built below sea level, submerging large parts of the city under water, forcing up to 20,000 people to seek refuge in the Superdome and leaving more than 1,800 dead.
Rita, a new storm, also one of the most violent hurricanes ever recorded, similarly spawned in the South Atlantic, headed straight down the center of the Gulf. Once again, the industry sprang into emergency mode. Rita hit the platforms that had been spared on Katrina’s course and then tore through onshore oil refining centers, leaving some of them severely damaged and flooded.
Altogether, more than 3,000 platforms and 22,000 miles of undersea pipeline were in the direct path of the two storms. A total of 115 platforms were completely destroyed (most of them older ones, not built to 1988 standards); 52 were damaged, as were 535 pipeline segments of pipeline. Yet so effective were the environmental containment measures that the offshore production facilities did not leak. At the peak, the hurricanes knocked out 29 percent of total U.S. oil production and almost 30 percent of U.S. refining capacity. Months later, a significant part of the production and refining operations was still not back on line.13
Onshore, some 2.7 million people were left without electricity. With electric power down, the long-distance pipelines that carry gasoline and other refined products to the East Coast could not operate, and supplies became very tight in the Southeast and the Mid-Atlantic states. The gasoline may have been sitting there in the underground tanks at the stations. But without electric power there was no way to pump it out and into the tanks of the ambulances and police cars and fire engines and repair trucks so that they could carry out their rescue and repair missions amid the chaos and devastation.
Oil prices surged upward, both because of the disruption itself and as word of shortages sent tremors of panic and fears of gas lines through the public. The two storms sparked the largest disruption of oil supply in the history of the United States—a loss, at its peak, of 1.5 million barrels per day. Other countries took the unprecedented step of shipping emergency stocks of oil to the United States to help make up for the shortfall.
By 2006 production was recovering in the Gulf of Mexico, and supplies from offshore were once again making their way to consumers. But the market continued to feel the impact of the various losses of supply from the aggregate disruption. Moreover—in addition to Venezuela, Nigeria, and Katrina and Rita—another disruption was having a big impact on the world market. This one was in the very heart of the Middle East.
7
WAR IN IRAQ
In late 2002, Philip Carroll received a phone call from an official in the Pentagon. The Department of Defense was putting together an advisory group on oil, and Carroll was a sensible stop. Twice retired—first as CEO of Shell Oil USA and then the engineering company Fluor—Carroll came equipped with considerable international experience in the logistics and infrastructure of energy supply, as well as a reputation for diplomatic skill.
The questions were about how and what to plan for, in terms of oil, in the event of war. Two things were known: Iraq was highly prospective but had not really been explored since the 1970s and indeed was one of the least explored of all the major oil-exporting countries. And its industry was in poor condition, although no one really knew how poor. Carroll recommended that the DOD do an in-depth study and think through how the industry could be managed during postwar transition. A few months later, in early 2003, Carroll was formally asked if he would go out to Iraq as oil adviser following U.S. military action. He would become one of about twenty other senior advisers, each to advise and help direct an Iraqi ministry. By that time it was more than clear that the United States, along with Britain, Australia, Japan, and a score of other nations, in what was called “the coalition of the willing,” would shortly be going to war.
WHY THE WAR?
Iraq was an oil country. Its only export was oil. It was a nation defined by oil, and as such was a country of great significance to the global energy markets. But the ensuing war was not about oil. It resulted from a convergence of factors: the primary ones were the September 11, 2001, attack and its consequences, the threat of weapons of mass destruction, the way the 1991 war ended, the persistence of Saddam’s intransigent and