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March 15, 2005

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Sebastian: It is typically used to imply that Bush invaded Iraq to steal its oil, or in a slightly more reserved moments to 'control' the oil. This understanding is not merely misleading, it is flat out wrong.

Bush told you this himself, did he? You know for sure that Bush & Co have no interest in controlling Iraq's oil?

Or perhaps you'd like to modify that statement a little?

Please, our entire policy in the ME has been about OIL for the last 70 years and Israel for the 50. I am always amazed that we have managed to reconcile both policy goals as well as we have.

Why do you think we overthrew Mossadeq in the 50's? OIL!!!

Why do you think we supported Saddam in the 80's? OIL!!!

Why do you think we will support just about any regime that will come to power in Iraq? OIL

Why do you think we support SA? OIL


It's all about OIL, the single most important commodity in the world at the present time.

He who controls the spice, controls the universe! (Dune)

This post starts with a simplistic theory about Bush’s motives, which “is flat out wrong.” Maybe it is, but we are not told why. Instead we get a story about how oil enables mad, bad and dangerous regimes to survive.

Since “it’s all about oil” is often a straw man which Bush’s fans build only to demolish it, here is a version which I, for one, am prepared to defend.

Oil is a vital raw material and America has an interest in ensuring that the world’s main oil-producing region does not fall under the sway of any rival power, existing or prospective. Right now America has no serious rival but American strategists are long-term thinkers. One day China will be a serious rival. India may be too. Perhaps even the EU will evolve into a USE with borders stretching from Connemara to the Caucasus.

It is in America’s interest to ensure that: (a) none of these powers will be able to dictate the terms on which oil is sold; (b) no regional power, such as Iran, secures sufficient influence to play America off against such rivals.

This didn’t start with Bush. Mossadeq wasn’t toppled because he was crazy. The Brits said he was crazy because they wanted American help in toppling him. The portrayal of the mullahs as suicidal maniacs itching for a chance to nuke Israel is a similar ploy. (Of course many people sincerely believe these things; people are generally receptive to ideas which serve their interests.)

Not about stealing oil? Oh really? Why is it then that while the weapons facilities, museums, and hospitals were being looted after the invasion the only building the military saw fit to defend was the oil ministry? Bremer's reconstruction plan specifically authorized denationalizing all industry and allowing western companies to compete in Iraq--in other words placing control of the oil in western hands, even if the oil itself was nominally still owned by the state.

Not about stealing oil? Oh really? Why is it then that while the weapons facilities, museums, and hospitals were being looted after the invasion the only building the military saw fit to defend was the oil ministry? Bremer's reconstruction plan specifically authorized denationalizing all industry and allowing western companies to compete in Iraq--in other words placing control of the oil in western hands, even if the oil itself was nominally still owned by the state.

Sorry about the double post!

In a different kind of political and economic system, things would not work out like this. If Saddam were merely paid a salary from the Iraqi state, and if oil in the region was owned by private actors who only sold oil at market prices, there would be no point in these sorts of wars of conquest. Whether or not he controlled Kuwait, he would have made $X per year, and oil would have cost $Y per barrel, and where the borders lay would have been perfectly irrelevant.

That's a pretty forgiving analysis, considering the history of crime and militant meddling that oil companies have in other nations. The Magic Of The Market doesn't eliminate human greed and the willingness to hurt other people to get More Of Whatever You Want.

One small example is the Canadian firm, Talisman Energy. It was sued in 2004, accused of participating in genocide against the people of Sudan. Use of helicopter gunships to clear towns surrounding oil fields is simpler than buying land, but quite illegal. Shell has supported Nigerian military dictatorships in order to keep oil supplies from that region stable.

This is not to say that corporate control of oil is evil per se. Rather, the point is that "private ownership of a resource" in no way assures the safety of innnocent lives.

"Arabs may have the oil, but we have the matches." Ariel Sharon.

Hmmm. So, getting access to more oil is going to help Bush's oil cronies in what way, exactly? Is it actually the point that oil profits will increase when the price drops?

"So it is about oil, but it isn't about stealing oil or even ensuring profit for US oil companies. Oil is involved in a lot of the problems in the Middle East, but not in the Marxist exploitation sense."

Maybe not Marx, but Henry George? Rent-seeking?

You say true things, but you and Matt only have part of the truth. Yes, ME oil might be better controlled by a democracies, although Venezuela makes me wonder. But:

a) I would be more comfortable if so many in this administration were not from the oil industry. If Chirac had invaded Iraq, you would probably not give him so large a benefit of a doubt concerning cronyism and profits for his friends. For instance, as long as oil is being pumped and exported, there is less incentive to switch to alternative energy or conservation...indirect profits and rent-seeking. America and the world has reasons to keep ME plastic and petro-chemical production down...we want the oil, and we like having those industries at home.

b)Donoghue makes the point about oil as a strategic resource, and the competition with China is not something in the far off future

c) It may partly about keeping the dollar as reserve currency and keeping oil sold in dollars.

d) The Red State Republican base are far more dependent on oil than Blue Areas, directly for transportation(suburbs,exurbs, ag distribution) and indirectly for fertilizer etc. Gas hits $5 I bet Repubs would lose the House.

"The Red State Republican base are far more dependent on oil than Blue Areas, directly for transportation(suburbs,exurbs, ag distribution) and indirectly for fertilizer etc."

Not really. The transportation issue is serious either way because the transportation issue is about shipping. There are very few major cities that could easily draw down their land shipping needs.

"The Magic Of The Market doesn't eliminate human greed and the willingness to hurt other people to get More Of Whatever You Want."

No it doesn't. And neither does a lack of market--see Communism.

Sebastian's right to an extent; it's not all a Michael-Mooresque capitalist conspiracy.

On the other hand, what is the Mideast without oil? It's sub-Saharan Africa. Have we fought any wars there lately? Do we give a damn who's being exterminated there? Not particularly (alas).

Obviously, the fact that the world's great oil reserves are in the area is playing a wee role in all this. But the blunt conspiracy-theorists like Moore drive out the more subtle analysis. Worst part of "Fahrenheit 9/11" was the pipeline/Saudi mess.

"So, getting access to more oil is going to help Bush's oil cronies in what way, exactly? Is it actually the point that oil profits will increase when the price drops?"

Please look up the definition of, and benefits of being a part of, an oligopoly in any economics textbook.

How do you think oligopoly works to bolster your ideas in this instance? Do you think that Bush invaded Iraq so he could raise the price of oil?

Please look up the definition of, and benefits of being a part of, an oligopoly in any economics textbook.

If you've got a point to make, probably you ought to advance it.

"How do you think oligopoly works to bolster your ideas in this instance? Do you think that Bush invaded Iraq so he could raise the price of oil?"

Which ideas have I expressed on this subject? Please provide a cite.

"The Red State Republican base are far more dependent on oil than Blue Areas, directly for transportation(suburbs,exurbs, ag distribution) and indirectly for fertilizer etc."

Not really. The transportation issue is serious either way because the transportation issue is about shipping. There are very few major cities that could easily draw down their land shipping needs."

It's not MAINLY about shipping and there is a real environmental difference between living in a city and in the suburbs, though we're all pretty oil-dependent. I don't really know how much this drives energy politics; I'm just saying it because it seems to blow everyone's mind that one of the most environmental choices you can make is living in a place like Boston, Chicago, or (above all) New York. Transportation is the main reason; it's also cheaper to heat and cool fewer square feet than more, and more efficient to heat and cool apartment buildings than single family homes. Housing supply in New York City is an environmental issue; rent control in NYC is bad environmental policy; Section 8 cuts are bad environmental policy; the rural/urban imbalance on federal transportation spending is bad environmental policy.

Since I love the cities and would want to live there anyway and would rather ride the subway than drive, this is pretty convenient for me. If you want peace and open space and want to choose a community for public schools, it's different. But it's something that people should at least be aware of. The environment is not something that we should stick in a corner in Alaska and just ignore the rest of the time.

okay, off hobbyhorse.

Sigh. Couldn't anyone easily predict that a war & its attendant instability would send prices up?

But there's the flaw in the anti-Bush conspiracy theories (we need a verb for that, people). The Bushies were literally too stupid to see what result the invasion would have. As far as we can tell, they believed we'd be greeted as liberators, the country would be up & working in 3 months, etc., etc. So presumably, they can't have anticipated the long-term hike in oil prices.

I agree with Sebastian on this one. Iraq's biggest customer for oil before the invasion was the US. IMO, the invasion had a lot more to do with declaring a new world order than ensuring access to oil.

On the other hand, if the ME didn't have the oil reserves that it has, I don't think we'd have seen the fuss over Hussein's regime. After all, far worse is happening in the Congo, and we don't seem to give a damn about it.

Sebastian, I don't mean to threadjack, but this kind of analysis of the how economic production influences the form of the state is why I read Marx.

That said, I want to point out one thing: oil isn't exactly an easily exchangeable commodity. Refinaries have to be built according to the chemical specificity of the crude supply. In other words, when Saudi crude becomes expensive, a refinary can't simply switch to a cheaper crude from another country. If a chemically appropriate crude isn't available, the refinary pretty much has to go offline. This fact complicates enormously a lot of the free market analyses of oil flow. I don't know exactly how US processing's being locked into specific sources fits into your overview of the geopolitics, but I thought I'd mention it.

'Oil reserves playing a wee role in this'? As a result of the Arab oil embargo of 1973, plans were drawn up to invade the middle east ("Dharhran Option Four") to secure a source of oil for the US economy. When the Soviets invaded Afghanistan, roughly contemporaneous with Ayatollah Khomeni coming to power in Iran, the Carter Doctrine provided that 'outside' control of the Persian Gulf would be an assult on the vital interests of the US. Those pictures of Rumsfeld and Saddam Hussein, circa 1983? Bechtel was trying to build an oil pipeline from Iraq to the Jordanian port of Aqaba, near the Red Sea, and of course, the state department backed the plan. George Schultz, you may recall, was the former president of Bechtel. Reagan and Schultz sent Donald Rumsfeld to the Middle East as a special envoy, to meet with Saddam Hussein regarding the project. Since 1991, France, Russia, China, India, Italy, Vietnam and Algeria either reached agreements, or sought to reach agreements in principle, with Iraq to to develop Iraqi oil fields, refurbish existing facilities, and explore for additional fields. These contracts, however, were contingent upon lifting UN sanctions. If the sanctions had been lifted, and Saddam remained in power, do you think the US would be on equal footing in Iraq?

Then there is the CPA's re-writing of the Constitution of Iraq to allow private owenership of Iraq's natual resources (Order 39).

I am no fan of Michael Moore's but Anderson is criticizing the critic to avoid an examination of his message. It's not a conspiracy theory. Donaghue has an accurate assessment given the public statements of those such as Wolfowitz, Cheney, Perle, and others: strategic control. Until a different energy source is viable, its all about the oil.

The Bushies were literally too stupid to see what result the invasion would have... [s]o presumably, they can't have anticipated the long-term hike in oil prices.

Which means that the Administration couldn't have anticipated the rise in oil prices that today lines the pockets of all their friends in the oil industry. So, how evil and self-interested were their intentions again?

So presumably, they can't have anticipated the long-term hike in oil prices.

Again, what would Bush's incentive be to drive oil prices down, given the idea was that his oil buddies were encouraging involvement? If this were a war about oil, you've got to admit that the current trend in oil prices is just what the oil-company investor is going to like.

Danetheman, "Which ideas have I expressed on this subject? Please provide a cite."

Ah, you were making a content-free comment about oligopoly and almost certainly misusing the term along the way. Gotcha. No further response needed. I'm just sorry I wasted my time thinking you had a point. I'll try not to make that mistake again.

Katherine,

"It's not MAINLY about shipping and there is a real environmental difference between living in a city and in the suburbs, though we're all pretty oil-dependent. I don't really know how much this drives energy politics; I'm just saying it because it seems to blow everyone's mind that one of the most environmental choices you can make is living in a place like Boston, Chicago, or (above all) New York. Transportation is the main reason; it's also cheaper to heat and cool fewer square feet than more, and more efficient to heat and cool apartment buildings than single family homes."

These are energy use issues, but not always 'oil' issues. Heating can be conducted electrically or with other burned sources--typically 'natural gas'. Electricity can be produced by a large variety of sources. My point about transportation is that it is the least easily replaced part of oil consumption.

We went to Iraq because we respect them and love their culture.

I don't think anyone, anywhere has made that suggestion in earnest, NeoDude.

Hmmm. So, getting access to more oil is going to help Bush's oil cronies in what way, exactly? Is it actually the point that oil profits will increase when the price drops?

I think the argument is not that the supply of oil will change, but rather that control of the supply, and the attendant profits, will change. Now, I don't think Bush invaded Iraq in order to turn over its oil to his buddies, but that's the way it would have worked.

Do you think that Bush invaded Iraq so he could raise the price of oil?

I myself don't think so. But it is obvious that oil has always been an important factor in ME policy, so it is hardly unreasonable to say that it played some part in Bush's Iraq war. One need not imagine a cabal of Texas oilmen getting Bush to seize the Iraqi fields on their behalf to believe that oil was a factor in the Administration's thinking.

The main strategic goal of GW2 was to establish large, permanent military bases in Iraq. Having basically been kicked out of SA and watching the EU, China and Russia becoming major players in the ME, the US had to take drastic action in order to retain their dominance in the region. If the price should go up or down a bit in the next few years or which companies will make a handy profit from the whole adventure is not so relevant. It's all about long-term access and control of the region. The oil reserves of the major companies are running out fast and, if the plan works out, the US is now in a strategic position to control the world's second largest oil reserves for decades. That's why this war was fought.

"The Magic Of The Market doesn't eliminate human greed and the willingness to hurt other people to get More Of Whatever You Want."

No it doesn't. And neither does a lack of market--see Communism.

Oh, absolutely. I'm far from a communist. I just get a little twitchy when I think someone's arguing that problems with human greed and exploitation will be solved by privatization of resources. I'm of the opinion that 'the market' is one of those memes that will always exist, no matter where you go. Even in a communist state, 'the market' exists underground.

For it to realize its effectiveness without destroying *people* in a rush for profit, 'the market' should be embraced, strengthened, and controlled. Monetary profit isn't the end goal; the enriched lives of individuals is.

--Jeff

Sebastian,

When you produce a post on this topic, it might help if you provide a primer on the basics. This would cut down on the number of misconceptions in the comments.

And yes, I do have some experience in the oil business, but all I have to say is, if a fire breaks out in a refinery...run like hell!!!

Thanks for the link Happy Jack. It looks like a useful source. It shows for instance that with a daily US consumption of 19.66 million barrels per day, 13.08 million is used in transportation (2/3).

It'd be interesting to know what percentage of food costs are taken up by the current price of gas/diesel at the pump.

Those gas pumps at the grocery store are especially handy re: Slartibartfast's question, because you can fill up your car & then eat on what's left in your wallet.

The transportation issue is serious either way because the transportation issue is about shipping. There are very few major cities that could easily draw down their land shipping needs.

Sebastian,

I think you are incorrectly using shipping and transportation interchangeably. Transportation includes personal automotive use. Shipping does not. To get an idea of relative use, look at the tables available here here. (Scroll down to "International Petroleum Consumption" and you can download a useful spreadsheet).

Distillate fuel oil, which includes diesel fuel, is less than half of motor gasoline. Now this obviously isn't a clear cut distinction between personal automobiles and shipping, but it does suggest that the statement "the transportation issue is all about shipping" doesn't really hold up.

'The main strategic goal of GW2 was to establish large, permanent military bases in Iraq. Having basically been kicked out of SA and watching the EU, China and Russia becoming major players in the ME, the US had to take drastic action in order to retain their dominance in the region. If the price should go up or down a bit in the next few years or which companies will make a handy profit from the whole adventure is not so relevant. It's all about long-term access and control of the region. The oil reserves of the major companies are running out fast and, if the plan works out, the US is now in a strategic position to control the world's second largest oil reserves for decades. That's why this war was fought.'


This is a succinct summary of my feelings about this whole thread. Control of the oil for the mid term is vital for our current way of life in the US. Personally, I think it would be great if, as Edwards noted, the admin put the same effort into conservation/alternative sources as they put into privatizing SS or overthrowing pissant dictators.

However, since that has not and will not happen, I have a very important question that hasn't been asked yet on this thread. This goes for righties and lefties alike. Supposing Bush invaded Iraq with the intent of securing a large oil reserve for 'democratic control', is this a bad thing? In other words, if Iraq democratization succeeds as best it can, are we better off as a country to buy our oil from them instead of SA?

I'm not sure myself.

Supposing Bush invaded Iraq with the intent of securing a large oil reserve for 'democratic control', is this a bad thing? In other words, if Iraq democratization succeeds as best it can, are we better off as a country to buy our oil from them instead of SA?

Define 'democratic control'.

I would say Yes!!!, in that we can buy all the oil we need on the open market and that the US, Canada and Mexico can probably produce all the Oil we need in case of emergency.

PS. Reducing US Oil consumption by 20 t0 30% should not be all that dificult since 2/3 of our oil consumption is for transportation.

if Iraq democratization succeeds as best it can, are we better off as a country to buy our oil from them instead of SA?

No. There is really no difference. SA will simply sell its oil to those who previously bought Iraqi oil. It's all the same.

heet: Supposing Bush invaded Iraq with the intent of securing a large oil reserve for 'democratic control', is this a bad thing?

It would be a hard thing to believe, as the Bush administration were - at best - publicly unsupportive of keeping the Venezualan oil reserve under democratic control.

I read somewhere that people that people who believe the US invaded "because of the oil" should ponder on why the following is not a paradox:

1) The US didn't invade Iraq because of the oil

2) If there was no oil in Iraq, the US wouldn't have invaded Iraq

clue

Yep, victor, Wolfowitz pretty much let the cat out of the bag on that one.

What part of that 'paradox' do you believe isn't dealt with in the post?

Bernard,
My understanding is that the oil is not all the same. Different oilfields have different chemical specifications, which translate into different kinds of refining plants, equipment, and layouts. This isn't my field--it's my father's--but my understanding is that the refinary has to be expensively rejiggered to process a different crude. So the US (or rather, US companies) can't simply switch to a politically convenient source. Or, rather, it can switch, but it's damn expensive and takes a long time.

(Happy Jack's link was so comprehensive as to be difficult to use, so if I'm getting this wrong, I apologize.)

"No. There is really no difference. SA will simply sell its oil to those who previously bought Iraqi oil. It's all the same."

I don't know. If we are approaching some production limits, because of reserves or capacity, what country sells to which country could have geopolitical implications. If Japan is getting its oil from SA, Japan will have an interest in the stability of SA. If SA goes offline, it is not automatic that Japan could find an equal replacement source at even a higher price.

Jes:'It would be a hard thing to believe, as the Bush administration were - at best - publicly unsupportive of keeping the Venezualan oil reserve under democratic control.'

That is a very good point.

However, in my original question I was taking the view that the admin is to be taken seriously.

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More information on this transaction if we get your request.

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Alh. Chikezie David
Co-Sec.

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