going up in flames—much more than Kuwait’s normal daily production and considerably more than Japan’s daily oil imports. The scale of this inferno was so much bigger than anything that even the most experienced oil-well fire-fighting firms had ever seen, and a host of new techniques had to be quickly developed. The last of the fires was put out in November 1991.
In the aftermath of the war, Saddam was boxed in; it seemed only a matter of time before the Iraqi dictator, weakened and humiliated, would be toppled by internal opponents.
A NEW AGE OF GLOBALIZATION
The outcome of the First Gulf War was a landmark for what was expected to be a more peaceful era—what, for a time, was called a new world order. The Soviet Union was no longer an adversary of the West. At the end of 1991, the Soviet Union disintegrated altogether. The talk was now of a new “unipolar world” in which the United States would be not only the “indispensable nation” but also the world’s only superpower.
A new age of globalization followed: economies became more integrated and nations, more interconnected. “Privatization” and “deregulation,” which had begun in the 1970s and gained momentum in the 1980s, became the watchwords around the world. Governments were progressively giving up the “commanding heights”—that is, control of the strategic sectors of their economies. Nations instead put increasing confidence in markets, private initiative, and global capital flows.
In 1991 India began the first phase of reforms that would unshackle its economy and eventually turn it into a high-growth nation and an increasingly important part of the global economy.
In the energy sectors of countries, as in so many other sectors, traditional government ministries were turned into state-owned companies, which in turn were partly or entirely privatized. Now many of these ministries-turnedcompanies worried as much about what pension funds and other shareholders thought as about the plans of government civil servants.
International barriers of all kinds came down. With the Iron Curtain gone, Europe was no longer divided between East and West. The European Community turned into a much more integrated European Union and established the principle of the euro as its currency. A series of major initiatives—notably, the North American Free Trade Agreement—promoted freer trade. Overall, global trade grew faster than the global economy itself. Developing nations morphed into emerging markets and became the fastest-growing countries. Their rising incomes meant growing demand for oil.
Technology also drove globalization—in particular, the rapid development of information technology, the rise of the Internet, and the dramatic fall in the costs of international communications. This was changing the way firms operated, and it was connecting people in ways that had been inconceivable just a decade earlier. The “global village,” a speculative concept in the 1960s, was now quickly becoming a reality. The oil and gas industry was caught up in these revolutions. Geopolitical change and greater confidence in markets opened new areas to investment and exploration. The industry expanded its capacity to find and produce resources in more challenging environments. It seemed now that an age of inexpensive oil and natural gas would extend much further into the future. That would be good news for energy supply but not such good news for higher-priced alternatives.
THE FADING OF RENEWABLES?
The energy crises of the 1970s had combined with rising environmental consciousness to give birth to a range of new energy options, known first as “alternative energy” and then, more lastingly, as “renewables.” They covered a wide range—wind, solar, biomass, geothermal, etc. What gave them a common definition was that they were based neither on fossil fuels nor on nuclear power.
They had emerged out of the tumult of the 1970s with a great deal of enthusiasm—“rays of hope” in a famous formulation. But over the 1980s, the hopes had been dulled by the realities of falling costs of conventional energy, their own challenging economics, technological immaturity, and disappointment in deployment. With moderate prices and the apparent restoration of energy stability in the early 1990s, the prospects for renewable energy became even more challenging.
Yet environmental consciousness was becoming more pervasive. Most environmental issues were, traditionally, local or regional. But there was growing attention to a new kind of environmental issue, a global issue: climate change and global warming. Attention was initially confined to a relatively small segment of people. That would change in due course, with profound implications for the energy industry—conventional, renewable, and alternatives.
In other ways, the combination of energy policies launched in the 1970s and the dynamics of the marketplace had worked.