Good essay, although I do have some quibbles. For all of the investment and diversification being done by the Middle East oil regimes, they are still highly dependent on oil - and if oil were to become irrelevant, they would not only have to generate solid economic development in other areas, they would have to do it large enough and fast enough to absorb both a rapidly growing population plus the no-doubt massive economic refugees that would flow towards the boom places (witness China, which has to maintain 8%+ growth per year, otherwise its social stability will be threatened by the tens of millions of economic migrants flowing into its cities every year).

Russia might not survive a rapid decline in oil money, at least not in its current continent-spanning state. They've done some diversification, but by and large they are a heavily consumerist society right now driven by oil money, with their only other major export being weaponry. Perhaps they would end up as a "rump" state west of the Ural Mountains, although we can't be sure.

One thing to keep in mind with the US is that we are still the overwhelmingly largest consumer market in the World, and even if the oil nations suddenly aren't oil nations, that's not going to change short of the Chinese sucking in as many imports as possible by 2025. Lots of countries have a stake in the US market being able to import like crazy, which means that they will have to take payment in dollars - and dollar dominance will continue. Again, if China or Europe were to suddenly become the key import-absorbing markets, that might change, but it's there.

Getting out of the Middle East, though, would be an unqualified boom for the United States. Without that, and with a badly weakened Russia, our main overseas military obligation would be in Southeast Asia, where we help balance power in such a way that the local regimes (aside from China, a strategic competitor) don't feel the need to both go nuclear and engage in arms buildups (read: Japan and South Korea). That's never been too expensive; we could get by over there with a strong marine corps (in case we needed to land troops in South Korea again), a strong air force, and a strong navy. The latter two existed even when America went isolationist after World War I, although the army was gutted - and probably would be gutted in this scenario, over time at least.

I imagine our strategic posture would go back to a more defensive version of the Eisenhower Era. We'd invest in new nuclear weapons plus ABM defense to shield the homeland, maintain a good airforce (which we'd almost never had to use), a good navy (particularly since none of our rivals seem to be even close in the Blue-Water naval development area), and a significantly smaller marine corps and army. The capital expenses would be much higher, but once we got past that it would probably both be cheaper in the long run (since we'd almost never have to use them), and more politically viable (since it wouldn't involve video footage and news about our boys being killed overseas in foreign wars).

Provocative, though I have some areas of disagreement. One of them is that I believe the Chinese are going to continue funding our budget deficit for as long as they can, because they are going to fixate on keeping their currency at par with the dollar. China made the fateful decision to build its economy on the American consumer rather than the Chinese consumer, and they are going to have a hard time getting out of that box. China, it seems to me, is also going to be a slow governmental actor, because, in its current form, it is not democratic, and has no real mechanism for judging what public opinion can stand. I don't think China could ever act as swift as the Euro or US governments for the simple reason that they don't have any idea whether their government could survive a drastic action that goes terribly wrong.

If I were to pick a likelier successful big power in 2020 -- I would pick India.

As for the mideast -- your speculations are interesting -- and ignore Isreal both as an irritant to Mideastern nations in general, and as a motivator for US policy in particular. I don't think the mideast gets to a better place without either (i) getting over Isreal or (ii) succeeding in destroying it. I also question whether all of the Arab governments will be as wise as you suggest. I thnk panic would make them take steps to save themselves and only themselves. Actually, both Iran and Venezuala, which have some democratic institutions (and which both have despots reaching the ends of their terms), are probably better positioned to correct course in an institutional sense.

As for the Euros -- I question how well that unity project is going. You have a situation there where there is a bureaucacy that is very remote from its constituant populations, and one that would get increasingly remote as it became larger. This is a recipe for internal disunion and dissension that would slow the Eurozone's ability to make nimble decisions, or do anything much more than drift and see what events bring. I think a weak Russia would actually heighten this trend.

Interesting, but I think not. It's not a vast conceptual leap to visualize a world in which the US is no longer a superpower but rather merely one of two or three top-rank great powers (including China, India, and perhaps the EU or Brazil) in that group.

But the decline of the US from Superpower to '2nd rank power' is a far greater leap, I think.

Your major argument is that the collapse in oil prices leads to the collapse of the dollar as the reserve currency. Qyuestionable logic, but I'll accept it for the sake of argument.

So the euro becomes the reserve currency and goes to $2.50 per euro, the Chinese currency appreciates similarly, so does the yen presumably. What happens to the US, then?

Let's guess. A nation with a vast skilled labor force and academic, scientific, and technological resources (and vast debts) suddenly becomes much cheaper. It's costs fall as well (remember that oil is cheap). So what happens?

I think that capital flows in, factories and research labs are built, those skilled (and cheap) workers are employed - and the US becomes the new Germany. Think of Germany during the 50's when the d-mark was devalued.

Interesting, but I also think not. The massive deficits you are "worried about funding in the post oil world" would be greatly diminished in world where we don't import oil and need a bloated military presence. 700 billion trade gap with 100bill of it being oil itself...120 billion plus per year in Iraq alone without other energy security related defence spending and contingencies.

"Good Will" is also an accounting term that is being spent in the current oil arrangment.

Much of the deficit is AS A RESULT of the current staus qou and NOT a reason we should worry about the oil trading system ending.

This is provocative but I can’t help thinking that it reads like a Clancy on a bad day with writers block and a nasty hangover.

It seems to be predicated on a number of assumptions that I would question. First, that it’s good if the Middle East needs the United States. Is this really the case? Because it’s sure as hell not like the US is getting a lot out of the ME right now. But maybe this relates to the second assumption, (I’m not sure you actually believe) that the US is really only in the ME because of oil. In other words, the security arrangements there are just because of this one resource – discounting any ideological explanation. (ie: The US is there to support its ally, Israel because it is a small democracy that shares a relatively common view with the United States – or a bunch of conspiracy reasons that I will choose to ignore.)

Third, the argument tends to assume that the US got off oil for the sole purpose of screwing the Middle East. This may be part of the reason, but it can’t be the sole logic. (Will the ME even HAVE a lot of oil in 2025?!) It discounts any environmental arguments (well, it IS the National Interest) or the idea that oil is just a really shitty resource that is unsustainable and bad for a whole host of reasons. (Why NOT have cars that run on sustainable resources?) There are a LOT of good reasons for getting off oil other than screwing up the ME.

Fourth, I don’t think China has the inclination to get off oil right now like Western countries. Maybe this means that China (who, quite frankly will not be THE dominant voice in international affairs in 2025 for, again, a whole pile of reasons not least of which it can barely control itself, it will go through its own series of convulsion, all of its children are going to get kidney stones, and that I don’t think that it really has tended to act as a revisionist power in a classical realist sense) will play a larger role in the Middle East, but I don’t think it would want to. If a Beijing consensus replaces the Washington consensus, I think it will look quite different and have less political implications.

I believe that most Americans want out of the Middle East because it is a snake pit where the US has had its hand bit many times. Whether or not it can do that is a good question, but the fact that Americans are probably going to vote in the guy that just wants to get the hell out of there is indicative of just a ME-fatigue that may partially be due to oil, but also the constant failures of the non-democratic regimes in the area.

I am having a really, really hard time believing in your security benefits. The markets collapsed, oil prices have collapsed and the dollar is doing amazingly well. Market sentiment drives an attachment to the dollar beyond petro-dollars (but you’re the expert here). I fear that this argument gives in to the left’s critique that Iraq really was all about oil – because it seems to suggest the only reason that the US is there. I don’t believe that this is the case. Maybe the US should just get out of there because it can no longer afford the cost in terms of money and political capital.

The West has a clear incentive to get off oil for many reasons – not least of which we’re going to run out of it. I also think that there will be other emerging markets which will mean that the decline of the OPEC countries would be managed – if they don’t manage to blow themselves up first or run out of the stuff which many are probably going to by 2025 anyway. I think it’s probably a good thing if they start looking to use their money to build up their countries in other ways with other resources.

BTW, your argument said nothing about Canada who, of course, has the second largest reserves in the world trapped in some, shitty, shitty oil sands in the crap-hole known as Alberta. Maybe we’ll get screwed by this but quite frankly it is Alberta and I don’t care.

The next US president should have all new cars meet a very high fuel efficiency standard, be hybrid or electric within the next 10 years. The planes and industry could have 15. I struggle to find credible arguments against these ideas.

"What they said", to most of the comments above. Plus...

One nitpick. You have American military power becoming largely irrelevant in a world where Russia is falling apart and China is rapidly expanding a de facto empire. That's kinda hard to see. Of course, you can save the scenario and your bigger points by assuming more Russian resiliance.

Next, my impression - which could be wrong - is that the UK and Japan can borrow in pounds and yen most of the time without much difficulty, so presumably the US could too even after the dollar isn't THE reserve currency anymore. More generally, you do seem to be assuming that the US adapts to the New World Order slowly and with great difficulty. That's possible but not certain - and of course you can save the scenario and your bigger points by specifying that the 2010's are a decade of American denial.

Finally, when I read the article I'm not sure whether the US becomes isolationist because it becomes a second-tier superpower, or it becomes a second-tier superpower because it becomes isolationist. An isolationist tendency on the part of the US could explain a lot of things in the scenario that are otherwise questionable, and it would actually be a logical response on the American part. It would be extra plausible if the global paradigm shift downgrading military power were accompanied by a major loss of American face. However, it isn't a necessary response, any more than denial and trying to sustain the Pax Americana is.

Interesting comments - like Brett above when I read the original post the first thought that crossed my mind was Eisenhower's military/industrial complex. With a humbled Russia we could finally wind down NATO, demand fundemental reforms or withdraw from the UN, Iraq could truely be a political model for the rest of the collapsing potentates in the ME [wind howling thru the unfinished girders of the 100 story towers in Dubai]. If 40% of our defense budget were freed up for health care, entitlements, and debt service what concievable party could challenge the Anglosphere for world leadership?

Probably the most deleterious effect would be on the sclerotic Soviet Union to our South, if Mexico loses oil revenue and a fence is put up, what happens there?

"...what concievable party could challenge the Anglosphere for world leadership?" My gosh, I hope this notion of some 'right' to perpetual 'anglosphere' leadership of the world is not endemic to our DNA.

I do find the perspective offered by the essay provocative, and perhaps a bit 'early' to warrant as much refinement as is reflected therein. The comments too - for the most part - are interesting. If, in fact, the transition to a post-oil world economy transpires over a 10-20 period, it isn't reasonable to expect that we shall have arrived at it without having meticulously strategized for so monumental an occurrence. We certainly won't awake one morning to all of a sudden discover that 'we're there' without having prepared ourselves for the eventuality. Indeed, if 'we' get there, it'll likely be largely attributable to our own ingenuity, which certainly won't be blindly applied without proper consideration and preparation for the global geo-political consequences. Or will it?