Opinion piece
Price spikes caused by political instability in the Middle East
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Supply and demand is not the only determinant of oil price. Short term 'spikes' have been historically caused by political power plays in what is an unstable area.

The first, and worst, was in 1973. The Arab-Israeli war resulted, first, in an oil embargo on Israel and it's supporters; and then OPEC deliberately restricted supply to drive up prices. Fed by panic as petrol supply was rationed and gas station ran out (as people hoarded petrol!), prices skyrocketed 400%. But other events in the unstable Middle East have caused spikes in oil prices.

At the time of the Iranian revolution (1979) oil price literally skyrocketed straight up from $US15 per barrel to nearly $US40 per barrel.

When Iraq invaded Kuwait oil price almost instantly doubled, from $US15 to more than $US30, as 4 million barrels a day (544 000 tonnes/day) were removed from supply.

When the USA liberated Kuwait the price of oil drops like a stone to more or less 'normal' levels as the Wests (chiefly US) deliberately accumulated  'strategic petroleum reserves' are dumped on the world market, and as Saudi Arabias unused excess productive capacity is cranked up to help make up the shortfall.

What can we learn from this?

The industrialised Eurasian and American world is dependant on the oil belonging to non-secular, poorly educated, corrupt, male dominated, volatile, unstable countries controlled by feudal overlords. Apart from Iraq and Iran, most citizens of the Middle East are hugely undereducated. Some - and particularly Saudi Arabia - are suceptible to hard-line religous fundementalist manipulation. The people - mainly young - have little work, and are increasingly impoverished and disillusioned. They are a social powderkeg. Yet these are the countries controlling an increasingly large percentage of world oil and gas trade.

For example, as at year 2000, 62% of all U.S. oil was imported. Some domestic reserves are held untouched for strategic reasons. But the percentage of imported oil rises an additional 3% every year. If the current rate of consumption of oil continues, in five years from now (2010) 92% of the oil the US depends on will 'need to be' imported oil. The USA burns a hugely greater share (per capita) of oil resources than any other country on earth. It has burnt the greater part of the oil in its own country.

If any 2 of the 5 major oil producing Middle East countries had to stop production due to 'political instability', more than 4 million barrels a day of productive capacity would be lost. If Saudi Arabia was one of the two, it would be 10 million barrels a day.

And now there is only half the unused production capacity to call on, compared to what was available at the time of Iraqs invasion of Kuwait.

Iraq, (i.e. USA) has, very broadly, about a sixth of the Middle East oil supplies. By around 2008 the Middle East's 'swing share' (the share of their oil production that makes up the difference between foreign countries own production and actual domestic demand) of oil production on the world trade will have passed 50% (thats the Middle East's share of world export trade in oil sucked out of the ground -currently about 38%- not share of world oil reserves. The 4 middle East countries plus the USA-controlled Iraqi oil have over half the world oil reserves right now).

At the same time, the Middle East countries plus USA's Iraq will be approaching their depletion midpoint too, after which "production will then start its inevitable long term decline at about 3% a year." (C.J. Campbell, in his presentation to a House of Commons All-Party Committee on July 7th 1999 titled 'The imminent peak of world oil production').

C. J. Campbells' 2000 estimate of the depletion mid point of totalled world oil supply is the year 2003. It possibly did not peak in 2003, but indications are that the peak was either late in 2004, or will be in 2005.

In the face of this crisis, would the USA use its military to secure oil for its businesses?

USA uses force to secure 'its' oil?
As its invasion of Iraq shows, USA will act to protect its oil supply. This would normally be regarded as inherently risky and destabilising. The American presidential administration/business/military complex is unelected and largely unaccountable, so has huge degrees of freedom to act on any whim. The original plan to take control of Iraqi oil was to use the traditional USA method of using USA secret service and military state agents to engineer the installation of a puppet regime. Astonishingly, the USA was delivered a perfect cover  - the co-incidental terrorist attack on thousands of American people in New York. The public fear and demand for action led to a so-called 'war against terror'.

This 'war' involved not attacking the Saudi Arabian terrorists responsible for the monstrous 9/11 crime; not attacking the flakey North Korean regime brazenly trumpeting to the world their making weapons of mass destruction - nuclear bombs; but attacking Iraq, a country which had nothing to do with terrorism - but does have vast oil reserves!

Although USA has a long history of installing and supporting butchers, murderers and torturers, (and continues to kidnap people it 'suspects' of terrorism and deliver them to third party countries to be tortured - imagine the world outrage if the UK kidnapped suspected Irish Republican 'Army' terrorists and delivered them to other countries for torture...) perhaps it decided the results would be too uncertain if it used the traditional methods this time. The circumstances were unbelievably fortuitous, so, for the first time, a decision was made to use USA soldiers to invade another country and seize its resources on business and economic grounds. It helped the US public relations sham that Saddam Hussein was a typical Middle Eastern despot, and used torture and murder to hold power - as do most regimes in the Middle East, including oil-rich Saudi Arabia and Algeria; both these murderous regimes continue to receive USA arms and training. The brutal Saddam Hussein regime also received USA arms and training - until  it invaded Kuwait, altogether too close to USA's oil-ally, Saudi Arabia.

Whatever the circumstances, it marks a turning point in USA presidential administration/business/military strategy. Apart from the death and maiming of uncounted numbers of Iraqi women, men, and children (and a relatively few USA soldiers) and damage and destruction of vast amounts of the infrastructure of civil society, from the inward-looking American view, nothing bad happened. Best of all, the American People remain largely unaware of the venal criminality of an action taken in their name. Having successfully invaded a country once and seized its oil, it ought to be easier a second time. Especially as the invasion infrastructure is now in place locally.

The public expectation was that oil would flow like water, to US benefit. The fact is that the country is in for a long, destructive civil war fought by terrorism, such as used by the (partially American funded) Irish terrorists (IRA) against Britain. Did the USA know this? Probably. What, then, are the 'non-oil' benefits to USA from its invasion of Iraq?

From the Iraqi standpoint, any monetary 'benefits' to Iraq of the US invasion are hard to 'realise'. The US must allow Iraqis to buy wheat, as Iraq is dependant on imported wheat (3 million tonnes per year), chiefly from Australia. Locally grown wheat is insufficient. With the country in turmoil, farmers can't get enough of any requirement - not enough fertiliser, and, ironically, not enough diesel for running planting and harvesting machinery. There are over 25 million Iraqi people to be fed every day. Post invasion, employment is insecure, and wages are third world. Iraq is highly dependent on oil exports. Virtually all Iraqi income is from oil sales. USA bombing of Iraqi infrastructure and forced contracting out to US reconstruction suppliers has made Iraq deeply indebted to US backed banks. Life in Iraq, while freer, is likely to be marked by religious and tribal turmoil for the forseeable future.

Perhaps suprisingly, from the USA standpoint at least, the chief benefit of the invasion of Iraq is not necessarily direct access by the USA or UK to Iraqi oil.

The chief benefit to the US is that continued civil instability will allow it to dominate the entire Middle East region. It can do this at relatively low cost (in the longer run) by maintaining a small but technologically advanced military force in a series of fortified airfield and port based 'forts' across 'unfriendy' tribal Iraq. These bases form 'unsinkable aircraft carriers' from which the USA can, if necessary, precisely attack the leaders and hierachy of Iran or Saudi Arabia - and certainly destroy any military capability. The modern asymetric war also includes the new tactic of destroying electric power generating facilities to demoralise the citizens. It does not include destroying oil infrastructure - except for infrastructure used to divert oil or gas exclusively to non-USA markets.

Power in Iraq was conferred by USA via the CIA-sponsored criminal Saddam Hussein and his brutal thugs. He overstepped his authority by invading Kuwait and denominating oil in euros. USA has removed him, and has now filled the power vacuum directly. That vacuum will remain filled by the USA for so long as Middle East oil lasts. But continued civil instability in Iraq is necessary to legitimise the continued US prescence in Iraq. Ensuring continued instability is unlikely to be a problem.

USA military is insurance of Western oil supply from the Middle East
War in the Middle East has previously sent oil prices through the roof, unrelated to shortage caused by actual reserve depletion. But this time, the USA invasion of Iraq had relatively little effect on oil prices. It may be that, in the same way that the dictator Saddam Hussein (installed by George Bush senior) ensured smooth running of Iraq through a regime of fear, so can USA ensure the smooth running of the oil production sector of the entire Middle East oil producing countries.

As it has demonstrated in Iraq, the USA has the power to largely isolate its invading force and oil administrators in english-speaking islands of 'little America' around the oil infrastructure and strategic airports and ports, and leave the Arabs and Persians, whose languages the invaders do not speak, to get by with just enough re-patriation of oil money to prevent mass starvation.

As Iraq shows, while expensive to mount and run in the short term, the technique demonstrably works, and thus could be applied to other adjacent Middle East countries.

But would it even be necessary to go so far as to mount another expensive invasion?

Can US bombs force Middle East compliance?
Iran has the second largest oil reserves in the world; it is producing about 4 million barrels per day by the latest (2005) estimates, and it is one of the few major oil producers with potential to increase daily output - perhaps by as much as an additional 3 million barrels (although this is open to dispute). This is relatively trivial in relation to the 83 million barrels a day consumed worldwide, and can hardly justify another American invasion, especially as USA does not buy Iranian oil. But there are slightly longer term reasons America will likely take control of the Iranian peoples oil from them.

The USA administration is very well aware that cheap petroleum will disappear within the next year or two. It will be acutely  aware that natural gas will be king very soon. Iran's gas reserves are the energy equivalent of about 155 billion barrels of oil. Combined with that countries oil reserves, it has total hydrocarbon reserves of about 280 billion barrels of oil equivalent. This almost equals those of Saudi Arabia.

Iran would be the real prize for the American administration, not Iraq.

In a moment of temporary insanity, Iran's leaders might refuse to sell oil or gas to the West, or they might decide to reduce supply at a critical moment to destabilise the dollar, or they may make the prudential commercial decision to reduce financial exposure and designate all or some of their oil in Euros, or Iran may establish an oil trading bourse trading in Euros, not dollars. (But, as at 2006, this danger is passing as world event unfold. Russia and several Middle Eastern countries are also establishing oil bourses denominated in other currencies.) Worst, they might form an Eurasian-Asian alliance with Russia, China and India and supply gas to the region by pipeline - just as Canada today supplies huge amounts of USA gas by regional pipeline. What could the USA do? There are several options.

It could look for a pretext to attack Iran, as it did with Iraq.

The perfect pretext has already been given to the USA on a plate (it is hard to believe it could be this lucky twice, and as hard to believe Iranian 'leaders' can be so stupid). The USA claims the Iranian decision to enrich nuclear fuel for electricity production - rather than spend oil revenue on buying-in enriched fuel from Russia - 'might' 'one day' lead to weapons capability. If the USA can once more get away with ignoring the hard evidence of North Koreas newly developed weapons of mass destruction, let alone the boastful trumpeting of their existance by the irrational and unpredictable 'leadership' of North Korea and launch a missile attack on Iran instead, it could 'teach the Iranians a lesson' without a drop of US military blood spilled.

It might invade, but Iran is not Iraq. The invader must feed its subjugated population.

Unlike Iraq, Iran can now almost produce enough wheat domestically to feed its rocketing population (it is now 70.7 million - 48 million of that total have been added in just 34 years). If America deliberately damages Irans civilian infrastructure prior to invasion, as it did in Iraq, Iran will slip back into dependance on wheat imports. A portion of the Iranian oil that America gains will have to be sold for food.

The global 2004/2005 wheat harvest was a bumper one - but wheat reserves are still only 3 months of world consumption. A bad harvest next year or the year after could see Iran under US control importing very expensive reserve wheat (demand exceeding supply), eroding the 'value' to USA of Irans oil. This risk counts heavily against a decision to attempt a full-scale invasion of Iran (although on the other side of the argument, Iran's Bandar Al Khomeini Gulf port would be a useful prize, as it is likely to be hired by the US to transit Australian wheat to Iraq - congestion and equipment damage at Iraqs Um Qasr port has slowed and prevented wheat ships from unloading). Other strategies may be more effective from a USA standpoint.

USA could achieve control of Iran by repeatedly blowing up military and government (away from oil and gas facilities) offices and equipment until the Iranian leaders capitulate. This presumes the bunkers built by North Korea in Iran are weaker than the German built bunker for Saddam Hussein in Iraq - which successfully resisted USA conventional explosive 'bunker buster' bombs. Nuclear 'bunker buster' bombs cannot be used as they cannot penetrate deep enough to contain any nuclear explosion - their use would kill large numbers of civilians and release a large radioactive debris cloud into the atmosphere of the Middle East and beyond.

If the religous despots currently in control of Iran are left in place, the message would be compelling  - do what you are told and you will be left alone, fail to cooperate with USA wishes and you, your family, and your palace are next to be blown apart.Your electric power facilities will be destroyed. The cost of recontruction will bankrupt your government. You will face continuous social unrest. Cooperation would be almost instantaneous.

New Iranian oil exploration and development would be put out to tender as joint ventures; USA oil companies would mysteriously win almost all of them. Gas supplies to Turkey and therefore Israel (Turkey onsells Iranian gas to Israel) would be assured. Russia, China, and Japan would be shut out of large scale access to Iranian gas. China and Japan would be forced to continue to pay greenbacks for much of their imported oil. Any idea of accepting a large proportion of Euros or other regional currencies for oil would evaporate. (The federal reserve and banks in USA would give a huge sigh of relief).

Other local Arab nations, seeing the price of disobeying, would do as directed by the USA, ensuring smooth and continuous production from the region. The USA would directly and indirectly control a huge part of the best oil wells in the world. It would then also control and guarantee access to the Straits of Hormuz, the strategically vital seaway of oil export.

Another, slightly riskier strategy would be to bomb Iran into a form of submission, but reward Turkey with north west Iran, on the pretext of protecting Turkeys access to gas supplies. The area could include some useful gas or oil prospects, and simply become an Ottoman-US-Israeli protectorate, or colony.

An even more attractive strategy would be for the USA, Turkey and Israel to assist in the creation of an new state of 'Kurdistan', taking in Kurdish Iraq, Kurdish Turkey, and Kurdish Iran. In this way, Turkey will no longer be as reliant on Russia for gas and oil, and 'Kurdistan' would have a more secure pipeline pathway for exports.

Paradoxically, this may lead to stability in world oil prices, as it would then be beyond question who dictates to the local dictators, and the makes crystal clear the consequences of not cooperating with the USA. Is this fantasy? Maybe. Maybe not.

Would the American public prevent USA destroying Iranian defenses?
No. The USA public is well propogandised. Even almost all the USA Congress has been successfully sold the line:

"Even with deteriorating support for the Iraq war, new information, well-planned propaganda, or a major incident will override the skepticism and heartache of our frustrating fight. Vocal opponents of an attack on Iran again will be labeled unpatriotic, unsupportive of the troops, and sympathetic to Iran's radicals....Unfortunately, regime change, nation-building, policing the world, protecting our oil still constitutes an acceptable policy by the leaders of both major parties.

It is already assumed by many in Washington I talk to that Iran is dead serious about obtaining a nuclear weapon and is a much more formidable opponent than Iraq....There is no evidence of a threat to us by Iran and no reason to plan and initiate a confrontation with her. There are many reasons not to do so: Iran does not have a nuclear weapon and there is no evidence that she is working on one, only conjecture.

Even if Iran had a nuclear weapon, why would this be different from Pakistan, India, and North Korea having one? Why does Iran have less right to a defensive weapon than these other countries?

If Iran had a nuclear weapon, the odds of her initiating an attack against anybody, which would guarantee her own annihilation are zero, and the same goes for the possibility she would place weapons in the hands of a nonstate terrorist group.

We forget that the weapons we feared Saddam Hussein had were supplied to him by the United States, and we refused to believe U.N. inspectors and the CIA that he no longer had them.

Likewise, Iran received her first nuclear reactor from us; now we are hysterically wondering if some day she might decide to build a bomb in self-interest. Anti-Iran voices beating the drums of confrontation distort the agreement made in Paris and the desire of Iran to restart the enrichment process. Their suspension of the enrichment process was voluntary and not a legal obligation.

Iran has an absolute right under the Nuclear Proliferation Treaty to develop and use nuclear power for peaceful purposes, and this is now said to be an egregious violation of the NPT. It is the U.S. and her allies that are distorting and violating the Nuclear Proliferation Treaty.

Likewise, our proliferation of nuclear material to India is a clear violation of the nuclear proliferation treaty as well.

The demand for U.N. sanctions is now being strongly encouraged by Congress. The Iran Freedom Support Act, H.R. 282 passed in the International Relations Committee and recently the House passed H. Con. Res. 341, which inaccurately condemned Iran for violating its international nuclear nonproliferation obligations. At present, the likelihood of reason prevailing in Congress is minimal.

Let there be no doubt, the neoconservative warriors are still in charge and are conditioning Congress, the media, and the American people for a preemptive attack on Iran

Once again, we are unilaterally declaring a preemptive war against a country and a people that have not harmed us and do not have the capacity to do so.

And do not expect Congress to seriously debate a declaration of war.

For the past 56 years, Congress has transferred to the executive branch the power to go to war as it pleases, regardless of the tragic results and costs.   

Secretary of State Rice recently signaled a sharp shift toward confrontation in Iran's policy as she insisted on $75 million to finance propaganda, through TV and radio broadcasts into Iran. She expressed this need because of the so-called ``aggressive'' policies of the Iranian government. We are 7,000 miles from home, telling the Iraqis and the Iranians what kind of government they will have, backed up by the use of our military force, and we call them the aggressors?

We fail to realize the Iranian people, for whatever faults they may have, have not in modern times invaded any neighboring country.

The obsession the neo-cons have with remaking the Middle East is hard to understand. One thing that is easy to understand is none of those who plan these wars expect to fight in them, nor do they expect their children to die in some IED explosion.

The President states: Iran's ``desire to have a nuclear weapon is unacceptable.'' A desire is purely subjective and cannot be substantiated nor disproved. Therefore, all that is necessary to justify an attack is if Iran fails to prove it does not have a desire to be like the United States, China, Russia, Britain, France, Pakistan, North Korea, India and Israel whose nuclear missiles surround Iran.

[Iran doesn't have a nuke and it is nowhere close to getting one, according to the CIA. If they did have one, using it would guarantee almost instantaneous annihilation by Israel and the United States. Hysterical fear of Iran is way out of proportion to reality. With a policy of containment, we stood down and won the Cold War against the Soviets and their 30,000 nuclear weapons and missiles. If you are looking for a real kook with a bomb to worry about, North Korea would be high on the list. Yet we negotiate with Kim Jong Il. Pakistan has nukes and was a close ally of the Taliban up until 9/11. Pakistan was never inspected by the IAEA as to their military capability. Yet we not only talk to her, we provide economic assistance, though someday Musharraf may well be overthrown and a pro-al Qaeda government put in place. We have been nearly obsessed with talking about regime change in Iran, while ignoring Pakistan and North Korea. It makes no sense....]

Logic like this to justify a new war, without the least consideration for a congressional declaration of war, is indeed frightening.

The need to go to war is always couched in patriotic terms and falsehoods regarding an imaginary, imminent danger. Not supporting the effort is painted as unpatriotic and wimpish against some evil that is about to engulf us.

The real reason for our militarism is rarely revealed and hidden from the public

...the rule of law is undermined, especially when military interventions are carried out without a declaration of war. Whenever a war is ongoing, civil liberties are under attack at home.... Extreme nationalism is common during war. Signs of this are now apparent..

....willingness to print whatever amount of money the government needs to pursue the war is literally inflation. Without a fiat monetary system, wars would be very difficult to finance since the people would never tolerate the taxes required to pay for it. Inflation of the money supply delays and hides the real cost of war...

   The tragedy is that the inflation tax is borne more by the poor and the middle class than the rich... the well-connected rich, the politicians, the bureaucrats, the bankers, the military industrialists and the international corporations reap the benefits of war profits.

Economic interests almost always are major reasons for wars being fought. Noble and patriotic causes are easier to sell to a public who must pay and provide cannon fodder to defend the financial interests of a privileged class.

The fact that Saddam Hussein demanded Euros for oil in an attempt to undermine the U.S. dollar is believed by many to be one of the ulterior motives for our invasion and occupation of Iraq.

Similarly, the Iranian oil burse now about to open may be seen as a threat to those who depend on maintaining the current monetary system with the dollar as the world's reserve currency.

   The theory and significance of ``peak oil'' is believed to be an additional motivating factor for the United States and Great Britain wanting to maintain firm control over the oil supplies in the Middle East. The two nations have been protecting our oil interests in the Middle East for nearly 100 years. With diminishing supplies and expanding demands, the incentive to maintain a military presence in the Middle East is quite strong."

- Congressman Paul (Texas) in a speech to the USA House of Representatives, April 5, 2006.

Will Indian and Chinese joint ventures in Iranian oil production inhibit American attack on Iran?
China has recently invested 100 billion US dollars to help Iran develop one of its major gas fields, and for the purchase of 25 years supply of liquified natural gas. China's oil production probably peaked in 2003, and it depends on Iran for 14% of its oil supplies. A pipeline from NW China to its recently acquired oil field inside Khazakistan is intended to be extended, to meet an oil pipeline being built from northern Iranian oil fields to take oil to Iran's Caspian sea coast. Oil from Iran and Khazakistan would then meet around 30% of Chinas needs. Iran is increasingly significant in Chinas economic/military strategy.

Is China militarily strong enough to face off the USA? Not conventionally. It's currency, the yuan, is tied to the dollar. Would it do anything that might prevent the dollar from 'acquiring' some backbone? No. Its best interests are served by quietly diversifiying its monetary reserves over time, and facilitating a gradual weakening of the US dollar, not a recession-triggering crash in dollar value.

Has the American administration-military come to similar conclusions? Possibly. Therefore, although it is possible the American administration might not attack Iran due to the prescence of Chinese energy companies, it is unlikely they will weigh their presence heavily - especially as they are in theory private companies (although in fact owned by the Chinese politico-military-banking complex, a complex of interests not dissimilar to Americas).

India has relatively few oil reserves, yet is the worlds sixth biggest oil consumer. It has to import about 66% of its oil needs. India has contracted with Iran to buy 7.5 million tons of liquified natural gas a year, the contract to run for the next 30 years.

Worst of all, India has made sufficient peace with Pakistan to agree to build a natural gas pipeline from Iran through Pakistan to India. The American Secretary of State condemned this blatant attempt by India to provide for part of its energy needs by piping gas from a nearby country (as USA does from Canada) -

"We have communicated to the Indian government our concerns about the gas pipeline cooperation between Iran and India". (Rice, US secretary of state).

Is India militarily strong enough to face off the USA? No.

Could China and India act together to face off the USA? No.

On these grounds, the execution of the second phase of the presidential administrations possible strategy - seizing the Iranian peoples natural gas reserves by coercive punitive strikes but without invasion - while causing great tension between these major world players, would probably only result in a temporary spike in oil prices. A spike of some sort is likely because, in contrast to 2003, Saudi Arabia has no real capacity to pump extra oil in advance of the attack to prevent it. Oil prices would probably spike on the rumor of the attack rather than the fact. But the American invasion of Iraq has shown the market that countries can be 'bombed back to the stone age' without significant damage to oil assets and infrastructure. When the TV images show the fact of the precision of the strikes, the markets may settle back rapidly.

Could Japan threaten to dump US dollars if America attacks its interests in Iran?
Japan has no oil, no gas, and no coal.

It is totally dependant on imported crude for its oil needs. An 'ant trail' of oil tankers loop continuously between Japan and the Gulf.

Japanese companies have a 20% stake in developing the 1 billion barrel Soroush-Nowruz offshore field in the Iranian Persian Gulf, and have contracts for natural gas and gas liquids from that and other Iranian offshore fields.

Obviously, Japan depends on the goodwill of America for protection, and would not attempt to 'strongarm' America even if it could. However, if it dumped its vast holdings of American dollars on the world market, it could make the dollar almost worthless overnight. That is a weapon. But, like nuclear weapons, it can never be used. Using it would destroy its own economic base. As with nuclear weapons, use of the dollar weapon would result in assured self-destruction.

Therefore Japan will not create a ripple of dissent large enough to frighten the market and spike oil prices.

Can US bombs prevent a popular uprising in Saudi Arabia?
So long as the feudal rulers who have hijacked peoples democratic self governance in Saudi Arabia can pay the population off, all will be well. The population continues to explode in number (about 4 million in 1955 to about 26 million today in a land of sand and rock).

Expectations of the 26 million, based on the oil wealth they could reasonably expect to receive an equal 'share' of, are not being met - except for the 7,000 rich 'royals' who have feudally taken what might politely be described as 'more than a fair share'. This is rich ground for the spread of ideology promising a 'better'and 'fairer' life. Especially when fundementalist religous extremists also promote an ideology that male violence against society in pursuit of a politico-religious agenda will be rewarded by 'use' of compliant virgins in some (apparently male) 'heaven'!

Weighing against an inability to pay off its citizens is an increase in profit as the supply:demand mismatch ensures greater profitability as physical production limits are reached, or even decline. So long as fields are able to produce at current levels, all will probably be well.

The greatest risk would be if a major field was damaged from over-pumping and the decline in production was enough to make a big dent in Saudi government receipts. Civil unrest might result, although it is by no means inevitable at this time.

The interests of the Saudi despots and the Americans are co-incident. Using techniques worked out in Iraq, there is no reason that Saudi oil fields could not be quarantined by Saudi and US military, restive cities sealed off, the Saudi rulers retired to a life of luxury somewhere, a provisional 'transitional' government installed, and oil kept pumping under Saudi oil company (linked to the feudal leaders) and US (linked to US oil and banking business) control. And Saudi oil would continue to be paid for in dollars, not Euros...

US bombs certainly can't stop a popular uprising and are unlikely to be used extensively to kill civilians; US military logistics (handily based in Iraq, with its US military 'owned' port and airport) can certainly seal an uprising away from the oil resources and infrastructure, and can certainly keep the supply pumping with little or no interruption.

Can US blockade Middle East compliance?
Violent actions are not necessary. While USA and the west needs hydrocarbons, the entire Middle East needs carbohydrates.

The Middle East is either desert, or is very dry and broadly unsuited to cropping. Only Iran and (pre-US invasion) Iraq can produce substantial crops of wheat. Success of the crop from year to year is at the mercy of a variable climate. There is almost no birth control in the Middle East. Their cultural constructs value as many children as possible. Only oil revenue, sold for food, makes unrestrained reproduction 'possible'.

A blockade of all sea and land routes (by airforce and navy) of any gulf state, including Iran, would allow USA to swap 'oil exports for food'. That is, US appointed agents would control the flow of oil out, and food in. The corruption in the UN 'oil for food' programme (if real) would allow a veneer of 'justification'.

While Japan is learning that money is not fungible, the middle east may discover that wheat is very fungible, and when there is a blockade on your ports, the worlds most fungible commodity can, astonishingly, become unfungible.

Alternative oil supplies for a 'foreign oil' dependant USA
In the extremely unlikely event Iran cut oil supply to the West (it would only obliquely affect America -the USA imports most of its oil from Canada, Mexico, Saudi Arabia, Venezuela, Nigeria, and, to lesser extent, Iraq) the only counter is to increase in supply from 'stable' areas, and where they are uncooperative, destabilise them and use the time tested technique of installing a puppet regime. Venezuela? Former USSR countries? Libya? Nigeria?  Too many, too far, too difficult. As Cheny said, "the Middle East is the prize".

Likely Scenario - no spikes from Middle East instability
In broad terms, USA de facto joining the OPEC cartel via its Iraqi oil is likely to make no difference to oil supply, in the specific sense of pumping oil madly to flood the market and drive prices down. But it will make a huge difference to security of supply.

The USA presence in permanent airfield and port bases in Iraq will act as a regional 'strong arm' guarantor that the supply will not be reduced by local wars flowing from the grandiose ideas of the local despots. Conflicts - such as when Saddam Hussein invaded Kuwait and set fire to the Kuwaiti oil wells - will no longer happen. The threat of them happening no longer exists. The threat of politically motivated cuts to supply is gone, but what about oversupply to drive down petrol prices?

The presidential administrations 'neocon' conservatives plan to seize Iraqi oil and overpump it to break OPEC cartel could only be dreamed up by people ignorant of the factual fundementals of the oil industry, Middle East demographics, world economic trends, and history.

'Over pumping' can permanently cripple the ultimate yeild of an oil basin. Virtually all significant fields are producing at or close to their capacity already. There is almost no excess unused pumping capacity anywhere. The taps are all fully turned on. Overpumping Iraqi fields will not significantly increase world supply. The idea of flooding the market with cheap oil is total fantasy.

World demand will exceed pumping capacity probably within the next few years. Futures traders are becoming increasingly aware of the supply:demand mismatch. A mismatch about which nothing can be done.

The price of oil will spike up and down due to fluctuations in amount and timing of 'call in' of bets placed now on future prices, and due to faith or loss of faith in the US dollar. These factors are totally unrelated to ability to pump additional oil - an ability which largely no longer exists. The bets are related to guesses as to which fields are declining in production, which fields of any size are coming into production, what economic growth demand is doing, and in which direction these factors influence demand.

The USA and the countries of the Middle East are intimate bed-mates in one thing. Both need money desperately. The USA needs oil money to back the greenback, to pay the military, to reward its business associates, and to borrow money for the huge US government deficit.

Obviously, even if the USA and its businesses cannot take Iraqi oil money directly through 'war reparations' (Iraq to pay for the cost of the missiles used to wreck its civil infrastructure; Iraq to pay American businesses for both supposed and real damage to business when the dictator Hussein invaded Kuwait), it can take it by circuitous means. As Iraq has been bankrupted, it has no capital to pay for developing and maintaining its oil and gas fields. USA can create a so-called 'Iraqi' national oil company contractually tied directly or circuitously (through 'shell' companies) to USA oil and banking interests.

Huge and padded loans can be made to the Iraqi company for oil development, with payment being made by giving a huge share of produced oil to the USA interests. There is little transparency in existing trust accounts set up and controlled by the US invaders of Iraq. While admittedly there is no evidence, it would be unsuprising if large parts have been already 'invested' in essentially valueless USA junk bonds - US treasury notes - in order to help alleviate the US current account 'difficulties' and help underpin a dollar whose value is currently essentially based on 'faith' and Middle Eastern (largely Saudi) apparent 'preference' to accept US dollars for oil rather than any other currency in spite of their huge trade with Europe...

"The costs of empire are borne by society as a whole, while the benefits of empire are enjoyed by the influential few. Therefore, in general, for those who make policy - who share interests and viewpoints with those who hold domestic power - it is entirely rational to use the resources of society to secure the interests of the wealthy and powerful, even if expenditure far exceeds projected returns. Costs are socialised, benefits are privatised. That is the reality of our 'free market' economy."- 'Oil & War' by Milan Rei, Znet, emphases added.

"History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have went into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished—he had successfully defended the U.S. dollar, and thus the American Empire....

The Iranian government has finally developed the ultimate “nuclear” weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse...It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro... it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system...The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy...

The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.

· The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves."
- Krassimir Petrov 'The Proposed Iranian Oil Bourse'.

Whatever arrangement is made, the greatest benefit of the value of the oil resource owned by the Iraqi people will not be substantially captured by Iraqi citizens for their benefit; ultimately it will 'flow up' into the hands of very rich people, mainly in North America. It can be engineered by means of a few large contracts and loans, or by a vast number of small conracts and loans. A few large wounds or a thousand small cuts - either way Iraq is left anaemic and weak.

The paradox is that USA wants cheap oil - but it must sell expensive oil to recover costs, cover North American debts, and make profits. The Middle East must sell oil at as high a price as possible to pay for its citizens profligate breeding in austere desert lands of few food resources and even fewer job opportunities. Oil companies in general want to make as much money as possible on behalf of their rich shareholders. Indeed, it is their duty to maximise returns to shareholders, by all 'legal' means. One party would 'like' cheap oil for political purposes, but knows it cannot afford to have it. All parties need 'fully priced' oil. The risk of conflict between Arab nations is gone.

Middle East instability no longer an issue thanks to US military
Therefore oil prices are likely to remain uninfluenced by regional politics. Even if the USA attacks Iran prices won't change much, if the evidence from the US invasion of Iraq is anything to be guided by.

As the peak of world oil production passes, supply is unlikely to meet demand. Prices in a free market will rise. There is nothing any party can do to prevent this. On the contrary, the USA, helpless in the face of market reality, may publicly deplore the higher prices and privately work with other OPEC members and the oil industry to keep them within a high band.

The 'wild card' of political instability in the Middle East is largely gone.

The 'wild card' of major Saudi field collapse from overpumping remains.

The 'wild card' of major world recession due to structural high oil prices and shift away from the US dollar remains.

Fiction of resource wars
The USA started to sequester Middle East oil early - 1947 onward.

The USA has a sophisticated techno-military machine in huge military bases in Iraq guarding the USA's Iraqi oil facilities.

USA controls the only major airport in Iraq.

USA controls the ports of Iraq.

USA controls, or can control, any element of airspace around the gulf.

USA controls the Straits of Hormuz. The Iranian anti-ship missiles along the Iranian coast can be destroyed by air at any time.

USA controls or could control any and every port in the gulf region by almost instant ability to interdict or destroy from above.

The 'resource war' for the gulf has long since been won by the USA.

That is a robust fact. Most people in the world simply have not been awake to it.

The uber wild card
If any mix of a series of events coincide - a Saudi major oilfield collapses, popular uprising by a disaffected Saudi population, world reserve currency (greenback) instability due to Russia converting to Euros for payment for its oil - the USA business/military/presidential administration complex may be forced to abandon pretense of 'moral justification' and indirectly or directly, openly, unilaterally, seize the rest of the Middle East oil.

This would be a relief to educated people around the world, who have long been enraged by USA propoganda insulting their intelligence with the transparently hypocritical garbage about 'bringing democracy' to the Middle East and a "war on terror". (There have long been terrorists, whether Basque ETNA terrorists, Irish IRA terrorists, or Saudi religious terrorists. Continuous, precise, multi-agency policing, intelligence, community pressure, and sanctions of all kinds used on these criminals have long been known as the only effective strategies to keep them in check in the medium run - and outlast them in the long run.)

War against an entire country that is the unwitting home to a relatively small number of terrorists - Saudi Arabia, Spain, UK, Ireland, Indonesia, Malaysia, etc - is a counter-productive blunt instrument. It creates further terrorists.

The Iraq war was a war to occupy and seize a military base in an area with the most vital of economic resources. At one level, understandable. But it was falsely, hypocritically, and cynically window-dressed as a policing action against terrorists - but military destruction, not policing precision was the instrument. The inappropriate instrument used gave lie to the publicly stated purpose.

People with a wide world view can easily understand why the USA business/military/presidential administration complex will always act unilaterally in it's economic best interest. They may oppose and disagree with it, but most people can see why the USA might move unilaterally to control Middle East oil and to prevent oil trading in anything but the dollar.

In a 'perfect storm' situation, the US business/military/presidential administration complex may well decide, using powers given themselves, to unilaterally embargo the Straits of Hormuz, seize Saudi fields, and supply oil (and more importantly, gas) 'preferentially' to itself and its friends (UK, Japan) and economic bedfellows (China).

The question then is, would pricing be 'two tier'? Would there be one price for the USA for 'it's' directly controlled oil in Iraq  (with oil rationed to 'close interests') and another price, a second market, for the rest of the world?

Would the rest of the world then be in a position of having to pay scarcity prices? Scarcity prices would become steep indeed as non OPEC oil pumping capacity fades. Scarcity prices would economically cripple all West Eurasia (except UK, which would likely be supplied in the 'primary' market). Would the USA really go so far as to allow West Eurasia to become economically crippled?

We simply don't know. It certainly has the military power to take unilateral control of the Middle East oil supply at any time it chooses.

But would this precipitate a 'tipping point' in domestic disaffection with the USA's poorly representative and weakly democratic system of popular representation? Or would temporary domestic comfort be more compelling for American People?

Given the inward-looking culture of the USA, control of the US media, and poor public education on the medium to long term issues, the American Public are most likely to be persuaded that they have a 'right' and 'just' cause to take control of the oil belonging to the people of the countries of the Middle East.

Even the most critical are likely to grudgingly 'accept' it at - one level - if the USA government stops the hypocritical moralistic justifications and simply says, "we need Middle East oil to support your lifestyle, we have invested US lives and money to position ourselves to take control of the Middle East, we can take control, we will take control because we can. It isn't fair, but we are going to look after our interests".

At this point, the uber wild card, once played, puts an end to spikes, and introduces a slide to depression for those with access to price-controlled oil, and a crash into depression for the rest of the world buying on the secondary market.

Further reading
William Clark, 'Revisited - The Real Reasons for the Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth,' January 2003 (updated January 2004)

Richard A. Clarke, 'Against All Enemies: Inside America’s War on Terror'.
Free Press (2004)

Peter Philips, 'Censored 2004, The Top 25 Censored News Stories'
Seven Stories Press, (2003)
General website for Project Censored: www.projectcensored.org/
Story #19: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq

Ron Suskind, 'The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’ Neill'
Simon & Schuster publishers (2004)

Analysis of Abu Musa Island, www.globalsecurity.org

'Oil Companies in Iraq:  A Century of Rivalry and War' by James A. Paul
Published by the Global Policy Forum in november 2003
URL: http://www.globalpolicy.org/security/oil/2003/2003companiesiniraq.htm

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