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Oil Wars

New Page -- 18 September 2003

Updated -- 30 June 2005

One of the classic rules of conspiracies is to "follow the money".  If one wants to understand the underlying motives of so many things that occur in modern times, the first rule is to find out who makes money on what is happening.  It can be a devious and tortured path, but the end result is inevitably enlightening.

One of the biggest money makers in modern history is oil, also known as black gold or Texas Tea It may not offer the multiple of a lottery ticket -- e.g. $35 million for a $1 investment -- but when it comes to large amounts of money yielding really huge amounts of money, oil is the ticket.  Year end and year out, the oil keeps flowing and the money keeps rolling in.  Accordingly, in "following the money" on a global scale implies the essential need of "following the oil".

Why would the United States, for example, invade Afghanistan and Iraq, but practically decline an invitation to winter in Liberia and send instead only a modicum of troops?  A couple of hints might be in order. 

First Hint:  Iraq can produce 35% more oil daily than can Saudi Arabia and with one fourth the number of operating wells.  The current average cost to produce one barrel of oil in Iraq is less than $1 (*), while it's $2.50 in Saudi Arabia and $10 in the United States.  These prices can be compared to the $20 to $30 a barrel of oil costs for the higher quality crude on the open market. [1]

[(*) This production cost per barrel of oil doesn't include a couple of hundred billion dollars to invade the country, pacify it, rebuild the oil infrastructure, and get the oil flowing in massive quantities again.  Such expenses are considered "incidental" (i.e. never show up on the balance sheet) and are, of course, never borne by the oil companies themselves -- who, by the way, make massive windfall profits from selling the oil.  The expenses are covered instead by the generous American tax payer... who, incidentally, also buys the oil from the oil companies at inflated prices.  Are you beginning to grasp why oil is such a money maker?]

Second Hint:  There is massive amount of oil in Afghanistan and in those Central Asia countries formerly of the Soviet Union and whose names tend to end in "stan".  There is, in fact, enough oil there "to offset any halt in production by Iraq..." [2]  In this case, the key is in providing a means of extracting the oil and moving it from the less than friendly regions of Central Asia to a convenient seaport, where it can be shipped to the waiting customers of Europe and America.  Afghanistan is the preferred route.

Third Hint:  Liberia doesn't have enough oil to make it worth invading.

Donald Barlett and James Steele have noted [1], "If Iraq is now handled openly -- meaning the war really was about liberating Iraq from a dictator and the rest of the world from a security threat, as the Bush Administration asserts, and not about gaining control of oil reserves, as much of the rest of the world believes -- it will be a historic first.  The yardstick to measure U.S. intentions will be 1950s Iran.  Before the U.S.-inspired overthrow of the Iranian government, American oil companies had no presence in the country.  After the coup, five U. S. oil companies moved in and produced oil for 25 years."

In Iraq, U. S. "Coalition" forces seized two critical offshore terminals literally hours after the beginning of the invasion.  The southern Rumaila oil field was under U.S. control so quickly that retreating Iraqi troops managed to set only 9 wells afire (as opposed to 650 Kuwaiti wells during Gulf War I).  "Three weeks later, when U. S. forces rolled into downtown Baghdad, they headed straight for the Oil Ministry building and threw up a protective shield around it.  While other government buildings, ranging from the Ministry of Religious Affairs to the National Museum of Antiquities, were looted and pillaged, while hospitals were stripped of medicine and basic equipment, Iraq's oil records were safe, and secure, guarded by the U. S. military. [The records were essential in knowing the details of the oil fields and to make early production much more expedient.]  General Richard Myers, Chairman of the Joint Chiefs of Staff, has an explanation: 'I think it's, as much as anything else, a matter of priorities.'" [1]

In Afghanistan, there was an early "diplomatic" attempt to deal with the Taliban, with offers of "either we provide you with a carpet of gold, or a carpet of bombs."  The Taliban inadvertently opted for the bombs by refusing the gold.  Perhaps they assumed the carpet would never fly.  Or the Taliban simply made the fundamental error of assuming that the Bush Administration would not spend hundreds of billions of dollars of taxpayer money and lose hundreds of American soldiers in battle in order to provide access for their friends in the oil business.  They don't know George very well, do they.

Parenthetically, we might note that according to FreeMarketNews.com, "the first oil pipeline to connect the Caspian Sea to the west has officially started to pump oil." The pipeline cost a group of international oil companies $3.2 billion, but will deliver as much as 1 million barrels per day from Azerbaijan to the port of Ceyhan in Turkey. A key factor is that oil companies may be making mega-profits from Caspian Sea oil, but guard duty along the pipeline -- from all the pashas, sultans, and dictators along the route -- will likely be the responsibility of the United States military. AntiWar.Com's Justin Raimondo has noted, "The crude mercantilism that constitutes the real economic philosophy and foreign policy of our rulers means that one principle is consistenly followed: When it comes to 'defending American interests' abroad, the costs and risks are socialized [paid by taxpayers], but the profits are privatized." For a nice map, see the BBC report.

Then there is "The Great Energy Scam", wherein private profits are to be paid with (inadvertent) taxpayer largese. Donald L. Barlett and James B. Steele [5] have, for example, investigated how plans to cut oil imports turned into a corporate giveaway -- in the finest tradition of robbing the poor to benefit the rich. It's called the synfuels tax break and "adds up to a $1 billion annual gift to U. S. Businesses." Even the Marriott hotel chain can get into the act by obtaining a nifty 246% return on its investment in one year. Before it's all over, American businesses can expect an additional $5 to $10 billion in bipartisan Congressional giveaways.

See how the system works?

vvvvvvvvv

Meanwhile, U.S. policymakers over the years have envisioned Iraq as the 'swing producer', an operation which produces just enough oil to meet the immediate world demand, but which can hopefully prevent producing a glut on the market.  The Council on Foreign Relations has reported, "Tight [oil] markets have increased U. S. and global vulnerability to disruption and provided adversaries undue potential influence over the price of oil.  Iraq has become a key 'swing' producer, posing a difficult situation for the U. S. Government." [1]  Translation: Iraq might not play ball when it's time to manipulate the production and thus the price of oil in the global market.

And yet, a "State Department-sponsored advisory group of Iraqi exiles has concluded that the country needs to double its output by the end of the decade to 'invigorate Iraq's economy and lift the Iraqi people out of a future of impoverishment."  The idea is that Iraq has the capability of bringing its people into a prosperous life.  The reality, however, is that Iraq has never come close to achieving this potential. [1] 

Times do in fact change, and right now Iraq may be reaching a new level of importance.

It has been pointed out that, "If there were a truly free market in oil, crude would sell for $12 a barrel or less instead of $26, and gasoline would go for less than $1 a gal."  "The midpoint of the so-called acceptable selling-price range for world oil, $25 per bbl., is pegged to meet the essential demands of the royal family, whose corruption is so pervasive it would make Saddam Hussein envious." [1]  In fact, oil selling at a lower price would put the very definite hurt on Saudi Arabia's precarious budget.

Barlett and Steele headlined their article with, "It's only a trickle now, but it could become a gusher than rocks the world." [1]  Iraq could become "a dream for some, a nightmare for others". [3]

Barlett and Steele's headline is a fascinating statement -- particularly the nightmare portion.  Consider the implications by first noting that:

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Saudi Arabia produced Osama bin Laden and 15 of the 19 hijackers on September 11, 2001.

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The Saudi royal family is corrupt (see above).

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The state religion of Saudi Arabia is Wahhabism -- which is being manifested in the world by the Saudis bankrolling terrorism and an active jihad against the rest of the world.  (See Oil in the Family and/or Ground Zero and the Saudi Connection.)

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Saudi Arabia flexed its muscles in the 1970s with an oil embargo -- thus affording a wake-up call to the world and the U.S. in terms of the flow of oil (and incurring the undying wrath of many neo-conservatives in the U. S. government).

bullet

Iraq's production potential could effectively soften any such attempt in the future.

Perhaps the conclusion is too obvious.  Saudi is virtually surrounded by the U.S. Military -- an army and marine corp who have demonstrated the ability to cover a lot of ground quickly.  The oil fields of Saudi Arabia are furthermore easily accessible without so much as a feint in the direction of the holy cities of Mecca and Medina on the Red Sea coastline -- which no sane invader would touch for fear of a massive, worldwide jihad-style retaliation.  The Saudi government has operated at a deficit in 16 of the past 17 years, with its oil revenues failing to keep pace with its spending, leaving the country deep in debt.  [1]  [It's expensive to fund a worldwide religious covert war.  George Bush, take note.]  Saudi Arabia is primed for problems.

One can only speculate whether or not it is again time for another terrorist attack, one sufficient to point the smoking gun at Saudi Arabia and put their oil fields in the line of fire of the Texas Oilmen.  Stratfor.com has previously suggested this likelihood -- even before the invasion of Iraq had begun.  And with the penchant of so many supremely arrogant leaders, war is the best distraction for a country about to vote in a national election.  It certainly worked in Nazi Germany.

Would the American people accept this?  On the one hand, Americans are used to an oil-run society.  This is particularly true of their automobiles, and more recently their SUV.  In fact, one of the hottest SUV on the market is the Hummer H2, "a three ton beast with the attitude and fuel efficiency of a battleship." [4]  When fuel efficiency is a "done that, been there, bought the T-shirt" kind of fading fad, then a war to end all oil wars is something that the voting citizenry just enough might -- knowingly or unknowingly -- buy.

But it's risky.  The flip side is that Americans may finally do as one long-time Republican Party supporter did and after thinking about it for some time come to the conclusion, "This is just not right."  In which case, we may bite the proverbial bullet (or Hummer spare tire, whichever) and say, "Enough is enough.  Time for a 'Regime Change' in the good old U. S. of A."

vvvvvvvvv

On the other hand... Maybe, just maybe there's a reason to be fighting wars in the Middle East, with the express mission of protecting the oil fields, pipelines, and full access to what has been referred to as a "friendly petrol station". Admittedly not so friendly nowadays, but at least we're not currently at war with Saudi Arabia, Iran, and a few other Middle Eastern countries.

The reason -- which is not necessarily a good reason, but one which is at least appealing to the gas guzzlers of the Western world -- is that the world just might be running out of oil and gas. Admittedly, there is enough coal to last a couple of centuries (at the present usage rates), but the black gold and its clean burning sidekick have now reached what is known as "peak oil". In other words, as Matt Crenson [6] has written, "the petroleum joyride -- cheap, abundant oil that has sent the global economy whizzing along with the petal to the metal and the AC blasting for decades" may be according to some oil industry observers coming to an end. "They predict that this year, maybe next -- almost certainly by the end of the decade -- the world's oil production, having grown for more than a century, will peak and begin to decline. And then it really will be all downhill. The price of oil will increase drastically. Major oil-consuming countries will experience crippling inflation, unemployment and economic instability" From a National Security viewpoint, something really needs to be done.

The Bushite idea of the "something" to be done is to use the substantial power of the United States (and to a lesser extent the British) military to make sure that "we" have our unfair share of what is left of the oil. It's as simply as that: the biggest kid on the block is going to be the last kid to do without.

It even suggests that the Bush Administration led by Dick Cheney and Haliburton may actually have the interests of the American automobile industry and their voting consumers and employees in mind. These stalwart politicians are out to make sure that there is plenty of oil for American purposes (and those of our close personal friends). There is no reason for America to suffer simply because we've almost used up this most convenient energy resource. The fact that there are Hummer-loads of cash to be made in the process by the select elite is just icing on the cake. Very expensive icing, but icing nonetheless. As someone once said, "let them eat cake" (albeit, without icing).

Joel Stein [7] writing about the highly successful New York Yankees (baseball team) as the personification of the American way, notes the following: "Americans haven't been underdogs since 1812. We like to remember the Alamo because we fought long odds and had to give up an entire building; the Mexicans remember [losing the entire state of] Texas. If ever a country's character demanded that it root against the underdog, it's ours. We are the country of crushing, monolithic corporations -- of McDonald's, Wal-Mart and companies such as Aramark, Cendant and Sysco that are so powerful we don't even know what they do. We crush foreign dictators for looking at us funny."

So obviously the answer is a willingness to go to war at the drop of a cowboy hat just in order to ensure a goodly supply of oil and gas.

Unless... of course, there is an alternative. And not surprisingly, there is an alternative -- else I would never have brought up the possibility.

There is, for example, the strong possibility of alternative forms of energy to be had. Everything from zero-point energy to the sources envisioned in The Fifth Element can easily make "Peak Oil" a non-event, rather like Y2K. The only problem, of course, is that these new forms of energy would tend to make average people very, very independent, and no longer the economic slaves of utilities and the like. It would also be a crushing economic blow to the oil industry and the politicians which they fund so prolifically. Accordingly, the idea of the U. S. government putting any sort of priority on developing alternative energy sources -- or even just getting out of the way so others can do it without hinderance -- is not a very likely scenario.

As Non-Sequitur phrased it: "I pledge allegiance to the flag of the corporate states of America... and to the Republicans for which it stands; one nation, under debt, easily divisible, with liberty and justice for oil." And if that implies a patriotic war to invade and rob less militarily advanced nations... It does seem to be the American Way.

 

Buy One, Get One Free         Oil in the Family         The Mother of All Battles

Homeland Insecurity         9-11-2001       Justice, Order, and Law

State of the Union and/or The Perils of Democracy

Or forward to:

Bush Wars         Water Wars         War Wars         Nature of Law

Preemptive Rule

_______________________

[1] Donald L. Barlett and James B. Steele, "Iraq's Crude Awakening", Time Magazine, May 19, 2003.

[2] http://www.listeditor@abcnews.go.com (Nightline), "In the National Interest", April 25, 2002.

[3] Merlin (in a conversation with King Arthur), the movie Excalibur.

[4]  John Cloud, "Why the SUV is all the Rage", Time Magazine, February 24, 2003.

[5] Donald L. Barlett and James B. Steele, "The Great Energy Scam", Time Magazine, October 13, 2003.

[6] Matt Crenson, http://cnn.netscape.com (25 May 2005)

[7] Joel Stein, "In Defense of Domination", Time Magazine, 1 March 2004.

 

               

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