X-Message-Number: 26390
From: "Mark Plus" <>
Subject: Outcome Grim at Oil War Game
Date: Fri, 24 Jun 2005 13:13:55 -0700

Manage your risk, not your terror.
Mark Plus



http://www.washingtonpost.com/wp-dyn/content/article/2005/06/23/AR2005062301896.html

Outcome Grim at Oil War Game
Former Officials Fail to Prevent Recession in Mock Energy Crisis

By John Mintz
Washington Post Staff Writer
Friday, June 24, 2005; Page A19

The United States would be all but powerless to protect the American economy 
in the face of a catastrophic disruption of oil markets, high-level 
participants in a war game concluded yesterday.

The exercise, called "Oil Shockwave" and played out in a Washington hotel 
ballroom, had real-life former top U.S. officials taking on the role of 
members of the president's Cabinet convening to respond to escalating energy 
crises, culminating in $5.32-a-gallon gasoline and a world wobbling into 
recession....

The exercise began with ethnic unrest in Nigeria, leading to the collapse of 
the oil industry in that west African nation. Then al Qaeda launched 
crippling attacks on key energy facilities in Valdez, Alaska, and Saudi 
Arabia.

But the war game's participants -- including former CIA director R. James 
Woolsey, former Marine Corps commandant Gen. P.X. Kelley and former EPA 
administrator Carol Browner, soon realized the U.S. government had few 
options in the short term to prevent an economic crash in this country and 
worldwide.

When the exercise's planners first met last year, oil was in the 
$40-a-barrel range. As they fantasized where oil prices would be for the war 
game's start in an imagined late 2005, they said, they set them at $58 but 
worried they were being absurdly pessimistic. Yesterday, the closing price 
for a barrel of oil was $59.42.

The war game players also referred several times to other real-life events 
of today. A major feature of the exercise was how China's voracious appetite 
for oil is driving up world prices, and only yesterday it was announced the 
Beijing government, in a bold and unprecedented act, is bidding to buy the 
U.S. oil company Unocal....

The underlying situation dramatized in the exercise -- and accepted by most 
energy analysts -- is that tolerances are so tight between supply and 
demand, that even small disruptions in the delivery of oil and natural gas 
can cause cascades of unpleasant developments.

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