Posted on 04/03/2002 4:30:15 PM PST by Boyd
THE last time the Arabs used oil as a weapon in 1973, the lights went out all over Europe, America was plunged into recession, and the economic shockwaves circled the globe.
Three decades on, fiscal reality makes the threat of a repeat performance - as demanded by Iraq to teach the United States a lesson for its support of Israel - something of a damp squib. Despite stock market jitters at the prospect of an embargo, the world has moved on and the coffers of the oil-rich kingdoms of the Middle East are no longer overflowing with petro-dollars. Turning off the tap is no longer a viable option. It may not even be possible.
The Arab oil cartel sold directly to customers in the 1970s, giving it the capability of applying damaging, selective sanctions.
Now the industry is dependent on a vast web of middlemen and futures exchanges. As Professor William Hogan, of Harvard University, says: "The Arabs can still cut off the bulk of the world's oil supply.
"But they no longer have the capacity to turn off an individual country's supply. Oil has gone from being a rapier to being a very blunt instrument indeed.
"It worked in 1973 as a response to the Arab world's battlefield humiliation in the Yom Kippur war with Israel.
"But it was a Saturday night special, a one-shot weapon likely to misfire. Now it's out of ammunition."
The other key factor which precludes a pan-Arab boycott is Saudi Arabia, the world's biggest oil producer and owner of an estimated 25% of the untapped global reserves. Riyadh's feudal rulers cannot afford to cork the bottle.
With an increasingly restive population, rising unemployment and jealously hostile neighbours in Iran and Iraq, its royal family's very survival depends on a steady income from the "black gold" under the desert sands.
The Saudis have also not forgotten the most expensive lesson they learned in 1973. Almost all of their oil revenues had been invested in the West.
When the embargo they embraced so willingly began to bite, the crash inflicted a decade's worth of damage on their Wall Street portfolios.
Saudi oilfields currently pump 7.2 million barrels a day. Even if Iraq pulled the plug on its own 3 million-barrel daily output and put its 75 billion barrel-reserve temporarily out of reach, the Saudis have the built-in capacity to rapidly step up production to 10.5 million barrels a day to bridge the gap.
The European Union's member countries have a 90-day strategic reserve on hand. The US, which consumes one third of the 76 million barrels produced daily worldwide, has a 40-day stockpile as a cushion against wildcat action.
The United States is using its war on international terror to help secure a future alternative to Gulf fossil fuel from the almost untapped reserves of the Caspian Basin, estimated at a staggering 70 billion barrels.
The bases in Kazhakstan occupied by US troops to seal Afghanistan's northern border will not be abandoned readily. They lie at the strategic heart of the new oil bonanza. The White House is also scheming to drive a pipeline from the basin out through Turkey to the sea to bypass and outflank Russian designs on the region.
By 2012, with Western investment, Caspian crude production will rival that of Saudi Arabia and could remove for the foreseeable future even an outside chance of a pan-Arab ban's impact on Western economies.
Until then, the Saudis should remain pre-eminent as a supplier. Their prime advantage to date is that it costs less than £2 to extract a barrel from their well established fields. The same product from US sites costs twice that amount. In Russia's remote drilling zones, the overheads are £6 a barrel.
The European Union's member countries have a 90-day strategic reserve on hand. The US, which consumes one third of the 76 million barrels produced daily worldwide, has a 40-day stockpile as a cushion against wildcat action.
The United States is using its war on international terror to help secure a future alternative to Gulf fossil fuel from the almost untapped reserves of the Caspian Basin, estimated at a staggering 70 billion barrels.
According to my math, this means at present usage, there is about a 3000 year supply of oil under the Caspian Basin. This is based on the British usage of a Billion being one million million. Am I off by a couple of orders of magnatude here? If it is only a thousand million, as Americans define a billion, it is only three years supply, which, while nice, doesn't seem as important.
CBS news might disagree. They forecast this exact scenario on a '60 minutes' program about 3+ years ago. [They seem to have an uncanny 'view' of how things will 'be']. Bob Ireland and I were aghast.
We were wrong, they were 'right'.
The bases in Kazhakstan occupied by US troops to seal Afghanistan's northern border will not be abandoned readily
Like most of these pundits, mentally deficient in the geography department.
There's another factor involved as well. A lot of these raw figures that quote "money" as what it "costs" to extract oil are not as accurate in gauging supply and true costs as using "energy costs" instead. For example, the US still has just oceans of oil underground-the big problem is a lot of the fields now require more btus to get it out than it's worth, it's a net energy loss. Even the ones that are somewhat profitable at 40$ a barrel are only profitable because most of that 40$ if you follow the dollar chains around are still made to be spent on cheaper saudi and local area oil being on the market so it can get used. At some point all fields become a net loss even when a lot of the oil is left in them. Similar to most of the fields on the planet, for example, north sea oil has just about peaked in the terms of energy in > to energy < out. Again, saudi arabia will be the big dog and the last big dog with what is termed "cheap" energy exchange oil. It takes cheaper oil to get more expensive oil in other words. Once those two libnes cross, it's a waste of time and energy, let alone "money".
China's projected needs by 2010 to 2015 will double (or more) from what they need now, just as an aside. Not that they just will want it, they are gonna need it or collapse.
Now let's see, hmm, china is selling arms to whom and supporting whom and where again?
Lots of interesting geopolitics revolve around oil and the middle east. All this talk of human beings involved in these struggles is public political soap opera nonsense mostly, all these various middle eastern and central asian and african wars are about drugs, water and oil, oil ownership, who get's it, how they get it, and for how long they get it, and that's about it.
Madmax was a fun puff action movie, but it's gonna be true too.
If you or anyone want a really good synopsis / overview / explanation of this by some smart guys, I heartily recommend this page, the olduvai theory. Long read, plenty of graphs, easy to understand. Back up the url to the main site, tons of good energy reading and links.
If you're interesed, take a look at my rumblings here.
I agree with some of that.
The Opecker Princes know this, and probably 9/11 was their attempt to smash us as a super power so they could delay this massive transition of power moving from them to other countries.
If they had brought us to our knees and forced whatever conditions they wanted on us, they could stay in power with the petro $'s flowing to them for decades. Now they have a very short time before the Opec Cartel is breached by competition.
How much is this little POS being paid by the Opecker Princes to increase our dependence on Opecker Oil?
How much are the Opecker Princes donating to the enviralists to keep us dependent on Opecker Oil?
"The Saudis have also not forgotten the most expensive lesson they learned in 1973. Almost all of their oil revenues had been invested in the West.
"When the embargo they embraced so willingly began to bite, the crash inflicted a decade's worth of damage on their Wall Street portfolios.
The Saudi Princes studied at the London School of economics, and they knew the pounding our economy would take from their phoney oil shortages. So they sell stocks and mutual funds invested in American stocks and buy bonds and mutual funds invested in Bonds before creating a phoney oil shortage. This is the selling at highs part of the equation.
Today and yesterday all of my wives and my mutual funds invested in stocks took a hammering as Wall Street became scared of a pending oil shortage and the increasing oil prices. Our bond mutual funds had two excellent days.
If I can figure that out and have enough diversity in our mutual funds, the Opecker Princes are way ahead with their investment bankers trained at the London School of Economics.
When Iran stormed our embassy and another oil shortage came up with Carter screwing up the economy with his tax and spend congress, interest rates jumped to over 12 to 14%. If you parked your money in good cds, you made 12 to 14% per year on your money while everyone was dying in the stock market. You can bet that the Saudi Princes were in the cash and bond markets here and in Euro areas.
If you are a Saudi Opecker Prince, and know when you are increasing the supply of oil that will reverse the economic recession due to the shortage, you cash out of your cds and bonds and buy stock at low rates. You didn't have to be a genius in picking stocks just buy the S&P 500 index in as many mutual funds as you can buy which are record lows, (the buying low part of the basic equation). Then, set back and watch your funds increase in value at 12 to 15% per year for years, until you are ready to cause another recession in America. Then, you cashout and go back to bonds and cds!
Oh my! This sounds exactly like:
Russian bases in Canada sealing Mexica's northern border blah-blah-blah...
Partially correct:
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