On Dec. 21, 2009, a hijacked ship rammed and sank a freighter in the Bosporus Strait, blocking the strategic shipping channel that brings Russian oil from the Black Sea to the Mediterranean and beyond.
It was the first strike in a wave of terrorist attacks on the world’s vital oil infrastructure.
Within minutes, coordinated attacks hit Saudi Arabia, including fatal bombings of residential complexes for the oil nation’s critical expatriate labor force. As the violence went up, so did the price of oil and the level of political concern. A cascade of events threatened to suddenly tumble the world energy market.
Welcome to Oil ShockWave, a simulated global oil crisis that has been played out several times in Washington, D.C., as well as at the Aspen Institute and the World Economic Forum in Davos, Switzerland.
It calls for role-playing by a cast of executive branch advisers. They respond to reports on an imaginary cable news channel (GNN) and to aides rushing to the crisis table with intelligence updates.
At Harvard, the half-day exercise played out in a truncated version for 90 tense minutes Monday evening (April 28) at the John F. Kennedy Jr. Forum, the chief public venue of the John F. Kennedy School of Government (HKS).
Playing federal advisers was an all-star cast of, well, former federal advisers, including two former treasury secretaries: One-time Harvard President Lawrence H. Summers, the Charles W. Eliot University Professor at Harvard, played the role of the secretary of the treasury. Robert E. Rubin ’60, a Citigroup executive and a Harvard Corporation fellow, moderated the crisis panel as the national security adviser.
Oil ShockWave “is a version of a war game … to help us understand the consequences of energy dependence,” said Douglas Dillon Professor of Government Graham Allison, introducing the event to a capacity crowd at the forum. He’s director of the Belfer Center for Science and International Affairs at HKS.
Two of Allison’s Belfer Center colleagues played roles on the federal emergency panel. Ashton B. Carter, co-director of the Preventive Defense Project, was secretary of defense. Senior fellow Meghan L. O’Sullivan, in real life a one-time deputy national security adviser for Iraq and Afghanistan, played secretary of state.
Ten-term Indiana Congressman Philip Sharp, a longtime professor at HKS and now president of the Washington, D.C., think tank Resources for the Future, took on a 90-minute role as the secretary of energy.
The Belfer Center sponsored the role-playing game, along with Harvard’s Institute of Politics (IOP) and Securing America’s Future Energy (SAFE), the Washington, D.C., not-for-profit that co-developed Oil ShockWave with the National Commission on Energy Policy.
The executive committee had 90 minutes to report to the president on that imaginary winter day in 2009. A G8 emergency meeting was coming up fast. The American public and the world awaited a reaction from the country that yearly consumes 25 percent of all the oil produced.
The sunken ship in Turkey had blocked the paths of oil tankers — 5,000 a year move through the Bosporus. That stoppage could shut off the world’s oil faucet to the tune of 1.8 million barrels of crude a day — for months, potentially.
Shortfalls started popping up in world oil supplies, global markets were feeling the hit, including a falling NASDAQ, and the U.S. Northeast faced a hard winter from rising prices. The scenario predicted that oil prices would soon hit $160 a barrel.
Through the 90 minutes of the imagined crisis, big-screen counters recorded the prices of oil and gasoline as it went up by the minute: from $127.63 a barrel at the start, and $4.25 a gallon to — up, up, up — $154.57 and $4.95.
“What do we do right now?” Rubin asked. (None of the players was privy to how the crisis would unfold.)
Several discussions emerged. The U.S. Strategic Petroleum Reserve, with a capacity of over 725 million barrels — open it up or not, and if so, how fast? Conservation measures — what and how fast? And long-term recommendations: Ride out the storm not doing much, or use the crisis to push for stricter fuel economy standards, more alternative fuels, and — a real spur to conservation, said Summers — a higher gasoline tax at the pump?
“We don’t have to change national policy in an hour,” said political strategist Joseph Lockhart, a one-time chief spokesman for the Clinton White House, who played counselor to the president. But he asked, hopefully: “Will we use this as an opportunity?”
“This is big,” said Lockhart of the sudden oil crisis. “The president has to be bigger.”
Looking at long-term conservation and tax measures makes sense, said Summers, who added that a global crisis might mean rethinking coal, nuclear, Arctic oil reserves, and permanently higher prices for oil. But a crisis is no time for immediate big changes, he said. “The most important thing we can do is stay cool and project cool.”
Cool is important, agreed Sharp, secretary of energy for the moment. Panic would induce instant fill-ups for all America’s vehicles, which average a third of a tank each. That would create “a huge drawdown on gas,” said Sharp — “a crisis instantly on top of a crisis we already have.”
We must cool down allies, added “Secretary of State” O’Sullivan. They’re ruffled by foreign policies “already breeding [the] kind of extremism” that leads to terror attacks. And go to the G8 with a package of conservation measures “to show the world leadership,” she said.
Start thinking big for the long haul — with higher prices certain and more attacks possible, said Carter in his role as secretary of defense. But start by battening down U.S. oil infrastructure, he said.
Vulnerability of energy infrastructure at home — including the port of Boston — was a point echoed by “National Intelligence Director” Joan Dempsey, a Department of Defense veteran and one-time official with the Defense Intelligence Agency.
After the exercise, Rubin said he had done Oil ShockWave role-playing twice now. The first time he was reluctant and skeptical.
“Once I did it, I thought it was enormously worth doing,” said Rubin. “It gave me a sense of how vulnerable we are.”