Oilmen wanted Iraq invasion in April, 2001

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Oilmen wanted Iraq invasion in April, 2001

Postby professorpan » Wed Jul 09, 2008 3:34 pm

Not a lot new here, but it's a good summary:

http://tinyurl.com/6avqdc

Eager to Tap Iraq's Oil, Industry Execs Suggested Military Intervention

By Jason Leopold
The Public Record
Tuesday, July 01, 2008

Published in : Nation/World

Two years before the invasion of Iraq, oil executives and foreign policy advisers told the Bush administration that the United States would remain “a prisoner of its energy dilemma” as long as Saddam Hussein was in power.

That April 2001 report, “Strategic Policy Challenges for the 21st Century,” was prepared by the James A. Baker Institute for Public Policy and the U.S. Council on Foreign Relations at the request of Vice President Dick Cheney.

In retrospect, it appears that the report helped focus administration thinking on why it made geopolitical sense to oust Hussein, whose country sat on the world’s second largest oil reserves.

“Iraq remains a de-stabilizing influence to the flow of oil to international markets from the Middle East,” the report said.

“Saddam Hussein has also demonstrated a willingness to threaten to use the oil weapon and to use his own export program to manipulate oil markets. Therefore the U.S. should conduct an immediate policy review toward Iraq including military, energy, economic and political/diplomatic assessments.”

The advisory committee that helped prepare the report included Luis Giusti, a Shell Corp. non-executive director; John Manzoni, regional president of British Petroleum; and David O'Reilly, chief executive of ChevronTexaco.

Those companies now stand to earn tens of billions of dollars in no-bid contracts in a U.S.-brokered deal that was recently announced to drill Iraq’s untapped oil fields.

James Baker, the namesake for the public policy institute, was a prominent oil industry lawyer who also served as Secretary of State under President George H.W. Bush and was counsel to the Bush/Cheney campaign during the Florida recount in 2000.

Ken Lay, then chairman of the energy-trading Enron Corp., also made recommendations that were included in the Baker report.

At the time of the report, Cheney was leading an energy task force made up of powerful industry executives who assisted him in drafting a comprehensive “National Energy Policy” for President George W. Bush.

More at link...
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Postby Wilbur Whatley » Wed Jul 09, 2008 10:15 pm

Bingo. It isn't an accident that Operation Iraqi "Freedom" was originally named Operation Iraqi Liberation.
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Postby JackRiddler » Wed Jul 09, 2008 10:23 pm

.

This is an excellent piece of reporting that ties together older with newer elements very well. What's solid about it is the focus on the salient details, building a case from concrete documentable events rather than preconceptions and ideology.

Quite a contrast to the lead article today in Counterpunch, which seeks to dismiss the importance of oil and resources push the Israel-ueber-alles angle through a series of fallacies: conflating different arguments, representing contrary positions falsely almost entirely without citations, strawmen, ideological assertions...

http://counterpunch.org/zadeh07092008.html

It's tempting me to spend way too much time dismantling it paragraph by paragraph. And to what end? Not like counterpunch tolerates too many rebuttals.
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Postby JackRiddler » Thu Jul 10, 2008 12:56 am

No, in the end I couldn't resist...

Shell Games
Are They Really Oil Wars?

By ISMAEL HOSSEIN-ZADEH

A most widely-cited factor behind the recent U.S. wars of choice is said to be oil. “No Blood for Oil” has been a rallying cry for most of the opponents of the war. While some of these opponents argue that the war is driven by the U.S. desire for cheap oil, others claim that it is prompted by big oil’s wish for high oil prices and profits. Interestingly, most antiwar forces use both claims interchangeably without paying attention to the fact that they are diametrically-opposed assertions.


No one who espouses this paradox is cited, possibly because although Hossein-Zadeh claims “most antiwar forces use both claims,” they don't actually exist. Who are they? If such people do exist, they're not the brightest of bulbs, but what would it show?

The only time I've heard the “cheap oil” argument (and my anecdotes and hearsay are just as good as his) is from war supporters who argue the Iraq invasion could not have been about oil, since oil is not cheap. That's ludicrous: American consumers confusing their own interests with those of the war architects.

However, the anti-war people I know all talk about how "Mission Accomplished" from the perspective of oil interests (and the banking interests with which they are invariably interlocked) involves making oil expensive. Obviously. I think what's going on here is that already in the opening paragraph, Hossein-Zadeh is preventively trying to portray possible objectors to his own views as utter idiots unaware of their own contradictions.

Not only do the two arguments contradict each other, but each argument is also wanting and unconvincing on its own grounds; not because the U.S. does not wish for cheap oil, or because Big Oil does not desire higher oil prices, but because war is no longer the way to control or gain access to energy resources.


Having himself falsely conflated the two contradictory arguments as though they were one, Hossein-Zadeh promises to treat them separately henceforth.

Colonial-type occupation or direct control of energy resources is no longer efficient or economical and has, therefore, been abandoned for more than four decades.


This doesn't mean that history ended. If that was the case during the last four decades, it may no longer be the case today. More importantly, those pushing the levers on the wars may no longer think it's the case, and desire a return to the old forms of control, or believe that such a return is being forced on them by the present circumstances. The thinking: if the empire is to survive, it must return to more traditional forms of exerting its imperial control. That's what the neo-imperialist wave and the Bush regime have been about. Whether it works or not is a different matter; they may be masterminds, but that doesn't make them smart.

The view that recent U.S. military adventures in the Middle East and the broader Central Asia are driven by energy considerations is further reinforced by the dubious theory of Peak Oil, which maintains that, having peaked, world oil resources are now dwindling and that, therefore, war power and military strength are key to access or control of the shrinking energy resources.


This is not peak oil theory, but Hossein-Zadeh's own simplified and false definition. Here and in the rest of the article Hossein-Zadeh avoids an accurate definition of peak oil. Peak oil is properly defined as the point at which the maximum rate of extraction on existing supply is reached for the world, after which more and more energy is required to extract a declining supply. This point is reached in every oil field individually, and was reached in the continental United States in 1970, something Hossein-Zadeh does not point out. Furthermore, the sentence has at least a semantic falsehood in it: world oil resources were at their maximum already at the beginning of the petroleum age and have been dwindling ever since, unless you think there is some process that creates new oil to replace the stuff that gets burned in anything less than geological time.

In this study I will first argue that the Peak Oil theory is unscientific, unrealistic, and perhaps even fraudulent. I will then show that war and military force are no longer the necessary or appropriate means to gain access to sources of energy, and that resorting to military measures can, indeed, lead to costly, not cheap, oil.


War and military force are not the necessary or appropriate means to gain access to sources of energy, but that doesn't mean that certain imperial-minded geostrategists and others who see war as the solution to everything will not honestly think so. And again, who cares about the "cheap oil" argument? I don't think Hossein-Zadeh needs to prove for us that the power elite doesn't give a shit about cheap oil, even if they might occasionally claim this in their PR for American consumers-voters. Many elements among them profit from costly oil, however, and the war has obviously contributed to that.

Next, I will demonstrate that, despite the lucrative spoils of war resulting from high oil prices and profits, Big Oil prefers peace and stability, not war and geopolitical turbulence, in global energy markets.


The rest of the article will cite a few "Big Oil" statements to that effect, although I'm sure hundreds are available, since what would you ever expect them to say? It's quite a contrast to the excellent Jason Leopold article in the OP, which names the names and describes relevant events showing that some of "Big Oil" (it didn't have to be all) saw an opportunity in an Iraq invasion.

Also, he's begun to conflate the "oil motive" with "Big Oil." This causes lots of confusion later.

Finally, I will argue a case that behind the drive to war and military adventures in the Middle East lie some powerful special interests (vested in war, militarism, and geopolitical concerns of Israel) that use oil as an issue of “national interest”—as a façade or pretext—in order to justify military adventures to derive high dividends, both economic and geopolitical, from war.


I largely agree with him here. These powerful special interests exist independently of oil, and the MIC for one is constantly looking for new wars and actions to justify its existence without necessarily caring where these wars happen. But it doesn't follow automatically that oil is only a facade.

Has Oil Really Peaked—and Is It Running Out?

Peak oil thesis, as noted above, maintains that world oil reserves, having reached their maximum capacity, are now dwindling—with grave consequences of oil shortage and high energy prices. While this has led many to call for more vigorous conservation, it has led others to argue in favor of unrestrained exploration and extraction of oil reserves, especially those located in the Alaskan Wildlife regions.


Again, important semantics here, because they reveal fuzzy thinking: world oil reserves had already reached their maximum when humans first started making use of them in 1850 (unless Hossein-Zadeh wants to argue that the earth is generating new oil, or pushing it up from the mantle, which he does not). Thus oil reserves have been "dwindling" ever since.

The proper questions are, when does the rate of extraction peak, and when does EROEI decline to the point when oil is no longer producing sufficient net energy to maintain the civilization at its present rates of consumption? EROEI is of course Energy Return on Energy Invested, a concept central to all thinking about energy and especially to peak oil theory. One sign that someone really hasn't thought much about these issues and isn't representing peak oil theory fairly is a failure to mention EROEI. Hossein-Zadeh's article never does.

Up until the point of extraction peak, furthermore, supply will continue to rise. Sufficient supply at this time does not indicate that peak extraction (a point reached in every oil field to date, since oil fields don't replenish themselves) won't come.

Significant policy and/or political implications follow from the view that oil is running out. For one thing, this view provides fodder for the cannons of war profiteering militarists who are constantly on the look out to invent new enemies and find new pretexts for continued war and escalation of military spending. For another, it tends to disarm many antiwar forces that accept this thesis and, therefore, “internalize responsibility for U.S. foreign policy every time they fill their gas tank. Thus they own the wars.”[1]


The first fallacy here is called argument from adverse consequence: "Peak oil would justify the wars, or give justification to the profiteering militarists, therefore it cannot be true." Obviously the adverse consequence has nothing to do with whether the thesis is true or not.

The second fallacy is that peak oil justifies wars, or gives justification to profiteering militarists. It does not. War is actually a giant waste of energy and thus a way to make it come faster and be a lot worse when it comes. The "profiteering militarists" may seek a propaganda justification in peak oil (interesting that they never have said so openly, however, so how does that work as propaganda, anyway?), but that would be more evidence of their perfidy, not an argument against peak oil.

The Peak Oil thesis serves as a powerful trap and a clever manipulation in that it lets the real forces of war and militarism (the military-industrial complex and the pro-Israel lobby) “off the hook; it is a fabulous redirection. All evils are blamed on a commodity upon which we are all utterly dependent.”[2]


Again, simply untrue. In their minds, the forces of war and militarism, if they are really thinking about peak oil, probably believe it honestly - since so much evidence says it really is coming. They choose to react with a new, desperate geostrategy (the "Project for a New American Century") that amounts to genocide followed by suicide. That's on them, not on peak oil theory. They may think they're rational actors, but that doesn't make them so.

The fact, however, is that there is no hard evidence that oil has peaked, or that global oil reserves are shrinking, or that the current skyrocketing price of oil is due to a supply shortage. (As shown below, there is actually an oil surplus, no shortage.)


Again, who said oil extraction has peaked? Hossein-Zadeh doesn't cite anyone to that effect. Until it has, supply can still continue to rise. Once you understand that oil extraction will inevitably peak, however, the time to strike for those who wish to maintain the empire and always see solutions in war and ancient geostrategy is not when oil extraction already has peaked, but a.s.a.p.

Peak oil theory is not altogether new. It was originally floated around in the 1940s, arguing that world oil reserves would be exhausted within the next two decades or so. It then resurfaced in the 1970s and early 1980s in reaction to the oil price hikes of those years—which were, incidentally, precipitated not by oil shortages but by international political convulsions, revolutions and wars. But it died down once the price of oil fell back to pre-crises levels.


Again, where are the citations? Who is making what claim in each of these decades? Why no mention of the originator of peak oil theory, King Hubbert (a Big Oil analyst, not a militarist), or his correct prediction in the 1950s that continental US extraction ability would peak in 1970 and decline from there?

The 1970s example is a canard, furthermore. Oil price spikes at that time were blamed on shortages due to the Middle East embargo and other turmoil, and not on peak oil. The situation did serve to raise awareness about the ultimately limited nature of the oil resource, but I have yet to see a quote from that time to the effect that the limits had already been reached, only that they would come. As we know, the reaction of the United States was irrational, if predictable: rather than start making the transition to other forms of energy then, the government made plans to one day occupy the Middle East, announced the Carter Doctrine and developed the Rapid Deployment Force, beginning a 30-year development that led to the 1991 and 2003 wars.

As recent geopolitical convulsions in the Middle East (especially the U.S. war on Iraq, and the resultant booming speculation in oil markets) have triggered a new round of oil price hikes, Peak Oil theory has once again become fashionable. The theory is being promoted not only by war profiteers and proponents of an unbridled domestic oil exploration and extraction, especially in Alaska, but also by some apparently antiwar liberals such as Michael T. Klare and James H. Kunstler.[3]


Kunstler recently stated his support for the Iraq war, so don't lay him on us!

The new "fashionability" of peak oil theory started years in advance of the "recent geopolitical convulsions" that Hossein-Zadeh specifies, at a time when oil was still in the $20 range.

Peak oil theory is based on a number of assumptions and omissions that make it less than reliable. To begin with, it discounts or disregards the fact that energy-saving technologies have drastically improved (and will continue to further improve) the efficiency of oil consumption. Evidence shows that, for example, “over a period of five years (1994-99), U.S. GDP expanded over 20 percent while oil usage rose by only nine percent. Before the 1973 oil shock, the ratio was about one to one.”[4]


Who? Who discounts or disregards these points? The citation is not to such a miscreant, but to an article from an Israeli professor arguing against peak oil, here:
http://www.meforum.org/article/527

What's with the puzzling reliance on on GDP growth (both the most faked statistic in the universe and, even if accurately measured, a measurement of nothing other than dollars turning over, thus largely unrelated to anything worthwhile in the real economy)...

At any rate, the whole paragraph is just a lot of dressing on the pig: US oil usage rose by nine percent. Simultaneously rises in the efficiency of its use (if you believe GDP really measures that) do not change the absolute fact.

Second, Peak Oil theory pays scant attention to the drastically enabling new technologies that have made (and will continue to make) possible discovery and extraction of oil reserves that were inaccessible only a short time ago. One of the results of the more efficient means of research and development has been a far higher success rate in finding new oil fields. The success rate has risen in twenty years from less than 70 percent to over 80 percent. Computers have helped to reduce the number of dry holes. Horizontal drilling has boosted extraction. Another important development has been deep-water offshore drilling, which the new technologies now permit. Good examples are the North Sea, the Gulf of Mexico, and more recently, the promising offshore oil fields of West Africa.[5]


Same citation, again.

We might find oil on Mars, too. What's the EROEI for getting it into the American tank? By definition, the harder-to-find stuff has a lower EROEI. More importantly, the ratio of current consumption to ongoing new discoveries is about 9:1. That's an annual average of nine barrels consumed for each new potential barrel located. This paragraph ignores that in lieu of techno-romance.

Third, Peak Oil theory also pays short shrift to what is sometimes called non-conventional oil. These include Canada's giant reserves of extra-heavy bitumen that can be processed to produce conventional oil. Although this was originally considered cost inefficient, experts working in this area now claim that they have brought down the cost from over $20 a barrel to $8 per barrel. Similar developments are taking place in Venezuela. It is thanks to developments like these that since 1970, world oil reserves have more than doubled, despite the extraction of hundreds of millions of barrels.[6]


Cost claims are another great way to avoid EROEI. Those who have studied it, unlike Hossein-Zadeh, find that the Canadian bitumen may deliver an EROEI of 5:1, as opposed to ME crude at 20:1 and up.

See http://www.theoildrum.com/node/3839

That's still worthwhile in energy terms, but the huge need for water in the process and environmental carrying capacity appear to place a limit on the ultimate extraction at somewhere around Canada's annual consumption. Not a long-term solution for the world.

By the way, those semantics, again: world reserves cannot double. The located reserves can rise, but not the actual existing reserves.

Fourth, Peak Oil thesis pays insufficient attention to energy sources other than oil. These include solar, wind, non-food bio-fuel, and nuclear energies. They also include natural gas. Gas is now about 25 percent of energy demand worldwide. It is estimated that by 2050 it will be the main source of energy in the world. A number of American, European, and Japanese firms have and are investing heavily in developing fuel cells for cars and other vehicles that would significantly reduce gasoline consumption.[7]


Who says peak oil theorists pay insufficient attention to the alternatives? I say, by pointing out the need, they're among those calling loudest for the immediate development of alternatives! (The "it is estimated" gas cite is the same article citing the WSJ, by the way. Gas is also a depletable resource.)

Fifth, proponents of Peak Oil tend to exaggerate the impact of the increased oil demand coming from China and India on both the amount and the price of oil in global markets.


Well, whoever (uncited) exaggerates, shouldn't! (Is demand from India and China increasing? Yes.)

The alleged disparity between supply and demand is said to be due to the rapidly growing demand coming from China and India.


Currently supply is being met, albeit at an outrageously high price that is serving to suppress demand, unlike Hossein-Zadeh's strawman version of peak oil theory. What the theory says is that increasing world demand will hit up against a supply limit in the future, and that this motivates actors now to do smart or stupid things in reaction.

But that rapid growth in demand is largely offset by a number of counterbalancing factors. These include slower growth in U.S. demand due to its slower economic growth, efficient energy utilization in industrially advanced countries, and increases in oil production by OPEC, Russia, and other oil producing countries.


Word game: "slower growth in US demand" = "growth in US demand." Efficiency is good, but it's not yet reducing demand. Efficiency is instead being put in the service of maintaining GDP and overconsumption.

Finally, and perhaps more importantly, claims of “peaked and dwindling” oil are refuted by the available facts and figures on global oil supply. Statistical evidence shows that there is absolutely no supply-demand imbalance in global oil markets.


At $144 a barrel, apparently not. This year.

Contrary to the claims of the proponents of Peak Oil and champions of war and militarism,


The facade drops: champions of war now the same as peak oil proponents...

the current oil price shocks are a direct consequence of the destabilizing wars and geopolitical insecurity in the Middle East, not oil shortages.


Which is begging the question of whether said wars are the product of a strategy to deal with peak oil, among other things.

These include not only the raging wars in Iraq and Afghanistan, but also the threat of a looming war against Iran. The record of soaring oil prices shows that anytime there is a renewed U.S. military threat against Iran, fuel prices move up several notches.


Okay.

The war also contributes to the escalation of fuel prices in indirect ways—for example, by plunging the U.S. ever deeper into debt and depreciating the dollar, or by creating favorable grounds for speculation. As oil is priced largely in U.S. dollars, oil exporting countries ask for more dollars per barrel of oil as the dollar loses value.


Ditto.

Perhaps more importantly, an atmosphere of war and geopolitical instability in global oil markets serves as an auspicious ground for hoarding and speculation in commodity markets, especially oil, which is heavily contributing to the recently soaring oil prices.


Absolutely.

As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds.


Pure speculation doesn't exist. It always needs a basis, whether that basis is true, false or exaggerated. Without a basis, other speculators will move to make money by correcting on those who overshoot.

It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price.


The latter being true doesn't rule out the former.

. . . Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the ‘tail that wags the dog.’[8]


Yes. Funny that they should choose to go for the higher price.

Wall Street financial giants that created the Third World debt crisis in the late 1970s and early 1980s, the tech bubble in the 1990s, and the housing bubble in the 2000s are now hard at work creating the oil bubble. By purchasing large numbers of futures contracts, and thereby pushing up futures prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $115 per barrel, if the futures price is even higher.[9]


Correct description of the depravities of capitalism doesn't argue either for or against the thesis that oil as a depletable resource is subject to a peak-extraction point.

This has led to a steady rise in crude oil inventories over the last two years, “resulting in US crude oil inventories that are now higher than at any time in the previous eight years. The large influx of speculative investment into oil futures has led to a situation where we have both high supplies of crude oil and high crude oil prices. . . . In fact, during this period global supplies have exceeded demand, according to the US Department of Energy.”[10]


Again, supply exceeds demand at the $144 price. What would happen at $80 or $50, we'll never know, since it's probably never going down there again.

The fact that the skyrocketing oil prices of late have been accompanied by a surplus in global oil markets was also brought to the attention of President George W. Bush by Saudi officials when he asked them during a recent trip to the kingdom to increase production in order to stem the rising prices. Saudi officials reminded the President that “there is plenty of oil on the market. Iran has put some 30 million barrels of oil that it can't sell into floating storage. ‘If we produced more oil, it wouldn't find buyers,’ says the Saudi source. It wouldn't affect the price at all."[11]


Again, at the current price. Furthermore, Saudi officials promised to pump up supply.

And why producing more oil “wouldn’t affect the price at all”? Well, because what is driving the soaring oil prices is not shortage but speculation: “with so much investment money sloshing around in the commodities markets, the Saudis calculate they have no hope of controlling short-term price fluctuations. They blame the recent price run-ups on speculation and fear of shortages [not real shortages], factors they say are beyond their control.”[12]


Next section takes on the argument for morons that Iraq was invaded for cheap oil. Obviously, it wasn't, so I'll go lighter...

War for Cheap Oil?

The widely-shared view that the U.S. desire for access to abundant and cheap oil lurks behind the Bush administration’s drive to war in the Middle East rests on the implicit but dubious assumption that access to energy resources requires direct control of oil fields and/or oil producing countries. There are at least three problems with this postulation.

First, if control of or influence over oil producing countries in the Middle East is a requirement for access to cheap oil, the United States already enjoys significant influence over some of the major oil producers in the region—Saudi Arabia, Kuwait, and a number of other smaller producers. Why, then, would the U.S. want to bring about war and political turmoil in the region that might undermine that long and firmly-established influence?


Don't assume they're as rational or as smart as you, Hossein-Zadeh.

Let us assume for a moment that the neoconservative militarists are sincere in their alleged desire to bring about democratic rule and representational government in the Middle East. Let us further assume that they succeed in realizing this purported objective.


Why would we ever make these assumptions?

Would, then, the thus-emerging democratic governments, representing the wishes of the majority of their citizens, be as accommodating to U.S. economic and geopolitical objectives, including its oil needs, as are its currently friendly rulers in the region? Most probably not.


Obviously not. Which is why the US strategists are looking to stay in the region, pump up chaos and "civil war," and carve out oil-rich autonomous regions as modern protectorates.

Secondly, and more importantly, access to oil no longer requires control of oil fields or oil producers—as was the case in times past. For more than a century, that is, from the early days of oil extraction in the United States in the 1870s until the mid-1970s, the price of oil was determined administratively, that is, by independent producers operating in different parts of the world without having to compete with each other. Under those circumstances, colonial or imperial wars of conquest and occupation were crucial to the control of oil (and other) resources.


The fact that history moved already from one stage to another contains within it the realization that history can move on to different stages. What was true in the 1870s and ceased to be true by the 1970s can at least appear to become true again to the imperialist planners of today.

Beginning with the 1950s, however, that pattern of local, non-competitive price determination began to gradually change in favor of regional and/or international markets. By the mid 1970s, an internationally competitive oil market emerged that effectively ended the century-old pattern of local, administrative pricing. Today, oil prices (like most other commodity prices) are determined largely by the forces of supply and demand in competitive global energy markets; and any country or company can have as much oil as they wish if they pay the going market (or spot) price.[13]


Raising that price makes less countries that can do that.

To the extent that competitive oil markets and/or prices are occasionally manipulated, such subversions of competitive market forces are often brought about not so much by OPEC or other oil producing countries as by manipulative speculations of financial giants in New York and London. As was discussed earlier, gigantic Wall Street financial institutions have accomplished this feat through “innovative” financial instruments such as establishment of energy hedge funds and speculative oil futures markets in New York and London.[14]

It is true that collective supply decisions of oil producing countries can, and sometimes does, affect the competitively determined market price.


It certainly would under conditions of peak extraction, which is why Hossein-Zadeh went after peak oil first. Since his argument in that section fails, this point is by no means dismissed by the following mostly sound arguments against the "cheap oil" canard.

But a number of important issues need to be considered here.

To begin with, although such supply manipulations obviously affect or influence market-determined prices, they do not determine those prices. In other words, competitive international oil markets determine its price with or without oil producers’ supply manipulations. Such supply managements are, however, designed not to create volatility in energy markets, or chronic oil price hikes. Instead, they are designed to stabilize global oil prices because oil exporting countries prefer stability, predictability and long-term planning for their economic development and industrialization projects. Here is how Cyrus Bina and Minh Vo describe this relationship:

As a result, we conclude that the global oil market is the prime mover [i.e., prime determinant of oil price] and OPEC indeed follows its trajectory accordingly and consistently. . . . When market price (both spot and futures) is falling, OPEC decreases its output; when market price is rising, OPEC attempts to increase its output; and when market price is steady, OPEC keeps its output unchanged. . . . And, this is a kind of oil market we have experienced after the dust settled following the crisis of de-cartelization and globalization of oil industry in the 1970s.[15]

Producers’ policy to sometimes curtail or limit the supply of oil, the so-called “limited flow” policy, is designed to raise the actual trading price above the market-determined price in order to keep high-cost U.S. producers in business while leaving low-cost Middle East producers with an above average, or “super,” profit. While for low-cost producers this limited flow policy is largely a matter of making more or less profits, for high-cost U.S. producers it is a matter of survival, of being able to stay in or go out of business—an important but rarely mentioned or acknowledged fact.

A hypothetical numerical example might be helpful here. Suppose that the market-determined, or free-flow, price of oil is $30 per barrel. Further, suppose this price entails an average rate of profit of 10 percent, or $3 per barrel. The word “average” in this context refers to average conditions of production, that is, producers who produce under average conditions of production in terms of productivity and cost of production. This means that producers who produce under better-than-average conditions, that is, low-cost, high productivity producers, will make a profit higher than $3 per barrel while high-cost, low efficiency producers will end up making less than $3 per barrel. This also means that some of the high-cost producers may end up going out of business altogether. Now, if the limited flow policy raises the actual trading price to $35 per barrel, it will raise the profits of all producers accordingly, thereby also keeping in business some high-cost producers that might otherwise have gone out of business.

Furthermore, supply manipulation (in pursuit of price manipulation) is not limited to the oil industry. In today’s economic environment of giant corporations and big businesses, many of the major industries try, and often succeed in controlling supply in order to control price. Take, for example, the automobile industry. Theoretically, automobile producers could flood the market with a huge supply of cars. But that would not be good business as it would lower prices and profits. So, they control supply, just as do oil producers, in order to manipulate price. During the past several decades, the price of automobiles, in real terms, has been going up every year, at least to the tune of inflation. During this period, the industry (and the economy in general) has enjoyed a many-fold increase in labor productivity. Increased labor productivity is supposed to translate into lower costs and, therefore, lower prices. Yet, that has not materialized in the case of this industry—as it has in the case of, for example, pocket calculators or computers.


Has this guy turned on his TV lately? The car prices are unbelievable!

The absurdity or rather ignorance of the argument made wrt the auto industry is completely belied by the consistent decline in their profit margins to the point where most producers have either been bought out or gone through the danger of bankruptcy. Anyway, side issue.

Oil profit margins are, despite efficiency increases, absurdly high. In their case, a function of cartel control.

Another example of price control through supply manipulation is the case of U.S. grain producers. The so-called “set aside” policy that pays farmers not to cultivate part of their land in order to curtail supply and prop up price is not different—nay, it is worse— than OPEC’s policy of supply and/or price manipulation.

It is also necessary to keep in mind that OPEC’s desire to sometimes limit the supply of oil in order to shore up its price is limited by a number of factors. For one thing, the share, and hence the influence, of Middle Eastern oil producers as a percentage of world oil production has steadily declined over time, from almost 40 percent when OPEC was established to about 30 percent today.[16] For another, OPEC members are not unmindful of the fact that inordinately high oil prices can hurt their own long-term interests as this might prompt oil importers to economize on oil consumption and search for alternative sources of energy, thereby limiting producers’ export markets.

OPEC members also know that inordinately high oil prices could precipitate economic recessions in oil importing countries that would, once again, lower demand for their oil. In addition, high oil prices tend to raise the cost of oil producers’ imports of manufactured products as high energy costs are bound to affect production costs of those manufactured products.


War for Expensive Oil?

Now let us consider the widely-shared view that attributes the Bush administration’s drive to war to the influence of big oil companies in pursuit of higher oil prices and profits. As noted, this is obviously the opposite of the “war for cheap oil” argument, as it claims that Big Oil tends to instigate war and political tension in the Middle East in order to cause an oil price hike and increase its profits. Like the “war for cheap oil” theory, this claim is not supported by facts. Although the claim has an element of a prima facie reasonableness, that apparently facile credibility rests more on precedent and perception than reality. Part of the perception is due to the exaggerated notion that both President Bush and Vice President Cheney were “oil men” before coming to the White House. But the fact is that George W. Bush was never more than an unsuccessful petty oil prospector and Dick Cheney headed a company, the notorious Halliburton, that sold (and still sells) services to oil companies and the Pentagon.


Baby Bush: who cares, he's nobody.

As I've written on this board before, a position at Halliburton is perfect to develop a sense of the "general interest" with regard to oil. They do business with all the oil companies and with the Pentagon simultaneously. They aren't peripheral, they're at the heart of the oil-military complex and illustrate exactly the confluence of these two industries, contrary to what Hossein-Zadeh is struggling to imply.

The larger part of the perception, however, stems from the fact that oil companies do benefit from oil price hikes that result from war and political turbulence in the Middle East. Such benefits are, however, largely incidental. Surely, American oil companies would welcome the spoils of the war (that result from oil price hikes) in Iraq or anywhere else in the world. From the largely incidental oil price hikes that follow war and political convulsion, some observers automatically conclude that, therefore, Big Oil must have been behind the war.[17] But there is no evidence that, at least in the case of the current invasion of Iraq, oil companies pushed for or supported the war.


At which point one can only conclude that Hossein-Zadeh needs to read up on the Cheney energy meetings, as in the real reporting done by Jason Leopold citing real events, as opposed to blanket fictional statements like "there is no evidence..."

On the contrary, there is strong evidence that, in fact, oil companies did not welcome the war because they prefer stability and predictability to periodic oil spikes that follow war and political convulsion: “Looking back over the last 20 years, there is plenty of evidence showing the industry’s push for stability and cooperation with Middle Eastern countries and leaders, and the U.S. government’s drive for hegemony works against the oil industry.”[18] As Thierry Desmarest, Chairman and Chief Executive Officer of France’s giant oil company, TotalFinaElf, put it, “A few months of cash generation is not a big deal. Stable, not volatile, prices and a $25 price (per barrel) would be convenient for everyone.”[19]


The footnote is an unpublished senior thesis. The quote is obvious PR bullshit from a state-owned oil company where the interests of the French people might actually matter. We're not talking about a few months of cash generation but years at six times the supposed cited price.

Very important to note here: There is no one Big Oil. There are companies competing for different concessions. They will necessarily have different interests depending on where they're looking to get which concession. The companies currently carving up Iraq are not thinking the war was a bad thing. But leaving post hoc aside, they were almost certainly the same companies carving up Iraq on Cheney's maps in 2001!

It is true that for a long time, from the beginning of Middle Eastern oil exploration and discovery in the early twentieth century until the mid-1970s, colonial and/or imperial powers controlled oil either directly or through control of oil producing countries—at times, even by military force. But that pattern of colonial or imperialist exploitation of global markets and resources has changed now.


Once again, history moves and I think Hossein-Zadeh is behind it. That pattern has not "changed now," it changed back in the 1970s and ever since then there have been important elements in the US-UK power elites looking to change it back and investing hundreds of billions in preparation for war in the Middle East. These elements have had the upper hand again for the last decade.

Most of the current theories of imperialism and hegemony that continue invoking that old pattern of Big Oil behavior tend to suffer from an ahistorical perspective. Today, as discussed earlier, even physically occupying and controlling another country’s oil fields will not necessarily be beneficial to oil interests.


Again, the concession winners of 2008 probably don't think so. And what they think their interest is, is more important in determining how they will act now than what will actually result later.

Not only will military adventures place the operations of current energy projects at jeopardy, but they will also make the future plans precarious and unpredictable. Big Oil interests, of course, know this; and that’s why they did not countenance the war on Iraq: "The big oil companies were not enthusiastic about the Iraqi war," says Fareed Mohamedi of PFC Energy, an energy consultancy firm based in Washington D.C. that advises petroleum firms. "Corporations like Exxon-Mobil and Chevron-Texaco want stability, and this is not what Bush is providing in Iraq and the Gulf region," adds Mohamedi.[20]


First of all, recall that it's not one oil company. Some (like the French who had the inside track on Iraq prior to 2003) may see military adventures as a threat, others may believe they will gain from it.

At any rate, this paragraph is completely belied by the excellent Leopold treatment in the OP, and by many other reports of what actually happened, as opposed to what is said by PR shills. And sorry, "an energy consultancy firm... that advises petroleum firms" is also a PR firm. What the hell do you expect Mr. Mohamedi to say? "Yeah, bring it on baby, Exxon wants the war, UNOCAL wants the Taliban toppled?" I think what was actually planned at Cheney's meetings is just a tad more significant.

Big Oil interests also know that not only is war no longer the way to gain access to oil, it is in fact an obstacle to gaining that access. Exclusion of U.S. oil companies from vast oil resources in countries such as Russia, Iran, Venezuela, and a number of central Asian countries due to militaristic U.S. foreign policy is a clear testament to this fact.


The war planners may not have these insights, however, and again Big Oil as such doesn't exist; it all depends who thinks they will gain what from which strategy. Anyway, the militaristic US foreign policy did its best to turn Russia into a colony, and failed, and did its best to overthrow Chavez, and will, I hope, continue to fail. They'll probably lose Iraq as well; that doesn't mean oil wasn't their consideration in invading Iraq in the first place.

Many of these countries (including, yes, Iran) would be glad to have major U.S. oil companies invest, explore and extract oil from their rich reserves. Needless to say that U.S. oil companies would be delighted to have access to those oil resources. But U.S. champions of war and militarism have successfully torpedoed such opportunities through their unilateral wars of aggression and their penchant for a Cold War-like international atmosphere.


No doubt! That doesn't mean that some of the US oil companies are not in the camp of the US champions of war and militarism, and seek opportunity that way.

When Vladimir Putin first became president of Russia he was willing to allow American energy companies to continue with the one-sided contracts they had drawn up during Boris Yeltsin’s presidency. Putin built a seemingly trusting relationship with George Bush who looked into Putin’s soul and liked what he saw.


What did he see? A guy who came to power and promptly had his spook allies stage a false-flag Attack On Russia to justify an immediate war and fix the election on his behalf?

The two leaders grew even closer in the aftermath of the 9/11 attacks on World Trade Centre and the Pentagon—when Russia provided “help for America’s invasion of Afghanistan.” Soon after this generous cooperation, however, “Bush repudiated the anti-ballistic missile treaty in the belief that America could develop the technology for winning a nuclear war. This posed a huge strategic threat to Russia.”[21]

Describing the heavy-handed, imperial U.S. policy toward Russia, Stephen F. Cohen writes: “The real US policy has been very different—a relentless, winner-take-all exploitation of Russia's post-1991 weakness. Accompanied by broken American promises, condescending lectures and demands for unilateral concessions, it has been even more aggressive and uncompromising than was Washington's approach to Soviet Communist Russia.”[22]

Bush’s withdrawal from the ABM treaty not merely posed an existential threat to Russia but was almost a betrayal of the trust that Putin had put in him. This led to Putin’s disenchantment with America. “Eventually he seems to have decided that every time America transgressed against Russian interests he would retaliate by stopping another American company from exploiting Russian resources.”[23]

During the past few decades, major oil companies have consistently opposed U.S. policies and military threats against countries like Iran, Iraq, and Libya.


This doesn't mean the same companies didn't line up for Cheney's Iraq carve-up.

They have, indeed, time and again, lobbied U.S. foreign policy makers for the establishment of peaceful relations and diplomatic rapprochement with those countries. The Iran-Libya Sanction Act of 1996 (ILSA) is a strong testament to the fact that oil companies nowadays view wars, economic sanctions, and international political tensions as harmful to their long-term business interests and, accordingly, strive for peace, not war, in international relations.

On March 15, 1995 President Clinton issued Executive Order 12957 which banned all U.S. contributions to the development of Iran’s petroleum resources, a crushing blow to the oil industry, especially to the Conoco oil company that had just signed a $1 billion contract to develop fields in Iran. The deal marked a strong indication that Iran was willing to improve its relationship with the United States, only to have President Clinton effectively nullify it. Two months later, sighting “an extraordinary threat to the national security, foreign policy and economy of the U.S.,” President Clinton issued another order, 1259, that expanded the sanctions to become a total trade and investment embargo against Iran. Then a year later came ILSA which extended the sanctions imposed on Iran to Libya as well.

It is no secret that the major force behind the Iran-Libya Sanction Act was the America Israel Public Affairs Committee (AIPAC), the main Zionist lobby in Washington. The success of AIPAC in passing ILSA through both the Congress and the White House over the opposition of the major U.S. oil companies is testament to the fact that, in the context of U.S. policy in the Middle East, even the influence of the oil industry pales vis-à-vis the influence of the Zionist lobby.[24]


In that case: What does the success of the MIC in getting arms sales to the Arab world against the opposition of AIPAC show?

And has anyone noticed how somewhere along the way Hossein-Zadeh switched the idea of oil as a geostrategic motive to the narrower question of "what do specific oil companies (defined as Big Oil) want?"

We have now arrived where Hossein-Zadeh was always headed, his central preconception: it's the Zionists, not "the oil motive" (now replaced in his arguments by the individual interest of oil companies). But I've been at this exercise for two hours, like an idiot, so maybe tomorrow...
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Postby JackRiddler » Thu Jul 10, 2008 1:27 am

.

I should have gone more into the idea that finance and "Big Oil" interlock. Who owns Exxon? What oil company isn't tied to the banks, who provide the debt and insure against the price fluctuations using mechanisms that allow them to profit from drops as well as rises? How can one cleanly distinguish between the nasty speculators on the markets and the oil companies with an (occasional) interest in peace? They resolve into the same class. Many members of the same set of billionaires are behind both oil and the financial sector that speculates in it.
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Postby wintler2 » Thu Jul 10, 2008 8:11 am

JackRiddler wrote:.. But I've been at this exercise for two hours, like an idiot, so maybe tomorrow...

I found it excellent, thanks for your effort.

JackRiddler wrote:.. How can one cleanly distinguish between the nasty speculators on the markets and the oil companies with an (occasional) interest in peace? They resolve into the same class. Many members of the same set of billionaires are behind both oil and the financial sector that speculates in it.
Its true, and doesn't make coordinated action against them any easier. The obvious thing to do is to pick out those that can be found to breaking the law, but imho that underestimates the evil of much that is legal. Withdrawing subsidies and nationalising resources would work.
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Postby MacCruiskeen » Thu Jul 10, 2008 8:45 am

Brilliant, Jack. That exhaustive rebuttal should also be published elsewhere. (The same applies to a lot of your best stuff, which is buried on message-boards either here or at DU.)
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Postby JackRiddler » Sat Jul 26, 2008 7:23 pm

.

(Reminding myself.)
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Postby JackRiddler » Tue Dec 15, 2009 3:42 pm

Rendered relevant by other thread, year-and-a-half later.
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Re: Oilmen wanted Iraq invasion in April, 2001

Postby JackRiddler » Thu Feb 02, 2012 9:55 pm

Thanks to vanlose's find I can put an end to this thread...

Crude Awakening
In Iraq's turbulent politics, whoever controls the oil production wields the power. And that might soon be ExxonMobil.
BY BEN VAN HEUVELEN | JANUARY 31, 2012

On Dec. 17, two days after the U.S. military cased its colors and formally ended its mission in Iraq, the brain trust of the Iraqi oil sector gathered for a symposium at Baghdad's Alwiyah Club, a fortified concrete complex of meeting rooms and outdoor gardens. They were officially meeting to discuss "Challenges Facing the Development of the Extractive Industry." The issues they grappled with held the prospect to transform the global energy marketplace and determine the course of Iraqi democracy.

A few top government officials sat on a dais while members of the audience -- about 150 parliamentarians, technocrats, and academics -- took turns at a podium, giving short speeches and asking questions of the panelists. Speakers often had to yell to be heard over the objections of audience members. A bit of shouting was to be expected: This was the first time in years that Iraqis were gathering without a foreign military occupation to outline their economic future. And in a country where 95 percent of government revenue comes from oil, any debate about oil is also a struggle for power. They addressed the most fundamental questions: How much oil should Iraq produce? What should happen to the revenue? Who should control the country's oil strategy? You wouldn't have known it by the volume of the rhetoric, but a lot of the talk was moot.

Much has already been decided. In 2009, the government started awarding contracts for the country's largest fields, and the biggest names in oil have signed up. Companies like ExxonMobil and BP have invested billions of dollars, bringing the latest in technology and engineering expertise. Production has rebounded from just over 1 million barrels per day after the invasion to nearly 3 million today. Baghdad's 11 international oil contracts promise to deliver a total of more than 13 million barrels per day within seven years -- a figure that would make Iraq the largest oil producer, ever.

There are good reasons to doubt these projections. For one thing, the current political crisis has underscored Iraq's failure to build the kinds of institutions -- a credible judiciary, non-politicized security forces -- that support a stable, functioning, democratic state. Even if Iraq weren't plagued by daily bombings and political dysfunction, it would be hard-pressed to achieve what would be the most rapid oil expansion in world history.

Yet if the investment bonanza can even partially succeed, it promises to reshape not only Iraq but also the regional balance of power. Falah al-Amri, director of the State Oil Marketing Organization, showed the audience at the Alwiyah Club a PowerPoint presentation with figures that he had quoted to his Gulf counterparts at a recent OPEC meeting. By 2014 or 2015, he said, the country would reach the magic number of 4.5 million barrels per day of oil production, at which point OPEC would start trying to enforce quota restrictions.

Amri vowed that Iraq would negotiate hard for a larger national quota. He also provided a clue to the government's contracting strategy, which appears to recognize that oil is a source of not only revenue but also geopolitical power.

"Our plan is not to flood international markets. This is not our goal. If we have a spare 2 or 3 million barrels per day, then so be it," Amri said. He later clarified to me that he thinks Iraq will have this "swing capacity" -- that is, the ability to drastically increase production on short notice -- by 2017.

Saudi Arabia is currently the world's only so-called "swing producer," with an already-developed capacity that far exceeds its current production. This status gives the kingdom enormous power. If any other producer falters -- if, say, rebels in the Niger Delta blow up a pipeline or Iranian oil is shut in by an embargo -- the world economy depends on the Saudis to open the taps and keep prices from rising too high. This Saudi leverage also keeps its OPEC associates in check: Other cartel members can't stray too far from their production quotas, lest the Saudis flood the market with a punitive deluge of crude, driving down everyone's prices and profits.

Amri's presentation contained the seeds for the disruption of this power dynamic. If Iraq develops 2 million or 3 million barrels per day of swing capacity, which is roughly what Saudi Arabia claims to have, OPEC will suddenly have a second enforcer. That could pave the way for a regional rivalry between Saudi Arabia and the Shiite-led Iraqi government. Relations between the two are already in the doldrums, as Saudi leaders have characterized Prime Minister Nouri al-Maliki as an Iranian puppet and continue to refuse to send an ambassador to Baghdad. Their worries are not unfounded. Maliki is no puppet, but he has taken dramatic steps to consolidate power by pushing aside all his major Sunni-backed rivals; as a result he is increasingly dependent on a Shiite political base with deep ties to Iran.

But though the geopolitical implications of Iraq's efforts to become an energy giant are dizzying, they will only become a reality if the country can meet Amri's ambitious projections. And there's no guarantee that the country can overcome the daunting challenges facing its oil industry.

Iraq has already come a long way. A Western oilman recently recalled for me the sorry state of Iraq's oil sector shortly after the 2003 invasion. He had just arrived in the southern port city of Basra to get a key field back up and running, and he found that after decades of sanctions and underinvestment, some critical equipment was literally held together with duct tape. Thankfully, Iraqi engineers were experts at improvising improbable solutions, and after weeks of work, everyone was confident that the field could restart production.

"It's time to light the flare," the oilman announced.

In most modern facilities, when you need to burn off certain byproducts of crude oil production, you press a button on a control panel and ignite a flare atop a metal chimney. But in Basra, where no such mechanism existed, it was a slightly riskier proposition -- and the responsibility for the task sparked a shouting match among the more junior Iraqi workers.

After a long argument, the Iraqis drew straws. The loser wrapped a wet T-shirt around his head, held a flaming torch in the air, and, crouching low, crept toward the chimney, which was hissing with invisible, flammable gases. When he got close enough, the air burst into a giant fireball and the man ran screaming back to his cohort, who doused him with water and laughed at his singed body hair. Soon after, the Western oilman introduced a slightly more modern ignition device: a flare gun, which could be fired from a safer distance.

Iraq's oil sector has matured since then, but that kind of crazy improvisation remains a defining characteristic. Bureaucratic hurdles also continue to hobble the oil industry's development. For several months in 2011, for example, many top Western oil company officials couldn't enter the country because their visas took months to process. Amazingly, the government was preventing them from doing the work it had contracted them to perform. The problem turned out to be a simple backlog: In a bureaucracy that functions through the authority of only a few strong leaders, the visa applications had to travel all the way to the prime minister's office for approval. Iraq's current atmosphere of political crisis offers little hope that Maliki will relax his tendency to micromanage and govern through just a handful of loyal subordinates.

Similar delays have affected almost every aspect of companies' operations: They have had problems getting paid on time; Oil Ministry officials have been slow to sign off on plans and subcontracts; and customs officials have held up the delivery of key equipment while waiting for authorization. One Western executive told me recently about a particularly troublesome holdup -- a shipment had been waiting for weeks at the border, he said, and now they were running low on essential supplies, including ammunition for their flare guns.

It's not just the facilities that are badly in need of modernization: The legal infrastructure for Iraq's oil industry is also held together by the political equivalent of duct tape.

Shatha al-Musawi, a former member of parliament and one of the speakers at the Alwiyah Club, knows firsthand the murky legal foundations of Iraq's oil sector. She had been the plaintiff in a 2009 lawsuit that challenged the legality of BP's contract for the Rumaila oil field in Basra -- the world's second largest, which now produces about half of Iraq's crude. Musawi's complaint centered on the fact that the Oil Ministry had not submitted the Rumaila contract to parliament for approval, as Iraqi law appears to require. Instead, Maliki's government unilaterally approved the Rumaila deal -- and all subsequent contracts -- without the legislative branch. Musawi's case was a quixotic fight against this power grab.

"There is not a strong legal basis for these contracts," Musawi said. "There is not any intention to build a new state, a democratic state."

The Iraqi Constitution calls for a modern oil law, but political dysfunction has prevented one from being passed. In a country where petroleum is power, any law that dictates the structure of the oil industry is also bound to define the state itself. And in a political arena dominated by fear and identity politics, nobody wants to share power. In recent debates, the sides have split along largely ethnic and sectarian lines: Maliki's Shiite-majority allies have backed centralized control of oil, while parties representing the minority Kurds and Sunnis say local governments should have more authority. No bill has yet survived parliament.

The Rumaila deal, Musawi argued, represented a textbook executive end-around. By commissioning billions of dollars' worth of investment, the Maliki administration was creating irreversible facts on the ground. Parliament could not pass a law that would invalidate major contracts because that would scare away future business -- and Iraq needs foreign investment for its reconstruction. Instead, future legislators would have to retrofit any new law to account for the existing contracts.

This is how governance works in Iraq: Strong leaders take action in the name of necessity when democratic bodies fail to function. As a result, the people in power have few incentives to compromise and many reasons to undermine public institutions. The Rumaila case, for example, was not allowed to proceed. Iraq's highest court, which has made several suspiciously favorable rulings for the prime minister, said Musawi would have to pay a $250,000 court fee just to bring the case to trial. Unable to raise the money, she was forced to drop the suit.

Political power dynamics have determined the course of Iraq's oil development far more than legislative policymaking. That volatility, however, hasn't dissuaded oil multinationals -- there's simply too much oil under the country's soil. So, many companies, from BP to ExxonMobil to Shell to Lukoil, have been willing to invest billions of dollars without the stability of a modern oil law. Companies have mitigated their risks by negotiating contracts that rely on international arbitration to settle major disputes, rather than Iraqi courts. But the overarching reason companies can operate with some confidence is that -- in the laissez-faire political economy of Iraqi oil -- their power rivals that of the divided Iraqi state.

Iraq's oil powers are split between two governments. After the U.S. invasion, the semiautonomous Kurdistan region in the north grew fearful that the new government in Baghdad would, like Saddam Hussein, use economic power to oppress them. Kurdistan's minister of natural resources, Ashti Hawrami, led an aggressive strategy to develop an independent oil sector, signing contracts without the central government's consent. He divided Kurdish territory into a grid of several dozen exploration blocks and, over the past decade, has signed a whopping 48 oil and gas contracts.

To leaders in Baghdad, this looks like an affront to Iraqi nationalism. The most forceful objections have come from Hussain al-Shahristani, one of Maliki's most powerful allies, who became oil minister in 2006 and now serves as deputy prime minister for energy. He argued that without a centralized system to manage oil, competing interests would tear the country apart along geographic, ethnic, and sectarian lines. He insisted that Baghdad should have sole authority over contracting and condemned the Kurdish deals as illegal.

Due to Iraq's vague constitution and incomplete regulatory structure, it's not clear which side has the legal upper hand. It's certainly an urgent question. One of the George W. Bush administration's biggest reconstruction benchmarks for Iraq was to pass an oil law, and U.S. Ambassador Zalmay Khalilzad spent months brokering negotiations. In 2007, a draft oil law passed the cabinet, and Khalilzad published a triumphant op-ed in the Washington Post proclaiming "the prospects for passage are excellent." But negotiations soon died in parliament. There were many reasons for the failure, but the single biggest was the rivalry between the Arab majority in Baghdad and the Kurdish government. The final nail in the coffin came on Sept. 8, 2007, when Kurdistan signed a contract with the U.S. firm Hunt Oil, whose chairman, Ray Hunt, sat on Bush's Intelligence Advisory Board. The definitive American influence, it turned out, was wielded not by the U.S. Embassy but by a private company.

Shahristani had to respond to this show of the Kurdish government's growing clout. He also had to start generating the kind of revenue that could fuel Iraq's reconstruction, with or without an oil law. One sure way to do both was to bring in even bigger companies to develop the vastly larger fields in southern Iraq. In October 2009, Shahristani signed a deal -- without parliamentary approval -- with oil giant BP to rehabilitate the Rumaila oil field. Then came ExxonMobil, with a contract for the 8.7 billion-barrel West Qurna Phase 1 field. Those two fields hold more proven oil reserves than the entire United States has, and if the terms of just those massive contracts are met, Iraq will reach more than half of Saudi Arabia's current production before the end of this decade.

Shahristani's contracting spree was driven at least in part by political motives, and his ambitious projections could easily run aground on some harsh practical realities. For one thing, if Iraq's fields were to increase production any further right now, the oil would have nowhere to go. There aren't enough pipelines, storage tanks, refineries, and export terminals. Iraq is building many of these facilities, but probably not fast enough for the production rates that the state is now contractually obliged to support.

Nor is it clear whether world markets could stand so much new supply. If Iraq were actually able to increase production to the unprecedented height of 13 million barrels per day within seven years, the price of oil would likely drop just as steeply. Not only would this destroy Iraq's profit margins, but it would also provoke dangerous levels of anger from nearby producers such as Saudi Arabia and Iran, both of which possess superior military power.

Worst of all, perhaps, Iraq has lost full control of its production strategy. The deals don't just require the companies to boost production aggressively -- they require Iraq to pay for the contracted volumes. If the companies hold up their end of the bargain, but the government has to make cuts for any number of reasons -- infrastructure constraints, market pressures, or OPEC politics -- Iraq could be forced to pay companies for oil they're not producing. As the gatekeeper of the world's third-largest oil reserves, Shahristani is hardly powerless to renegotiate these deals. Still, the contracts do surrender a remarkable degree of economic sovereignty for a government still struggling to formalize its own powers.

One dramatic expression of Iraq's declining power over the oil giants came on Oct. 18, 2011, when ExxonMobil signed a massive exploration deal with the Kurdistan region. The move directly violated Shahristani's policy of unitary authority. In past cases, Shahristani punished oil companies for signing with Kurdistan by blacklisting them from his contracting auctions. But now, with ExxonMobil pumping more than one-tenth of Iraq's crude from the West Qurna Phase 1 field, the government found itself with much less leverage. (ExxonMobil has not acknowledged any contract with Kurdistan and has declined to comment, though multiple officials in the Kurdish and central governments have confirmed the deal.)

Baghdad is now left with two bad options. It could banish ExxonMobil, risk a loss of production, and probably provoke a lawsuit that would stoke the anxiety of other investors. The more likely scenario is that the federal government will seek some sort of compromise that will eventually validate some of the contracting powers Kurdistan has already claimed.

Nevertheless, Kurdistan isn't likely to win the complete autonomy that it desires anytime soon. Baghdad continues to hold two trump cards. First, it controls the pipeline network to the Mediterranean port in Ceyhan, Turkey, through which any large-scale exports must travel. Second, it controls the sale of oil and the collection of export revenues -- and therefore the flow of money from oil sales back to both Kurdistan's budget and its contractors. Hawrami, the natural resources minister, has suggested that he wants to increase Kurdish oil exports from their current level of about 175,000 barrels per day to 1 million barrels per day within five years. For that to become a reality, he needs a deal with Maliki and Shahristani.

Indeed, a truce between Kurdistan and Baghdad could be in the works. When Maliki visited Washington in December, he met privately with Exxon CEO Rex Tillerson. One of Maliki's advisors, speaking anonymously, confirmed to me that Maliki asked Tillerson to "freeze" the Kurdish contracts. The advisor said the government is proposing a quid pro quo: If all parties agree to a new oil law, then Baghdad will endorse a mechanism to recognize ExxonMobil's Kurdish contracts. Maliki is essentially trying to borrow ExxonMobil's new leverage with the Kurds, asking the company to pause its new deal in order to force the Kurds into a grand oil bargain. This could be a pragmatic solution that uses ExxonMobil's influence with both governments to reconcile the two sides. But, assuming it would even work, this plan would transform the oil giant into one of three main parties, alongside the federal and Kurdish governments, that shape the country's oil sector.

ExxonMobil is hardly to blame; Iraq is simply too divided to realize its potential strength.

If the state were functioning well, then politicians and technocrats would fight their battles within policymaking bodies and through private debates. On the international stage, they would speak with a single voice to the oil majors and neighboring countries. Such a unified front would help Iraq enormously. Its negotiating power would rise and likely its production too. This kind of successful policymaking would probably look something like the passionate arguments at the Alwiyah Club -- and indeed, many of the speakers there pointed out that, with strong institutions and a dose of compromise, everyone would benefit.

But this isn't how it works today. In the arena of Iraqi identity politics, leaders don't trust each other -- often for good reasons -- and power looks like a zero-sum proposition. Such perceptions can be self-fulfilling. For the oil sector, the dysfunction of the government has already set projects back; ExxonMobil's willingness to risk its relationship with Baghdad is one sign of well-informed pessimism. As we look ahead, the atmosphere of crisis and improvisation seems unlikely to break, and the outlook for Iraqi production seems uncertain at best. But in a fledgling country where everyone is still jockeying for power, this much is still clear: Oil is king.

http://www.foreignpolicy.com/articles/2 ... _awakening


In reiewing it, I noticed this:
ISMAEL HOSSEIN-ZADEH back in 2008, the year before Deep Horizon blowout wrote:
Second, Peak Oil theory pays scant attention to the drastically enabling new technologies that have made (and will continue to make) possible discovery and extraction of oil reserves that were inaccessible only a short time ago. One of the results of the more efficient means of research and development has been a far higher success rate in finding new oil fields. The success rate has risen in twenty years from less than 70 percent to over 80 percent. Computers have helped to reduce the number of dry holes. Horizontal drilling has boosted extraction. Another important development has been deep-water offshore drilling, which the new technologies now permit. Good examples are the North Sea, the Gulf of Mexico, and more recently, the promising offshore oil fields of West Africa.[5]



I see he also put in an implicit endorsement for fracking.

Today's oil price is $96, by the way.

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Re: Oilmen wanted Iraq invasion in April, 2001

Postby JackRiddler » Sun Apr 15, 2018 11:08 pm

Wow, wow. Six years later. We have seen the fracking and shale oil booms to access formerly unconventional shale oil and create an apparent and temporary surplus of hydrocarbons at the cost of awesome environmental destruction. The burning-through of these resources is a matter of another decade.

The link to the 2009 Jason Leopold article in the original post no longer works, but here it is on its original page still:

http://pubrecord.org/nation/2430/eager- ... -invasion/

Six years ago, it seemed like the U.S. oil bigs had not succeeded in getting the expected concessions in Iraq that led them to support the 2003 war of aggression. In the meantime, we've seen renewed and horrific war in Iraq with heavy U.S. involvement, thanks to the Islamic State's turn on the world stage, and apparently there's been a renegotiation of concesssions. The biggest deal just happened with the end of Kurdish autonomy in the wake of the IS collapse and the ill-advised declaration of independence, to which the rejuvenated Bagdad state responded with a relatively bloodless occupation of the north. BP got the prize. I've been looking for an accurate breakdown, but what's certain is that there's an international with China, BP and Shell at the fore and ExxonMobil and Chevron in the mix.

.
We meet at the borders of our being, we dream something of each others reality. - Harvey of R.I.

To Justice my maker from on high did incline:
I am by virtue of its might divine,
The highest Wisdom and the first Love.

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