Oil price warfare.

• Author: Howard, Roger

WAGING WAR in this tight-oil age will be an especially hazardous undertaking, not only tactically and economically, but also geopolitically. Preventing any sudden oil-price spike has become a strategic priority, circumscribing the maneuvering of defense architects and, for all of warfare's inherent risks, posing profound new challenges.

We can no longer assume, as we did as late as 2003, that oil markets will quickly recover from a minimal disruption in supply caused by military action in a major oil-producing region. Given the vulnerability of the global economy to oil-price shocks, as well as the political fallout from high gasoline prices, Washington's ability to use military force in various parts of the world, notably against Iran, will be significantly constrained, not least because a large body of global political opinion would pin responsibility only on Washington for the consequent damage to the global economy.

In the run-up to the first and second Gulf Wars, the Pentagon had the luxury of being able to gradually build up forces in the Persian Gulf for a period of months, taking its time to deploy personnel and supplies. Now, however, in the interest of avoiding an oil-price shock, military chiefs will be much more likely to conceal any preparations for war, while political leaders will have to play down the likelihood of any such attack, even if they know it is inevitable. Financial markets have become so susceptible to rumors of any possible disruption to oil supplies that the attacking party will have to try and surprise not only his opponent, but also the market, in order to minimize the longevity of an economic crisis. Any country that is sensitive to the price of oil, even if it has overwhelming force at its disposal, can no longer so easily make military threats at another, or begin to undertake any obvious military build-up, prior to the onset of a campaign. Military chiefs would therefore be constrained to waging surprise war.

Look at how oil markets have responded to developments in Iran. Commercial sensitivity to regional politics became clear on February 16, 2005, when financial markets panicked amid reports of a small explosion in Bushehr province, which was wrongly assumed to be a foreign missile attack. The sharp price climb in the spring of 2006, as a barrel fetched just over $75, was caused largely by the strength of Iran's nuclear intransigence in defiance of strong UN pressure.

Traits of this form of oil-price warfare were evident in the April 1986 attack by U.S. warplanes on Libya, an oil exporter which was struck without warning on the orders of President Reagan. Such tactics meant that the oil markets, as well as Colonel Qaddafi, were taken wholly by surprise.

Waging surprise warfare does have clear dangers because resources rapidly deployed may be insufficient to sustain more than a single attack or a brief...