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Saturday, August 05, 2006

Turning Around the Oil Weapon

Once again there is open war between the Israelis and Muslim Arabs, and once again there are threats to unleash the Oil Weapon.

With prices already at record highs the crazy people who live atop much of the world's most easily recoverable oil still aren't happy. They need more money. For palaces. And maybe a few rockets and nukes.

The same Wall Street kool-aid drinkers who think countries should just throw open their borders for cheap labor also hallucinate that the oil market is free. They say nobody controls the price, that the government shouldn't interfere by increasing taxes. Following this advice has produced disasterous results. Out of ignorance or greed these geniuses have helped fleece the West and enrich the enemies of civilization.

The oil market is most definitely not free. Every time an oil oligarch acts nutty the market rewards him. The formula is so obvious that by now even Hugo Chavez surely knows it: Make loud threatening noises and the price of oil will jump.

On top of that oil is subsidized by trillions of dollars in US defense spending. The concept of externality might be a bit too subtle for the Wall Street types. It's simple. Ignoring the consequences can make any action appear sensible.

The US pays to keep Mid East oil safe and ensure stable prices. What would the price of oil be if the US didn't police the Mid East? Lower? Why? Because the US is a bullying imperialist power exploiting the world's resources and those who rebel are altruistic patriots who only want peace? Puhlease. Iran would be a threat whether there were troops in Iraq or not. Without US policing the price of oil would be higher. Some strongman or another would long ago have seized a large enough chunk of the supply to extort oil consumers. Saddam tried. Iran is trying.

So why does the US fear an oil embargo? Shouldn't it be the other way around? Suppose country X threatens to alter their oil exports with the stated aim to harm the US. This is an act of aggression. Suppose the US responds by calling the bluff and deliberately crippling country X's oil infrastructure. This would have several predictable consequences:
  • The price of oil would go up worldwide.
  • Oil would stop flowing out of country X.
  • Money would stop flowing into country X.
  • Enemies and rivals of the US, including a coalition of Leftists, pacifists, and Islamists living throughout the civilized world, would condemn the US.
This is not the unmitigated economic catastrophe the fearsome Oil Weapon is supposed to produce. The economic losses shared by the oil consumers would be matched and concentrated on country X. The higher more honest prices would spur the development of alternatives. Other sources of oil, particularly in North America, become profitable above certain thresholds.

Yes this scenario requires the US to make a "preemtive" strike against country X. This action could be legitimately justified by self-defense, in response to the threat from country X's use of an Oil Weapon, and the WMDs funded by oil money. Is it not more humane to destroy pipelines and pumps then to wage war by deliberate acts of violence and destruction against people?

To those who say that preemptive strikes are beyond the pale I respond: This is how the war is already being waged against the US. Civilization's enemies are envigorated by the influx of oil money, using their profits to strengthen and broaden the pursuit of their repressive aims. They are intentionally bleeding civilization into backruptcy. It isn't unfair for the US to fight fire with fire.

The Danegeld doesn't have to be paid. It shouldn't be paid. The US produces a large fraction of the oil it consumes. It can quickly find alternatives for the excess.

Can the leaders of Iran and Venezuela stay in power and export their poison without oil income?


Blogger flippityflopitty said...

So what was the big national security issue in Iraq? Hmmmmmmmm....

So now that we are being transparent with our foreign policy, we should just set sail, call battle stations and take out foreign oil infra-structures? All in the name of national security, of course...

There may be a little country named China that has a problem with that, but what the hell...

"Can the leaders of Iran and Venezuela stay in power and export their poison without oil income?"

Funny... Iran and Venezuela are saying: "Can the leaders of the US stay in power and export their poison without incoming oil?"

Food for thought -

The price of oil will continue to go up because consumption is on the rise. Fluctuations in the market created by foreign policy and mother nature cover up the continued impact by consumption and depletion of reserves. The US produces only 1/3 of what it consumes and our reserves are drying up fast (keep in mind that we export 1M b/day of the 8M we produce).

Historically, the one check that kept the strongman from controlling the market price was Saudi Arabia (opened and closed taps to keep the price in line). No More! The Saudis are at capacity largely thanks to good ole chinese know-how.

The best way to screw the theives is make the product less valuable. Time to change gears, go cold turkey and get off the oil. Brazil did it - geez theyre like a 2 3/4 world country.

8/06/2006 07:46:00 PM  
Blogger Tanstaafl said...

Well thanks FF for making my point concerning China, Iran, and Venezuela. They are already behaving as if the US is their enemy. They can, as they say in New York, suck it. Maybe we'll negotiate, maybe not. Their machismo and brinksmanship can talk to the hand.

What I'm saying is rather than US foreign policy being dictated by a fear of what dictators might say or do next, as the case has been since at least 1973, instead the dictators should be the ones who feel obligated to placate the US.

I can say this with complete disregard for the interests of the other side because I recognize there are sides in the shitstorm that is coming down, and because I know which side I'm with.

We can do ethanol. Between that, liberal exploitation (why sugarcoat it?) of domestic resources, and demand reduction the US wouldn't need any foreign oil.

Unfortunately that wouldn't completely solve the problem of funding our enemies. We have to find and share a solution with the entire world in order to complete defund the oil oligarchs.

I wonder what they think about that? Not.

8/06/2006 08:56:00 PM  
Blogger flippityflopitty said...

Get off the oil!

Now BP shuts down Prudhoe Bay!?

Wall Street is surprised and prices spike!?

Hello? BP is planning on replacing 73% of the pipeline and this is a surprise?!?

What no heads-up? Whose side are they on? oh, yeah... their side.

I guess Hugo and Mohammed will have some new, shiny chinese rockets before year's end.

8/07/2006 01:17:00 PM  
Blogger Tanstaafl said...

Maybe now those who oppose domestic drilling will change their position. But I'm not holding my breath.

Oil Companies' Investment Exceeds Profits:

Over the same time span, however, the companies spent even more than they earned -- $550 billion -- on oil exploration and development. Some of them went deeply into debt to finance new ventures, especially during times of lean profits.

Despite the massive sums of money oil companies spent trying to find more oil for the world's fuel-thirsty consumers, returns on investment over the past 10 years declined sharply because most existing oil fields in the West are in decline and the most promising new discoveries are not available for development, Ernst & Young found.

"Most of the new reserves are outside of North America, and much of the global reserve base is off-limits to Western oil and gas companies," said Mr. Swanson. Moreover, oil-rich countries such as Venezuela and Russia are exacting onerous licensing terms and costly royalty payments from Western companies seeking access.

8/09/2006 08:31:00 AM  
Blogger flippityflopitty said...

Sniffle, sniffle...
The oil companies are suffering with record profits and obviously the US govt is not doing enough to maximize their volume and secure Big Oil's future for another 100 years. Maybe we should reduce our royalties to those reserves on federal lands so the oil companies can squeak a little more profit out.
Wah, waaaah....
Now were running out of viable oil reserves, existing reserves are tapping out, more wild cat drilling is yielding little hope.
...and evil Hugo Chavez is taking bigger cuts out of the multi-national oil companies... in fact he is basically forcing them out with his leftist, nationalist ideaology. He doesnt play fair!!!

Its Dickie to the rescue - just drill, drill, drill our way to independence.

Domestic drilling programs will do dick to the problem. They will put more oil on the back end and the cost will continue to skyrocket.

What we need is a real energy policy. One that sets alternative and renewable energy at the forefront of our energy production within the next decade. The leadership is frozen by Big Oil (and I dont just mean Bush & Co) - no one has the balls to move the US away from fossil fuels.

So when the Chinese are drilling off Cuba, the govt answer will be to drill off florida. Problem solved.


8/09/2006 09:02:00 PM  
Blogger Tanstaafl said...

$5/gal tax. Use it to fund the transition to alternatives.

And drill. If the BP loss causes such a problem how can anyone argue against tapping larger deposits like in Florida or ANWR? Except for Luddites of course.

8/10/2006 03:54:00 AM  
Blogger Tanstaafl said...

$5/gal tax. Use it to fund the transition to alternatives.

And drill. If the BP loss causes such a problem how can anyone argue against tapping larger deposits like in Florida or ANWR? Except for Luddites of course.

8/10/2006 03:54:00 AM  
Blogger flippityflopitty said...

$5/gal tax? Who are you, Jimmy Carter?

I was leaning towards $1/gallon and pinning it to a raise in the tax ceiling from $10k to $15-20K for a net loss to govt coffers of $0. Let the consumer make the change without feeling it (directly).

FF for Congress in '06!

8/14/2006 09:49:00 PM  

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