War and Oil

Washington Post ^ | 10/18/02 | David Ignatius

[Tumbleweed_Connection]

"It's really about oil." That's the first thing many suspicious Arabs say about U.S. policy in the Middle East -- and the first thing some skeptical Americans also say.

Let's assume for the moment that the cynics are right: When you peel away all the high-minded talk about Arab democracy, America's national interest lies in maintaining a reliable supply of oil at stable prices. So the first question about a war with Iraq is what it will do to the oil market.

Looking through this narrow lens of economic self-interest, some analysts foresee disaster. They warn of rising oil prices and a possible shortage of crude.

But the surprising prediction of several oil experts is that oil prices may actually crash next year, from the curent level of about $29 to $15 per barrel or less. That's because Saudi Arabia may raise its production in an effort to force down prices and crush its higher-cost competitors, especially in Russia...

[Quix]

Welllll do one or both of 2 things.

Open up the alternative energy technologieS

and/or open up North Slope wholesale. Survival of us is more important than causing a few scampering furry folk to walk a few thousand feet out of their way.

Then tell MidEastern oil to take a hike.

I realize this may not fit the plans of some to terrorize the world sufficiently to form a global tyranny. . . but hey . . . it IS an option.

[LA-Lawyer]

"It's really about oil."

Well, duh. I never understood the reasoning that because the coming war with Iraq is really, when you boil it down, about oil, we shouldn't do it. Oil is what drives the world's economies and Saddam finger on WMD's aimed at Riyadh, oil fields, etc., and thereby having total control over the the world's economies, is totally unnacceptable. Of course its about oil, you numbskulls!

[mewzilla]

Maybe the folks who are so offended at the thought we might go to war, in part, over oil ought to ask themselves if they'd like to take a pony cart to work...?

[Paradox]

There are far, far easier and more cost effective ways for the US to ensure a good oil supply. Thats what these "War for Oil" idiots dont seem to realize. If ALL we wanted was oil, we'd get it other ways, puhleeze...

[WFTR]

I was talking with a friend at work about the use of oil and we came across an interesting thought. People complain about pollution from the automobile, but imagine how bad the pollution would be if everyone rode horses. The methane concentrations over our cities would be horrendous. No society could handle the solid wastes that they'd generate. There wouldn't be a water supply anywhere that wasn't contaminated with horse manure.

WFTR
Bill

[mewzilla]

It's not just our oil, it's also Europe's and Japan's supply, whether they want to admit it or not. And if we wanted to get more of our oil domestically, that would take time. This isn't all about oil, but even if it was, so what? I'll ask it again: are folks willing to ration, pay a lot more per gallon, take a horse, heat their homes with wood? If not, they can shut up.

[Seti 1]

I don't think Paul Wolfowitz, Richard Perle, Bebe Natanyahu, and the other War Hawks have any concern about US oil. They do have long histories as Israel Firsters.

It's about Israel, stupid.

[alloysteel]

Does Israel have any oil? No. If G-d were TRULY just, and not simply rolling dice on humanity, He would have located all the oil in the Middle East west of Jerusalem, and allowed Saudi Arabia to be as barren as Afghanistan. Then the Arabs would have someting to fight FOR. As it is, they simply don't want the Jewish people to profit in any way from their largesse.

[marron]

Most writers show a remarkable lack of understanding both of economics and of the oil industry in particular.

This is not surprising, when the writers are from outside the US, where dirigist economies and national oil companies are the norm. But American commentators are often afflicted with this same myopia. Analyses of oil politics usually have a mercantilist flavor, and one almost expects the divine right of kings to enter into discussion.

If you are a country whose only product is oil, and whose economy is centrally controlled, and whose oil is government owned, then a certain tunnel vision sets in. To you, certainly, its all about oil. This is indeed the lens through which you will unavoidably see the world. For you, the price of oil is everything. If its up, you can fund all of the programs that keep your people mollified and the coup-plotters quiet. If its down, and the money dries up, then the knives are out and you must fear for your life.

But none of this applies to the US, or free economies in general, or private oil companies. We are extremely flexible, and we will profit which ever way it goes. If crude prices are high, then its profitable to go looking for oil deep offshore, or in some horrid country no one ever heard of before. If its cheap, then you lose your shirt on production but make it up in refining.

The way it works, by and large, is this: American companies usually don't own the oil, they bid competitively for the right to pump the oil. They put up all the money, and they do all the work, and after their contract runs out, all of their infrastructure reverts to the ownership of the host government.

After a few bad experiences where their investments were nationalized, this is the way it works now. US oil companies don't try to "own" the oil, they know that there is no way to enforce their claim. So its all done by contract and by concession.

Its important also to understand that the oil industry is not some giant hegemonic entity, it is made up of hundreds of companies, with competing interests. What is bad for Exxon may be just fine for a smaller, leaner company like Oxy, for example, or where an oil producer does not dare to go, oil service companies may be active. No-name oil service companies were active in Siberia long before the majors were willing to risk it. No-name Canadian companies are active in countries where Exxon won't go.

This is why France and Russia will try to lock in their concessions in Iraq prior to the fall, whereas US companies have no need to do this. If you want to pump oil, you will bring in experts, and US companies are quite at ease competing in this world. They don't need to have anything locked in, in advance. Just open up the bidding and they'll do fine. If the terms aren't fair, they'll drill somewhere else. If prices are high, or low, is of crucial importance to producing countries such as Saudi Arabia or Iraq, but much less so to American oil companies. Because they can shift left or right to take advantage of the situation whichever way it goes, and either way they can turn a profit.

If it was all about oil, for us, then we would have allied ourselves with Saddam from the beginning. But oil is just a commodity, and we can get it anywhere. Thats the advantage that free economies and private oil companies have over the rest of the world.

[Drammach]

Well, it is about oil, but not as represented by the anti-war groups.

Going in and taking over Iraqi oil fields could lower our energy prices, but would devastate the fledgling Russian oil industry.
Any takeover of Iraq must also consider the Russian oil economy, as well as Iran, Saudi Arabia, South America, Mexico, etc.
It is far more in American ( & world ) interests to simply keep oil prices Stable, not Cheap.

A regime change in Iraq would however, change the oil economy.
Firstly, UN sanctions would no longer be in effect, and Iraq ( under a new, democratic regime ) would be free to sell oil on the international market.
Scrupulous manipulation of supply and demand would yeild maximum income for Iraq, and stabilize oil prices worldwide.
Oil sales would provide Iraq with the income to meet reparations payments to Kuwait, and Coalition forces, ( to repay costs of liberating the country ) fullfill prior regime's contractual obligations, ( such those with russia ) as well as to provide income for health, education, and "peace oriented" industry jobs for the Iraqi people.

I envision supervisory forces remaining in Iraq for at least 10 years, and the costs for maintaining those forces should also be met by Iraqi oil revenues.

So there is solid evidence that the war is about oil, but not exclusively, and not necessarily Iraq's oil as much as world oil prices. There are many players in the game.

One last note concerning North Slope oil.
I would rather wait to develop it.
Preferably, after everyone else's oil is all used up, and we're the only ones left with untapped reserves.
As long as there is plenty of oil flowing world wide, I would rather we "nurture" our own reserves as part of a national defence strategy.

[Seti 1]

As Golda Meir said "Moses wandered in the desert for 30 years and then picked the only spot with no oil"(paraphrase only).

I'm puzzled by your final sentence. What largesse?

[Quix]

According to an interesting oil industry book decades ago, we have a secret oil reserve equal to the Saudi fields in our midwest. Supposedly Ike decided to keep them until the rest of the world ran out.

[js1138]

Of course its about oil, you numbskulls!

Let's face it. It's also about Israel, and Iraq's financing of terrorism against Israel.