Fitzgerald: The price of oil, and how it got there

[Snowden]

Fitzgerald: The price of oil, and how it got there


The price of oil is now very high, and it became very high very rapidly. Some blame "speculators," without realizing how small is the amount of money that speculators take -- see Philip K. Verleger -- while almost all of the rise in price goes to the oil-producing states. It would hardly be surprising, either, to discover that the Saudis and other Arabs were in fact behind some of these speculators, and were even employing them. After all, the speculators not only run the price up, but become the object of criticism that deflects from fury at this handful of plutocratic states.

These states, by the way, have far tinier native populations than they give out. The real populations of Qatar, with its natural gas, and the constituent parts of the U.A.E., for example, are at most a few hundred thousand, with Qatar being far less. This means the per-capita take is even greater than has been given out. If the real figure were to be known, it might increase the fury against these statelets, and people might begin thinking that all of these places could be taken over by a well-armed Western brigade or two, backed by air support. Saudi Arabia consistently exaggerates its native population, for fear that others would realize just how weak, how vulnerable, and how very very rich, its population is.

Despite the endlessly-recycled pictures of President Roosevelt meeting the Saudi king (Ibn Saud, or his father, or one of his sons, it hardly matters), which are meant to show that Saudi Arabia and the United States go way back and are still "allies" today, Saudi Arabia is not, and was not at the time of that meeting, and never has been, and never possibly can be, an "ally" of the United States. It can, very occasionally, appear to share some interests. Its manipulation of the Americans in such situations has been fascinating. The most obvious case is in Afghanistan, where the Americans appeared to believe that they and the Saudis had an interest in supporting the local muhajedin against the Soviet army, and collaborated in supplying those muhajedin. But what prompted the Saudis was not hatred for Soviet totalitarianism, but hatred for Infidels. When the Soviets left, the Saudis, along with the U.A.E. (a constant sidekick in so many ventures), supported to the hilt the Taliban. The views of the Taliban, you may recall, on what constitutes a rightly-ordered society, and on the treatment of women and of non-Muslims (the remaining Hindus were forced to put yellow identifying marks on their clothes "for their own safety"), did not correspond to the American conception -- at all.

Long ago, back in 1973, the American government should have recognized that the phrase "oil is a weapon" was false. For oil is fungible. In fact, the supposed Arab oil boycott was ineffective -- see J. B. Kelly, "Arabia, the Gulf, and the West." But it was effective in fooling and confusing the West into thinking that if it began to do the bidding of the Arabs, or at least tried not to antagonize them, that somehow this would be reflected in "price moderation." It was nonsense then, and it is nonsense now. The Saudis, as the swing producer (with a lot more to "swing" then than they do now, where their excess production capacity hardly exists, and they are blowing smoke about it just to inflate their power, like a frog blowing up its throat to impress would-be predators), always made the same calculation: what price X, at time T, will maximize the total value of Saudi reserves over time? In doing this, they kept in mind current budgetary needs, and also carefully watched what effect price rises, of various conceivable sizes, had on:

1) overall oil demand;

2) oil exploration and production elsewhere;

3) short and long-term investments in other forms of energy, including nuclear plants, solar energy, wind, and so on;

4) changes in political will to effect, including a willingness to subsidize, those alternative forms of energy, including nuclear, solar, wind;

5) the political will to subsidize mass transit systems and to rebuild train systems as a carrier of both freight and passengers; and

6) the political will to tax gasoline, and thereby encourage, much earlier, and in a more predictable manner, the use of smaller cars and less reliance on cars.

And you can add to this a half-dozen or another dozen considerations, and someone else can add a dozen more.

But then came all those who were in the pay of the Saudis -- those "public relations advisers" such as the Kennedy apparatchik Fred Dutton, or those ex-diplomats (see James Akins), or former intelligence agents (see Raymond Close), or all those corporations that went to bat for Saudi Arabia. There was the famous AWACS sale. The leader was United Technologies, ably assisted by Whitney Corp., with the first a supplier of arms to the Saudis, and the second a builder and maintainer of hospitals in Saudi Arabia. There were all those businessmen who were so eager for Saudi contracts. Then there are all those fixers, the ones who as soon as they leave "public service" decide, as they grotesquely put it, "to make some real money" -- insultingly for the rest of us, who would be delighted to have their government salaries. These include such people as the founder and participants in Kissinger Associates, selling essentially its Who-Do-You-Know expertisee, that is, its ability to contact and influence people in the government. Then there are the Carlyle boys, and all the other fixers and promoters and wheeler-dealers who have convinced themselves, because they are so eager to "recycle" Arab oil money, that Saudi Arabia is our "friend" and "ally." And they have made that nonsense our official attitude, one encouraged in the ready-to-repeat-any-platitude and largely mindless press.

So here we are today, with oil at $140 a barrel, which is no doubt right where it should be. But it should be at that price because we ourselves, beginning back in 1973, began to tax oil, and tax gasoline use, and had made a smooth transition to that price, reducing oil use and having subsidized mass transit, and train track rebuilt all over. (Try to get from Portland, Maine to Lawton, Oklahoma by train as you once could -- just try.) Long ago we should have given subsidies to solar energy companies that went under without those subsidies -- though they were bringing down the price, and doing everything right (for example, there was Becker's pioneering Luz).

The Saudi Lobby is the most powerful lobby in Washington. More generally, the Arab Oil Lobby is the most powerful lobby in all the capitals of the Western world. Powerful people everywhere have been bought up. As a consequence, there has hardly been anything like an intelligent, long-term energy policy, one that made geopolitical and environmental sense (they go, as it happens, together; they are, as it happens, almost identical).

And the results we can now see all around us, as we frantically flail, and fail, and flail again, unable to grasp the enormity of what was not done over the past 35 years, slowly and intelligently, and now must somehow be done in great haste and mental desarroi.



Jihad Watch: Fitzgerald: The price of oil, and how it got there

[pepe]

Excellent post.

"We the People" missed the boat, so to speak, and failed to learn the lessons from the Arab Oil Embargo of '73.

The Europeans are light years ahead of us in the use of "gas taxes" to support the build out and maintainence of mass transit and rail infrastructure.

At least in Europe, these Excise taxes were recycled through their internal economies providing jobs without having to raise (borrow) capital from foreign sources vis a vis the US.

I am a firm believer that "Peak Oil" is either here now or is right around the corner. The time to start preparations was during the Carter years but we need to get moving now with a sense of purpose.

A good place to start is the Electrification of Transportation.

It appears the Juan McAmnesty has had a change of heart with his new advocacy of Nuclear Power Plants.

I hope there can be a political consensus that the Nation has dug itself into a deep hole and the time has arrived to put down the shovel and start building a ladder.

Time will tell.

[Snowden]

When I was growing up, we had electric transportation -- streetcars. We could go all the way through Baltimore on them -- no pollution, no stress, no need to park anywhere in town. They were great -- torn up because of the determination of the car manufacturers and the oil people that we would get cars and travel that way.

Even the trains, electric or not, were torn away from us. Instead we have roads and tarmac parking lots, none of which are attractive and all of which merely increase the heat and make the nation downright ugly in places that once were lovely. Many of those roads wouldn't be needed if we still had the streetcars and trains.

Yes, it's time we turned to other power sources, electricity created by solar power appeals to me, but it's not in the minds or pocket books of our Congress, so forget that. The environmentalists are polluting common sense. No -- they have already destroyed it where they reign, haven't they.

[Paladine030]

What many do not know(including me, until my recent "middle east vacation") is that in most of the oil producing, Middle Eastern countries,....if you have a job, you are poor, regardless if it a managerial job at a large hotel chain, or the like.....including our ally, Kuwait. The "employed" are poor, while the "jobless" are rich. Boggles the mind, huh?

[leobold1]

I hope there can be a political consensus that the Nation has dug itself into a deep hole and the time has arrived to put down the shovel and start building a ladder.

According to recent polls, Reuters/Zogby, Rasmussen, and CNN/USA Today/Gallup, the American people realize the danger and want the change, if only drilling for more oil.

Now, its up to us to convince Congress of our desires.

I've already sent my daily e-mail.

[Snowden]

I've visited some of those poor Middle East homes, Dave. They aren't all that bad, but it's obvious that they are not rich. However, they are rich in hospitality and kindness to a visitor.