Energy Was and Will Be Key to Economic, Military and Tech Dominance

The US military talks about two historical “offsets” where the US used military technology to outmatch a competing military capability.

Offset strategy are part of long-term competitive strategy. It is a peacetime competition between rival great power to generate and sustain strategic advantage.

Offset strategies are not solely about technological approaches but have a powerful technological component. They are about finding the right combination of technologies and operational and organizational constructs to achieve decisive operational advantage and thus bolster conventional deterrence.

The US military talks about the two times it has been done since WW2.

The First Offset began during the early 1950s at the start of the Cold War. The Soviet Union had a geographical advantage over the U.S. in Western Europe and had a far larger conventional force of tanks. The USA used nuclear superiority to counter. Nuclear weapons were miniaturized to about the size of a football. The Soviets were able to match US capabilities in about ten years.

The Second Offset of the 1970s and ’80s, where the focused on conventional munitions with near-zero miss, precision-guided weapons and the joint battle networks that employed them. Information technology and the digital microprocessors changed the game in terms of sensors and the weapons carried by our platforms.

The US has funded and tried to implement a third offset centered on Artificial Intelligence, combat lasers, and other advanced technologies.

Other Relevant Offsets

A more important Offset was where the US rose to become the dominant military power in the late stages of the 1800s and the first half of the 19th century.

The US had 70% of the World’s oil production at the start of WW2.

A large part of the reason was Henry Ford and John Rockefeller.

There were other competitors to both Henry Ford and Rockefeller, but I think it is reasonable to think that the innovation and aggressive business leadership of those two increased US manufacturing and oil production by 2 or 3 times.

Henry Ford’s creation of mass production factories and production of cars created increased demand for oil. In 1908 Henry Ford’s mass-produced automobile started a demand for gasoline and initiated an oil boom.

John D Rockefeller and Standard Oil were a significant part of accelerating the US to become the dominant oil producer by the start of WW2. The US was producing 70% of the World’s oil.

Around 1912, using traditional methods, petroleum refiners had trouble extracting enough gasoline to meet the rising demand from cars. A new process for obtaining a much higher fraction of gasoline from a barrel of crude oil — thermal cracking — was invented around 1909 by William Burton. In 1909, Burton became head of production at Standard Oil Company of Indiana.

Vastly better industrial production and oil technology enabled the US to make the large numbers of aircraft carriers, tanks and planes than Germany or Japan. Higher octane fuel enabled US planes to be faster than German or Japanese planes.

We are seeing the US become the dominant world oil and gas power again with Shale 2.0. The US could have more oil and gas production than Russia and Saudi Arabia combined by 2025. The US could get to 25-30% of the World Oil and gas production. China is importing about ten million barrels per day now. India and China are like Germany and Japan in that they need large amounts of imported energy.

The US was also able to attract large numbers of immigrants to get to higher populations and a larger economy. GDP is actually an economic proxy for the full military power potential of a mobilized economic power. There is a correlation between GDP economic power and military power. This is especially the case if there is rough parity in military technology and per capita income. There can be a couple of decades of lag and a country can vastly underperform but there is a correlation.

What could change and has been changing the current and near-term balance in economy and technology?

China has gone through its economic miracle and economic rise and technology catchup.

China, Russia and the USA all have the offensive capability to inflict casualties upon their Great Power opponents at levels beyond the most deadly prior conflict aka World War 2. There is no need to debate details about nuclear or conventional war but inflicting more than twenty million casualties is a certainty. WW2 had over 70 million people and Soviet lost 20-27 million, China 20 million and Germany 6-8 million.

At the start of WW2, Japan and Germany each had strategies involving quick victories to try to force favorable negotiations. They wanted to quickly conquer vastly weaker powers and then force early losses on tough opponent and then force a new more favorable status quo. Japan wanted to take big chunks of Asia and the Pacific and wanted the US to not be willing to bear the costs of defeating them. Germany wanted big chunks of Europe, the Caucasus for oil and then to establish an Atlantic Wall.

China minimum economic and technology future is to have Russia level per capita income with a population about 9 times larger and a fully modernized military technology at better than Russia’s level.

What could China do for an economic, technological and military offset?

China could mass produce nuclear energy. China already used 6846 TWh of electricity in 2018. The US generated 4178 TWh in 2018. The EU generated 3255 TWh in 2018. China used 64% more electricity than the USA. China is adding 300-600 TWh every year in power generation. The US has been virtually flat in electricity usage for three decades.

China’s power generation and consumption was up 5.5% in the first 3 months of 2019 despite having an economic slowdown. In March, China generated 7.5% more. In 2018, China increase 8.4% over 2017. A US-China trade deal and economic stabilization should see China at 7-8% power increase in for all of 2019. China will be at 7300 TWh to 7400 TWh. This should mean in 2019, that China will have the power generation of the US and the EU combined.

China built about two coal reactors every week for about 30 years. Coal power plants are about half the power level of large nuclear reactors. If China copied the French move in the 1980s to standardize and develop nuclear power to 70-80% of electricity from 2025-2050. China could match Europe on per capita income and per capita power usage in 2050. China would move up from about 5285 kWh per person to 8000 kWh per person. China would generate more power because they tend to build for export. This would mean 11000 TWh of power generation in China. If China went to current US per person power levels of 13000 kwh per person then this would be 18000 TWh. All electricity could also be 20-40% higher with oil for cars and trucks replaced with electricity.

The US now has 800 TWh from 100 GW of nuclear power. If China went to 8000TWh from nuclear power they would need 1000 GW of nuclear power and if they were at the higher end economic scenario China could go to 12000-14000 TWh of nuclear power. This could be from a range of nuclear reactors like mass produced 25 MWe reactors to the 200MWe power bed modules to 1-2 GW large reactors. The Westinghouse eVinci 25MWe reactor could have its first build in 2025 and has a mass produced price of about $2 per watt. This would mean about $50 million. They could be built by the thousands like the production of passenger planes.

China is developing molten salt reactors and a range of other nuclear reactors and would nearly matches western nuclear power technology. China is also currently building about half of the new nuclear power in the entire world.

A vast mass produced nuclear power economy would eliminate the oil import problem and would enable China to easily build a few hundred more nuclear reactors for vast fully nuclear navies and have small modular reactors for new land and space military capability. If the USA wanted to have 10-30% of China’s potential nuclear build would have to convert coal and natural plants by switching out fossil burners for higher temperature nuclear power.

The US let Russia and China deploy hypersonic weapons first despite having a decades-long technological lead. The US military knows that allowing US commercial nuclear energy to whither leaves military nuclear in a fragile state.

China is getting to about 50 GW in nuclear power next year and will be at about the level of French nuclear. This is all just exploratory development. China is testing and playing with all of the various reactors and refining the technology before they scale up for coal replacement from 2030-2060. China is going to get serious about scaling an energy shift around 2030. It seems that if they make an energy choice that meets economic, technology and military gains then they would choose that option.

SOURCES- Harvard, DOD Live, EIA, World Bank
Written By Brian Wang,