Posted on 06/08/2011 4:53:43 AM PDT by Arman Z. Calbay
At present, more than a year after the Gulf of Mexico disaster, Big Oil’s image remains black and unattractive. The supermajors understand this, perhaps, better than all. So, what can one do to vindicate oneself? Increase expenses for environmental protection? It goes without saying such a step is being taken after the BP oil spill. Moreover, it is impossible not to increase expenses, otherwise mass media and courts would simply bury the oil industry.
The question is not only in good PR; oil pollutions are poorly redeemed by an additional influx of money. What is actually needed are real actions. And the actions should be there where oil, Realpolitik, and war come together. It might be odd, but this place is far from the Gulf of Mexico. It is Middle East.
Possibly, this is a paradoxical proposal, but if Big Oil would have a hand in the establishment of peace in the Persian Gulf region, then a grateful public opinion would forgive the oil spill in the Gulf of Mexico. And other problems, too. There are some issues which public opinion considers even more important than an oil spill near the U.S. coast. And the first of them is fatigue from the Iraq war.
Even pathologic haters of Big Oil realize that oil and energy are synonyms now. The other combination – oil and war – is also known, but they prefer to speak less about it.
Military transport, as does civil, needs oil, too. Tanks of military vehicles – from the F-22 Raptor fighter to the M1 Abrams tank and Humvee vehicle – are filled with fuel from oil. Only aircraft-carrier atomic reactors need another fuel.
But if they all gather for war, i.e. for what they were created, this has an influence on the oil market, but not on uranium. At that the rule is quite definite. The higher a concentration of Western military equipment near the Middle East’s oil wells, the higher the oil prices.
Sometimes an impression is formed that the oil lobby knows about this rule very well and, therefore, pushes the West to interventions in the Middle East. This is achieved more or less successfully during Republican administrations in the White House and not during Democratic ones. The Democrats in general are less subjected to the energy lobby's influence than Republicans and, therefore, they are indifferent to oil company profits.
So, the more soldiers of the Western coalition in the Middle East deserts, the higher the oil prices. To make certain of it, just remember the 1990s when the Clinton administration avoided military actions in the Gulf, but had bombed Belgrade and invaded Somalia when there is not one drop of oil. Oil prices were low at that time. So low that it was a catastrophe both for the Western supermajors and also for the oil exporting countries.
I am not an adherent of low oil prices. Low prices do not have as many positive moments as it seems. Actually there is only one. You just spend less money when you refuel your car. But it is the only advantage.
As for the rest, low oil prices create problems. First of all, oil is an irreproducible resource. It should be managed wisely. The second reason is ecological issues. Nobody will think about minimum environmental impact if oil prices would be low. And third, it has emerged that the economic growth and prosperity of the world economy occur during high oil prices. Certainly, these parameters are interrelated; however, if one relies on the statistics of the two last decades, we can observe exactly such dependence.
At present, when the Iraq troops pullout plan has already been put into action and will conclude by December 31, 2011, the factor of oil prices reduction is gaining momentum. This factor has a fundamental nature in contrast to speculative psychosis which envelops the oil market from time to time. The more tanks and helicopters return to bases in Texas and North Carolina, the heavier the price reduction factor will be.
It means that there also must be a plan for oil price retention. There is nothing to be ashamed of because low oil prices will bring more harm than benefit.
There are several rising factors in the oil price mechanism. Only some of them are acceptable, while others should not be supported in any case. So, raising of tension in Middle East is one of the unacceptable factors. There must be some line that may not be crossed. One can keep high oil prices by means of taxes or even tolerating speculators, but one should not initiate military interventions for it and allow the deaths of thousands of civilians. It must become a clear position in world politics.
The feature of primary industries, for instance, production of oil, diamonds, or iron ore, is that as a result of military actions the resource appeal does not fall, but, on the contrary, rises. As do prices, too. However, as regards the oil industry, unfortunately, the war component in it has become constant. The Western countries think it fit to wage war for oil, but not for diamonds. Wars for diamonds are local and happen among clans or tribes, but the West never considers it acceptable to interfere in those conflicts.
The undesirability of war component in the rising of oil prices is becoming obvious for everyone. For the Middle East countries it was clear all time, but for Big Oil it was not so obvious. Now, however, the comprehension is increasing that military interventions harm the Western companies in the long run.
Another rising factor is speculation in the oil market. If price inflation by OPEC still could be justified by the principle of equity; however, speculators’ actions could be described in only one way – by the indefatigable thirst for profit. That is immoral to some degree.
One can hardly believe that gambling games on the oil market are something natural, like men’s passion for cards. And if for satisfaction of that passion mankind has invented the casino, but I do not believe that the oil business is Las Vegas. A small group of moneymakers has turned it into a likeness of Las Vegas, but that is not a reason to agree with it and to tolerate the presence of a brothel in the neighborhood.
A much more acceptable thing would be the expulsion of these morbid games and building of an actually respectable business. What is really needed is balance among customers’ interests, international oil companies, and petroleum exporting countries. The speculators and war adherents must not be in this balance.
Instead of market uncertainty and the smell of gunpowder, one should introduce higher ecological requirements, stricter licenses, and other similar methods of governmental control. Certainly, a limit also should be here; however, regulation is still lower than the level it should be.
Society now makes higher demands of the oil business. The business should be clean, not only from an ecological point of view, but also from a structural and even a moral one. It will be wise to follow these demands because it meets the interests of the business, too. "Yes, we can" – Big Oil is able to say such words. As a result, the oil market will be predictable and steady. And as a bonus, international oil companies will get a good price for oil.
Nightmares: immorality, legal, unions, government growth.
The nightmares push jobs overseas, real productivity down, shrink gdp and wealth.
Lead to lower value of dollar.
Which means more dollars needed to buy a barrel of oil.
End the nightmares, dollars become more valuable, oil becomes cheap.
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