Figure 19. In 1970, the Saudi tapline to the Mediterranean was
closed. What I remember most, because I was not old enough to
really remember the earlier disruptions, is sitting in the gas lines in
1973 and 1974 for hours on end and being told I could have only
10 gallons of gas. As I recall, oil prices went up by a factor of three
or four at that time.
Other events included the 1979 Iranian revolution where oil
prices surged (Figure 20). In 1990, Iraq invaded Kuwait and the
1991 Gulf War followed. U.S. Naval forces were assigned to escort
oil tankers. More recently, the U.S. invasion of Iraq in 2003 resulted
in most Iraqi oil production being taken offline.
388
Climate and Energy Proceedings 2011
Figure 20. Additional Past Oil Disruptions
Figure 21. Historical Price of Crude Oil: 1947–2009
The question then becomes what does this mean for price?
Figure 21 plots price per barrel, measured in constant 2008 dollars,
over time. Based on the data, you can see that the Suez crisis did
not have much of an impact. However, the 1973 Yom Kippur War
involving Israel, Egypt, Syria, and Jordan and the subsequent Arab
oil embargo produced a substantial spike. The result of that was the
Chapter 11 Economic and Energy Security and Its Impact
389
1973–1974 recession, during which prices started to drop. Shortly
afterward, the Iranian Revolution occurred, followed by the Iran—
Iraq War, both of which led to supply disruptions and subsequent
price spikes.
As a result of those price increases, many Americans essentially said that gasoline had become too expensive, and so they
traded their 12-mile-per-gallon gas guzzlers for 24-mile-per-gallon
compact cars. So many people did that, in fact, that over a period
of just 7 years, the average miles per gallon for the entire automobile fleet in this country went from 12 miles per gallon to 24 miles
per gallon. Because the Europeans did the same thing, demand
dropped worldwide and the price of petroleum declined over the
20-year period from 1980 until about 2000.
Over this period, the OPEC countries had trouble staying on
quota. They kept cheating on their quotas, and so the supply of oil
remained high. Finally, in about 2000, they agreed to cut supplies
by 4.2 million barrels per day. As a result, the price of oil began
to rise. This was followed by a large strike in Venezuela, substantial economic growth in Asia following their 1998 meltdown, and
a weakened U.S. dollar. A big spike in the price of oil followed.
Then, prices dropped substantially after the 2008–2009 recession,
but they have begun to rise again as demand has started to come
back up.
One of the things the United States has been very smart about
was that after the 1973–1974 oil embargo, we established the
Strategic Petroleum Reserve (Figure 22). Basically the idea was
to have a billion barrels of oil stored in underground reservoirs
in southern Louisiana, Texas, and Mississippi. That specific area
was chosen for several reasons: (1) the underground salt domes
located there provide ideal storage areas for petroleum, and (2) that
is where the majority of oil inflows come into the United States, so
that is where the pipelines are and that is where the refining capacity is. It makes sense to have it there.
The basic idea of the strategic reserve was to have 90 days of
U.S. imports set aside, based on an average importation rate of
about 11 million barrels a day. As it turns out, we did not build the
390
Climate and Energy Proceedings 2011
billion-barrel reservoir, we built a 727-million-barrel storage facility. That facility is currently full, because the United States has been
spending money over the last few years to fill the reserve, which in
my view is a good thing.
Figure 22. U.S. Strategic Petroleum Reserve (SPR)
The drawdown capacity for the reserve is about 4.5 million
barrels a day, about one-third of U.S. imports. There are always
calls to release oil when prices go up; however, the government
always pushes back and says no. Why? Because you really only
want to release petroleum from the reserve when you have a true
shortage, such as the shortages after Hurricanes Katrina and Rita in
2005 and after Hurricanes Gustav and Ike in 2008.
The International Energy Agency (IEA) provides a worldwide
strategic petroleum reserve that is the global analog of the U.S.
Strategic Petroleum Reserve. This Paris-based intergovernmental
organization was founded in 1974, shortly after the 1973 Arab
oil embargo. It was created to prevent disruptions in the supply
of oil. As of June 2007, the IEA’s combined stockpile was about
4.1 billion barrels, of which 1.5 billion was under direct government control. As you can see from the map in Figure 23, the IEA
includes Canada, the United States, several nations in Western
Europe, Scandinavia, Turkey, Australia, New Zealand, Japan, and
Chapter 11 Economic and Energy Security and Its Impact
391
South Korea. The participating nations meet periodically to vote or
resolve issues.
Figure 23. International Energy Agency
The IEA’s agreement is called a Coordinated Emergency
Response (Figure 24). In the event of a worldwide disruption, they
have agreed in advance as to who gets what. The IEA agreement
was implemented during the 1999 Gulf War and in 2005 following
Hurricane Katrina.
Figure 24. IEA Coordinated Emergency Response
Measures (CERM)
392
Climate and Energy Proceedings 2011
Implications for U.S. Maritime Forces
Now let us return to our discussion of potential attacks on oil
infrastructure. One of our options is to draw on our national or
international strategic reserve. Clearly, the United States and other
nations will have to work together to see the shortage created by
a terrorist attack through. There will be lots of efficiency measures
that can be implemented. For example, the country could go to a
4-day work week or make cutbacks in other areas.
We next examined the general question: What should the maritime role be in protecting infrastructure and choke points from
potential follow-on attacks?
To start, we asked ourselves: Do critical ports and terminals
need to be guarded, and, if so, who does it? As it turns out, the
answer to the first question is yes. But obviously, if we are engaged
in other places—for example in Iraq, Afghanistan, or Libya—we
have to come up with the assets to do that. We have to determine
what assets to put where and what we can trade off.
The Navy, Marine Corps, Coast Guard, and SOF personnel,
in collaboration with the military forces of allies, would, quite
frankly, have to do this. The next question is whether the DoD
would actually guard ports, terminals, and production facilities.
The answer that we arrived at was yes, they absolutely would and
that a regional cooperative approach would be required. We are
going to have to work with our allies.
As for the United States itself, legal constraints such as those
imposed by Posse Comitatus, Title X, and the Jones Act (which says
that only U.S. flagships can move certain commodities within U.S.
waters) will impose limits on what the DoD can do. Despite these
restrictions, the DoD is probably going to get involved in protecting
U.S. infrastructure. The DoD could use a “layered” approach with
local port authorities, metropolitan police, the National Guard,
the Coast Guard, and the DoD. The Navy obviously can help,
for example, by providing ISR support. In certain areas, the Navy
might be required to provide missile defense. Obviously, effective
prioritization is going to be key.
Chapter 11 Economic and Energy Security and Its Impact
393
What about follow-on attacks? We considered two categories:
attacks on the U.S. homeland and attacks somewhere in the rest of
the world. In either case, terrorists could seek to damage oil industry facilities, related industrial facilities, or major ports. Regional
interstate wars or internal threats also could pop up as a result
of the disruption. Disputes over ownership of oil-producing areas
could flare up. Vulnerable economies would undoubtedly suffer,
and strife could occur as a result. Internal strife could, in turn, lead
to repression.
My guess is that our alliance system and our economic dependencies could be threatened by such attacks. Serious statesmanship would be required to resolve the international issues. Still,
opportunities for mischief are likely to abound.
As for the question of what the worst case is for follow-on
attacks, the answer we arrived at was that a series of attacks against
refineries or ports would impose the most stress. If you take out
a port or a refinery, it is not like a choke point that you can sail
around. If you take out a port, you have a major problem. It is like
the Strait of Hormuz; there is simply no easy workaround.
In such a case, festering disputes over access to oil could
worsen. China’s claim of ownership of potential oil-producing
areas near the Spratly and Paracel Islands in the South China Sea
or other Southeast Asian oil facilities could once again come to
the fore. China might also use the situation to gain leverage over
Taiwan, Japan, or other states in the region. Or, suspicion that
one nation state had funded terrorists or acted directly to take out
another nation state’s oil facilities could cause war to break out in
the Middle East.
As to whether the DoD should be involved in helping to stabilize the global system, I think the answer is that the Department
should support homeland security by providing assistance to the
security of ports, infrastructure, and lines of communication. As
for broader Mideast security, we probably do not want to put additional forces on the ground there, but we could provide advisors
and support wherever possible. We can train and equip others to
take on antipiracy operations and keep the sea lanes open. We
394
Climate and Energy Proceedings 2011
should work hard to convey the message that it is not okay to seize
oil production facilities, and that it is not going to work. We can
use deterrent measures to do that, to discourage such opportunism.
Over the last two decades, we have clearly moved from
the Cold War environment into a post-Cold War environment.
However, given that some of our adversaries obviously intend to
disrupt Western economic and energy flows, as Osama bin Laden
made clear, should the DoD now be considering moving to an
economic-and-energy security environment? The question I would
leave you with tonight is: “Is it time to pay more attention to this
particular problem?”
Figure 25. Two Schools of Thought on Future Maritime Forces
There are two schools of thought regarding the future role of
our maritime forces (Figure 25). We saw a similar argument play
out when the Navy was working on the previous version of the
maritime strategy. On one side of the argument are those who
believe that we should be getting ready to fight the next big war
and thus that the primary roles for our maritime forces should be
power projection and sea control. On the other side are those
who argue that we should focus on tasks such as economic and
energy (E2) security, antipiracy, and humanitarian relief. I do not
think the question is whether we should be doing all of one or all
Chapter 11 Economic and Energy Security and Its Impact
395
of the other, but rather where should we place our emphasis. That
is something I would ask you to think about.
Along these lines, I find it particularly interesting that in January
2011, NATO released their new maritime strategy. It basically
says that global trade relies on secure and low-cost international
maritime transportation and distribution networks and that both
of these are vulnerable to disruption. Because those disruptions
would have serious impacts, the maintenance of freedom of navigation, sea-based trade routes, and related critical infrastructure is
of considerable importance to the NATO nations.
REFERENCES
1. Global Commerce Networks: Presentation to JHU/APL’s
Rethinking the Future International Security Environment,
Mr. Steve Carmel, Maersk Line, August 22, 2007.
2. Accenture, A Global Study of Supply Chain Leadership and its
Impact on Business Performance, 2008.
3. Congressional Budget Office, The Economic Costs of Disruptions
in Container Shipments, 2006.
4. Booz Allen Hamilton, Port Security War Game: Implications for
U.S. Supply Chains, 2003, http://www.boozallen.com/media/
file/128648.pdf.
5. Energy Information Administration, Annual Energy Outlook
2009, 2008.
6. Center for Naval Analyses, Value of Maritime Trade in Southeast
Asia, 1994.
7. Department of Defense, National Defense Strategy, 2008, http://
www.defense.gov/news/2008 national defense strategy.pdf.
8. Michael Scheuer, Stephen Ulph, and John C.K. Daly, Saudi
Arabian Oil Facilities: The Achilles Heel of the Western Economy,
Jamestown Foundation, May 2006, http://www.jamestown.org/
uploads/media/Jamestown-SaudiOil.pdf.
396
Climate and Energy Proceedings 2011
Q&
A
Session with MR. DUNCAN BROWN
the oil pipelines from Canada to the United States be
Q: Might
vulnerable to attack?
Mr. Duncan Brown: Yes, people could go after pipelines.
Fortunately, however, pipelines can be repaired. You can put in
new pipes and valves fairly quickly. You can take them offline for a
short period of time. The more serious attacks are those directed at
ports or large oil-processing facilities. As I stated earlier, I think that
is where the major issue would be. And again, it is not so much
about disruptions in the United States; it is about disruptions anywhere in the world. Petroleum is traded on the world market—we
all drink from the same trough, and we are all in this together.
question has to do with the ongoing (and very tragic) crisis
Q: My
in Japan. Given your three constructs of economics and the oil
supply and consumption piece, the fact that their economy went down
has apparently reduced demand for oil but significantly increased the
price at the same time.
It seems to be kind of a double-edged sword. What lessons can we
learn from that kind of interdependency as we apply it toward your
stated questions?
Mr. Duncan Brown: Well, I think the answer is supply and
demand fluctuates. We have obviously just been through a major
recession. Japan just got a huge hit. Demand is down on a relative basis, for example, from where it was in 2008. But my guess
is demand will come back up at some point; supply usually tries
to meet demand, and producers will produce less. And so that will
dictate the price. Having said that, if you have a major disruption,
whether it is a port disruption, the closure of a major choke point
that cannot be overcome, or an attack on a major facility, that is
just going to drive prices through the roof, and that is definitely
going to hurt the economy. And we saw that in the past.
For example, in 1973 and 1974, we intervened on Israel’s side.
Arab nations were not happy with that, so we had the subsequent
Chapter 11 Economic and Energy Security and Its Impact
397
Arab oil embargo, and the price of oil went through the roof. The
consequence of that was a major recession in 1973–1974, which,
until this last recession, was the biggest U.S. recession since the
Great Depression. So the answer is it does not matter necessarily
where we are today in terms of supply and demand. Supply and
demand will pretty much balance out most of the time. But the
issue of concern is what happens if you take a major hit.
cannot defend every choke point everywhere in the world
Q: You
with limited resources. Do you have some specific choke
points or egress points in mind?
Mr. Duncan Brown: I think you focus on the Strait of Hormuz
because there is no way around it. I think you give up on the other
straits; you just say, “If I have to, I can sail around,” so you do not
worry about those as much. I think you worry about major import
and export ports, and we know where those are. You worry about
major facilities, such as the refining capacity in Houston, Texas.
You pick and choose the major pieces—the ones whose disruption would cause major harm. Because you are absolutely right,
we cannot defend everything, so we have to pick and choose, and
we have to prioritize.
Q: What other critical infrastructure might you have to protect?
Mr. Duncan Brown: That is a good question. I think you
break it into two pieces. One is the intercontinental communication cables; the other is their connection points. When I was a kid,
I loved charts, and one of the charts I had hanging on my wall was
one that showed where all the AT&T lines came into the East Coast
of the United States. They do not produce that chart anymore, for
obvious reasons.
So I think you have to defend those. I do not know how you
defend thousands and thousands of miles of undersea cable. I think
what you do instead is create the capability to repair those things
or you create workarounds. And those workarounds might be routing traffic a different way, which we should be able to do to some
degree, or reducing the amount of traffic and prioritizing when that
traffic can move on those cables in terms of the time of day.
398
Climate and Energy Proceedings 2011
look at balancing responsibility, how do you reconQ: Ascileyou
what the federal government should do and what private
industry should do in terms of protecting critical infrastructure?
Mr. Duncan Brown: In my mind, such questions are very similar to the excess capacity question: how much excess capacity do
you build, how much security do you pay for, and what do you
plan for? Obviously industry, to the extent that it can, is going to
wring out as much excess capacity as possible. Firms are going to
wring out as much security as possible; when possible, they will
base their decisions on risk calculations. Still, I do not have an
exact answer, and I do not think anybody knows. I think there will
be a lot of assumptions made and there will be a lot of calculations
made, but at the end of the day, I do not know.
that piece, but what I am really trying to get
Q: Iyourunderstand
feel for is the balance between what the federal government takes on and what industry takes on.
Mr. Duncan Brown: I do not know the precise answer for
that. I do not know how to rationalize who pays for what and what
portion of the bill is allocated to the federal government and what
portion is allocated to private industry. I am sure there are lots
of people with lots of answers, but I am not sure I would believe
them, quite frankly.
anyone done a study on the cascading and potential
Q: Has
failures that come with different amounts of oil shortage?
For instance, power plants typically run on coal, but the trains that get
the coal there run on diesel. Has someone studied the other parts of the
infrastructure that could fail sequentially in the event of a shortage?
Mr. Duncan Brown: There is a critical infrastructure panel in
this country that I think has examined such issues, but I do not
know if they have addressed your precise question: Does the loss
of a tremendous amount of oil screw up the trains that are delivering coal to our nation’s electrical power plants? There are so many
inter-relationships between all of the variables that affect our ability
to respond, and sometimes when we do calculations we find that
we have missed one.