Why this war is about oil

national | miscellaneous | news report Friday January 24, 2003 14:34 by Graham Caswell - Feasta caswell at indigo dot ie

Oil is Iraq's REAL Weapon of Mass Destruction

America depends on oil more than any other country. But oil is becoming scarcer and more concentrated in a hostile Middle East. America also needs to buy oil in dollars - but with competition from the euro, dollars aren't worth what they were.

Only Bush administration insiders know what is motivating this rush to war. But there is a vary good case that oil is is a big part of it. Consider:

-Oil is the blood of the Western, developed, technological world. It supplies 40% of the world's energy and 90% of transportation energy. The world as we know it can't function without oil and relatively small changes in oil supply and demand can have devastating effects on the economy.

-Oil production peaked in the US in 1971, in Britain in 1999, and in the world outside of the Middle East in 1997. Oil production in 5 countries in the Middle East (Saudi Arabia, Iraq, Iran, Kuwait and the UAE) is the only thing that is preventing the world from having reached peak production.

-World peak production of oil will be reached within the next decade. This will put a consistant and permanent upward pressure on the price of oil. Look at the European fuel protests of a few years ago to see how important the economic effects of this will be.

-Because of its vast reserves, along with declining production elsewhere, the United States and the west is becoming more and more dependent on Middle Eastern oil. Even now, today, in the midst of this vast buildup to war, the United States is Iraq's biggest customer for its oil and imports nearly 10% of its oil from Iraq.

-Saudi Arabia, with 25% of known oil reserves and by far the biggest 'swing capacity' (i.e. it can up production quickly) is an unstable, fundamentalist country run by an autocratic regime. The fact that 15 of the 19 September 11th hijackers were Saudi illustrated this very clearly. America's nightmare is for a fundamentalist Saudi coup similar to what happened in Iran in 1979.

-Bush, Cheney, Rice, Rumsfield and many other members of the current US administration come from the oil industry and maintain very close connections with the industry. They understand these issues very, very well.

America and the Western world depend on oil, yet oil is becoming scarcer and more concentrated in the unstable Middle East. Iraq has the second largest oil reserves in the world and borders Saudi Arabia, Kuwait, and Iran -the other main Middle East producers. Political control of Iraq (directly or through a complient regime) would greatly increase oil security for America. This must be a major factor in the decision of the Bush administration to go to war.

But that's not all. There is another, related, but more immediate reason why this war is about the political control of oil. Consider:

-America's trade deficit has been at record levels and growing for years and is now over $40 billion per month (i.e. bigger than even American military expenditure). This means that America consumes $40 billion of goods and services more than it produces every month.

-This vast and consistantly-growing American trade deficit is paid for by the rest of the world, partly by investment in the United States (i.e. American borrowing from the rest of the world) but also by the rest of the world's using the US dollar as a defacto international currency.

-Most countries hold at least some of their reserves in US dollars and the US dollar is used for much international trade, particularly the vast trade in that most necessary of substances, oil. In order for Chile to increase its US dollar reserves or for France to buy oil from Saudi Arabia they must first buy dollars from America. Since dollars are free for America this acts as an interest-free, long term load for America. In other words, America's biggest and most important export is one that is highly profitable - dollars.

-But now there is a compeditor to the dollar - the euro, currency of the world's biggest economy. Some countries have already started converting at least some of their reserves into Euro and even on the streets of the third world euro are now excepted where only dollars were good before. This time last year the dollar was worth over €1.19. Today it is worth less than €0.93 and is falling. Money is flowing from the dollar to the euro.

-By far the most valuable traded commodity is oil, and the currency in which this substance is trading is important. OPEC still only accepts dollars for its oil, with the exception of Iraq (for political reasons). However Iran is talking about selling its oil in Euros and there is the possibility that OPEC may start accepting Euro. If OPEC begins accepting euros for its oil then the world will need a lot less dollars.

-As demand for America's greatest export (i.e. dollars) declines America's economy is put under pressure as imports become more expensive. If America's most important import, oil, is sold in euro then oil will become much, much more expensive for America.

-The only solution to this potential disaster for America is to make sure that oil remains available for sale in dollars, no matter how far the dollar falls. And in order for America to guarentee that it can buy oil in dollars it must have political control over those who sell oil. In other words it is not enough for America to have access to a free and open oil market. It MUST have political control.

America has been living increasingly beyond its means for years and has been paying for this excess by exporting confidence and dollars, both of which are are losing their value. This is a far, far greater danger to America and its way of life than terrorism. America depends on the rest of the world for that oil-dependent way of life but lacks a secure way to pay. Now it may be prepared to use force to get what it wants and feels it needs.