Crude World Read online

  As a finale, Simmons mentioned an interview in which he’d told a skeptical reporter that the price of a barrel of oil would hit the triple digits. At the time, in 2005, a barrel fetched $50.

  “A hundred dollars?” the journalist had scoffed.

  Simmons issued another of his mischievous smiles as he recalled what he’d told the disbelieving journalist.

  “I wasn’t talking about low triple digits.”

  Whom to believe? Before visiting Saudi Arabia, I was advised by several oil experts to try to interview Sadad al-Husseini, who had just retired after serving as Aramco’s top executive for exploration and production. I faxed him in Dhahran and received a quick reply; he agreed to meet me. A week later, after I arrived in Riyadh, Husseini e-mailed me, asking when I would come to Dhahran. In a follow-up phone call, he offered to pick me up at the airport. He was, it seemed, eager to talk.

  It can be argued that in a nation devoted to oil, Husseini knew more about it than anyone else. Born in Syria, Husseini was raised in Saudi Arabia, where his father was a government official who acquired Saudi citizenship for his family. Husseini earned a PhD in geological sciences from Brown University in 1973 and went to work in Aramco’s exploration department, rising to the highest position. Until retirement, he was a member of Aramco’s board as well as its management committee. He was one of the most respected oil experts in the world.

  After meeting me at the cavernous airport that serves Dhahran, he drove me in his luxury sedan to the regal yet, by Saudi standards, modestly sized villa that houses his private office. As we entered, he pointed to an armoire that displayed a dozen or so vials of black liquid. “These are samples from oil fields I discovered,” he announced. Upstairs, there were even more vials, and he would have possessed more than that except, as he said, laughing, “I didn’t start collecting early enough.”

  We spoke for several hours. His message was clear: the world was heading for an oil shortage. His warning was quite different from the calming speeches that Naimi and Yergin delivered on an almost daily basis. Husseini explained that the need to find and produce more oil was coming from two sides. Most obviously, demand was rising. Less obviously, merely to maintain their reserve base, producers needed to replace the oil they extracted. It’s the geological equivalent of running to stay in place. But oil companies, Husseini said, were unable to do so. Husseini acknowledged that new fields are found from time to time—for instance, offshore near West Africa and in the Caspian basin—but he believed their output wouldn’t be sufficient. With demand rising a few percentage points every year at times of economic expansion, and with the output of older and larger fields declining by a few percentage points annually, the industry needed to find vast amounts of new oil to maintain an equilibrium of supply and demand. “That’s like [finding] a whole new Saudi Arabia every couple of years,” he said.

  He spoke patiently and firmly, like a ship’s captain spotting an iceberg and explaining to his passengers that it was time to put on their life preservers. He did not disclose precise information about Saudi reserves—that could land him in jail—but he was unusually forthright and pessimistic for an insider. Traditionally, the Saudis have had an excess of production capacity that allowed them to control the market in times of emergency. In 1990, when Iraq’s invasion of Kuwait shut down not only Kuwait’s supply of oil but also Iraq’s, the Saudis upped their output to address the shortfall. They did the same when America created jitters by invading Iraq in 2003. The Saudis functioned, as they always had, as the central bank of oil. Husseini argued that those days were over—that at times of global economic expansion, the Saudis could not satisfy the world’s thirst for more.

  At the energy conference in Washington, James Schlesinger, the moderator, conducted a question-and-answer session with Naimi at the conclusion of his speech, and one of the first questions involved peak oil. Might it be true, Schlesinger asked, that Saudi Arabia was nearing the geological limit of its output?

  “I can assure you that we haven’t peaked,” Naimi replied. “If we peaked, we would not be going to 12.5 and we would not be visualizing a 15-million-barrel-per-day production capacity. … We can maintain 12.5 or 15 million for the next thirty to fifty years.”

  Husseini told me that the 12.5 million target was realistic but anything beyond it was not. Even if output can be ramped up to 15 million barrels a day, geology may not be forgiving. Fields that are worked too hard can drop off quite sharply, in terms of output, leaving behind large amounts of oil that, with better reservoir management, would have come to the surface. This is known as “trapped oil;” the haste to extract more oil can lead to less oil being extracted. “It’s not sustainable,” Husseini said. “If you are ramping up production so fast and jump from high to higher to highest, and you’re not having enough time to do what needs to be done, to understand what needs to be done, then you can damage reservoirs.”

  On this, Husseini was not alone. I talked with Nawaf Obaid, a Saudi oil and security analyst regarded as being exceptionally well connected to the Saudi leadership. “You could go to fifteen, but that’s when the questions of depletion rate, reservoir management and damaging the fields come into play,” he said. “There is an understanding across the board within the kingdom, in the highest spheres, that if you’re going to fifteen, you’ll hit fifteen, but there will be considerable risks … of a steep decline curve that Aramco will not be able to do anything about.”

  Even if the Saudis are willing to try for 15 million barrels a day with the world economy recovered, Husseini pointed out a practical problem. Saudi Arabia would need to drill a lot more wells and build a lot more pipelines and processing facilities. During times of expansion, the oil industry suffers a deficit of qualified engineers and of equipment and raw materials—for example, rigs and steel. Husseini said that such things cannot be wished from thin air to meet demand. “If we had two dozen Texas A&Ms producing a thousand new engineers a year and the industrial infrastructure in the kingdom, with the drilling rigs and power plants, we would have a better chance, but you cannot put that into place overnight.”

  You don’t need to be a Saudi geologist to grasp the peak crisis that awaits us. A fourth-grade understanding of math will do. In 2004 the Energy Information Administration (EIA), which is part of the U.S. Department of Energy, forecast that by 2020 Saudi Arabia would produce 18.2 million barrels a day, and that by 2025 it would produce 22.5 million barrels a day. Those estimates were not based on hard data about Saudi supplies but on the expected demand of the world’s oil consumers. The figures simply assumed that Saudi Arabia would be able to supply whatever it was called on to supply. A year later, the EIA revised those figures downward, but not because of new and accurate information about world demand or Saudi capacities. The United States changed the figures because the original ones were so patently unrealistic.

  “That’s not how you would manage a national, let alone an international, economy,” Husseini said. “That’s the part that is scary. You draw some assumptions and then say, Okay, based on these assumptions, let’s go forward and consume like hell and burn like hell.” When I asked whether Saudi Arabia could pump 20 million barrels a day—about twice what it is now producing from fields that are not getting younger—Husseini paused. It wasn’t clear if he was trying to figure out the answer or if he needed a moment to decide if he should utter it. He finally replied with a single, forceful word: No.

  “The expectations are beyond what is achievable. This is a global problem … that is not going to be solved by tinkering with the Saudi industry.”

  Time has been good to Matt Simmons. A doubling of prices after the publication of his book prompted even Chevron and British Petroleum to announce that peak oil is a near rather than a distant event. The recession that followed, suppressing the need for oil, only put off the reckoning. We face an era of scarcity that involves higher prices for oil and fiercer competition for what’s left. We are a foggy-headed boxer on his knees, unaware of the
blow that awaits us.

  I stood beside a dirt road with some of the poorest women in Africa, waiting for one of the richest men in Africa.

  Along with a few hundred unfortunate citizens of Equatorial Guinea, I was trying to avoid heatstroke at a sweltering spot where the dirt of the jungle met an unevenly paved road on the outskirts of Ebebiyin, a hungry and wary town that reminded me of a stray dog whose ribs poke hard at its skin. Around me, women swayed to a rhythm that was hard to resist, even though the lyrics were not of a can’t-stop-dancing variety: “We await you Mr. President / We are happy to see you / You are the people’s president.” In the near distance, a cloud of Martian dust heralded the arrival of the leader whose visage was on their T-shirts.

  President Teodoro Obiang’s motorcade consisted of forty vehicles with enough firepower for a small war. In the lead were army-green trucks carrying elite soldiers in black ninja outfits. The jeeps in front of his armored Lexus SUV carried his Moroccan bodyguards—the president does not trust his own people to protect him—some of whom were perched on running boards, clutching machine guns aimed at the crowd. The president seemed to be invading rather than visiting. His personal armada was a projection of fear, not strength, because uneasy lies the head of a man who clutches a nation’s wealth. Obiang, whose salary was reportedly $60,000 a year, had recently been discovered to control bank accounts exceeding $700 million.

  Teodoro Obiang, president of Equatorial Guinea, at a parade in Ebebiyin

  The presidential Lexus halted amid Ebebiyin’s chickens-in-the-road squalor. Obiang strolled up the street, shaking hands with the people who lined the broken sidewalks as they shouted and gestured a bit awkwardly, unsure of the precise calibration of enthusiasm and piety desired. His posture was regal, almost rigid; he can turn on the populist charm, as dictators must do on occasion, but he wants everyone to know that he is not a common man. On this day, his strict posture and expensive suit conveyed a particular and intentional message: I am the leader, you are my subjects.

  Obiang had traveled to Ebebiyin to celebrate the thirty-sixth anniversary of independence from Spain, but the weekend-long party had more to do with his alleged brilliance than the end of colonial rule. This is one of the keys to retaining absolute power anywhere: the nation and the dictator should be regarded as conjoined entities, so that the health of the former is impossible without the latter. Obiang enjoys being called “El Libertador,” suggesting that he freed the country from the nightmares preceding his longed-for intervention. It is not mentioned that he “liberated” the country only from a postcolonial genocidal regime in which he was an instrumental enforcer.

  The highlight of the weekend was a parade down Ebebiyin’s finest stretch of asphalt. On the morning of the parade, I stopped by a two-story hospital a few hundred yards from the rutted tarmac upon which soldiers and workers would march in honor of their leader. The hospital had almost no medicine. A Cuban doctor—Equatorial Guinea does not have a medical school, and few of its citizens are licensed doctors—unlocked a storage room to show me the supplies, which consisted of bandages and a few bottles of aspirin and other pills. A place for dying rather than healing, the hospital had just received a dash of much-needed attention from the government: it had gotten a fresh coat of paint because it was visible from the reviewing grandstand and needed to look nice for the dignitaries.

  There is a political price for having no medicine for the people but lots of booze for the elite (a VIP reception on the eve of the parade, to celebrate a leadership award Obiang bestowed upon himself, had featured enough Jack Daniel’s to inebriate Las Vegas). A few hours before the parade, several hundred soldiers—not the presidential battalion but underfed conscripts whose jungle checkpoints served as opportunities to cajole spare change from civilians—were ordered by the Moroccan bodyguards to break down their weapons to show they had no bullets. The Moroccans supervised this task with glares that made it clear that everyone they regarded was suspect.

  The parade was led by the bulletless soldiers, goose-stepping in a manner that evoked East Germany circa 1976, though with less than Teutonic precision. I sat beside the grandstand, under an umbrella for protection from the occasional rain and the painful sun that was like a laser to my head. Delegations from town after town marched by with banners saluting the president, who sat in a cushioned chair in the grandstand, paying occasional attention to the exertions below him.

  Just as the festivities settled into mind-numbing redundancy, I noticed a trio of American flags coming up the road, carried by a delegation of local men and women whose banner said they were from ExxonMobil. They also carried white ExxonMobil flags and wore T-shirts imprinted with the company’s logo. They were followed by delegations from Halliburton, ChevronTexaco and Marathon, all of them hoisting corporate banners, American flags and celebratory placards that hailed the wisdom of the president. They were not the only representatives of Big Oil: American executives, having flown into town on corporate helicopters, sat in the VIP grandstand, mingling with dozens of diplomats and military attachés, including a colonel from the United States Army Special Forces.

  It might seem odd that dignitaries from the world’s largest countries and executives from the largest companies would attend a dismal parade in a scorching corner of an oppressive nation so small it had just a few traffic lights and not a single bookstore. This was testimony to the reach of oil, which was turning the powerful into plunderers.

  Just as every unhappy family is unhappy in its own way, every dysfunctional oil country is dysfunctional in its own way. A distinguishing feature of Nigeria is that it suffers all-against-all mayhem in which generals, ministers, oilmen, rebels and village chiefs are cogs in a national corruption machine. In Ecuador, oil led to the contamination of a swath of the Amazon and left the government poorer, because it accumulated billions of dollars of debt it could not pay off. In Saudi Arabia, the financing of Islamic extremism is directly connected to oil. But Equatorial Guinea has been shaped in a different way. Oil consolidated power and wealth into Obiang’s hands and turned American companies and America’s government into his all-too-witting accomplices. If there was a silver lining to the petrodisasters of the twentieth century, it was that the same mistakes would not be made again. Equatorial Guinea became an oil exporter in the 1990s, by which time the world’s politicians, bankers and oilmen had promised to do a better job.

  Parade in Ebebiyin, Equatorial Guinea

  When I visited in 2004, the results were in. Thanks to oil, Obiang enjoyed a global embrace that had enabled him to become one of Africa’s richest men. The Western dignitaries at the Ebebiyin parade, though not stirring from their shaded seats, were carrying out a demonstration of their own—showing, by their satisfied presence, that they were on the side of dictatorship. Of course, it’s common for Western nations to embrace dictators, but the Mugabes and Marcoses of the world tend to be abandoned if their rule becomes too odious. The calculus is different if a dictator has oil. The substance not only offers itself as a treasure to be stolen; it can become a political amulet that protects the thieves from abandonment or punishment. Obiang, who accumulated friends rather than enemies, was proof. I learned this quickly while in the country, and the steepness of my learning curve was fortunate, because within two weeks Obiang became bothered by my presence. I was accused of being a spy and expelled.

  Equatorial Guinea has a population of just over 600,000 people, spread over several islands in the Gulf of Guinea and on a postage stamp of land between Gabon and Cameroon. It was one of the last African nations to become independent, and for decades its island capital, Malabo, remained a throwback to colonial times, with nineteenth-century architecture and a pace of life that recalled a sleepy Spanish town in the early Franco years. Before the oil boom, itinerant dogs could nap in the middle of streets that had more potholes than cars. Even as the oil rush was taking hold, Malabo, which had a population of perhaps 100,000 souls, retained a lost-in-time vibe. My first visit to the Mini
stry of Information required a jolting drive on a road that had become a flood-plain after a rain shower. There was no runoff system, and there wasn’t much asphalt in Malabo. When I got to the ministry, there was no electricity; it was dark and stifling and felt like the setting of a 1950s Graham Greene novel.

  I wandered on foot through Malabo as much as possible, because petty crime was not a concern. Nor did anybody tug at my sleeve to ask for money or try to practice his English on me. I had the sensation of being invisible, though I was the only Caucasian on these African streets. Few people even looked me in the eye. This was unusual, and there was an explanation.

  Equatorial Guinea may be the most brutalized country on earth. In 1968 the Spanish handed control of their colony to a civil servant, Francisco Macias, whom they believed to be pliant. Macias, whose self-bestowed titles included “The Sole Miracle of Equatorial Guinea,” turned into a mass killer, murdering or driving into exile a third of the population. Some victims were crucified, and others shot in a soccer stadium, their screams drowned out by a military band playing the song “Those Were the Days.” Macias combined the worst aspects of Idi Amin and Pol Pot but evaded global notoriety because his suffering nation was so small and of no geopolitical interest. Spain, its former colonial ruler and at the time still a dictatorship itself, paid little attention to his bloodbath.

  Macias surrounded himself with relatives from his hometown of Mongomo. A trusted nephew, Teodoro Obiang, was responsible for security in the capital, and by most accounts he fulfilled his duties avidly. At Black Beach Prison, Obiang allegedly supervised the torture and murder of inmates. Obiang began fearing for his own life after one of his brothers was killed by Macias, whose insanity now threatened his confidants. Obiang made his move, staging a successful coup in 1979. Macias was sentenced to death in a show trial held at Malabo’s only movie theater; the deposed madman was displayed in a cage suspended from the ceiling. Macias was executed by a firing squad composed of Obiang’s newly hired bodyguards from Morocco.