On January 16, 2008, I made a prediction: “Oil prices have finally reached $100 a barrel. I now hear predictions of $200 a barrel. People who make forecasts like round numbers.
“I do not expect $200 oil any time soon. I expect $85 oil first, and $70 oil first, and $50 oil first.”
Here is a long-term graph of oil prices:
Oil made it to $140 and then the price collapsed, getting down to $40.
General Conway in February of 2014 wrote “Well ladies and gentlemen, oil is an international commodity and it is a global market but it is not a free global market. Seven of the top ten oil companies in the world are state owned. That means there is a cartel out there that dictates what the price of oil is going to be. There is a Prince that is responsible for such things sitting in Riyadh and he has said the price of a barrel of oil will no longer ever go below $80 and that is not as the law of supply and demand, that is because that’s what it takes to satisfy the social programs in Saudi Arabia to keep the Arab Spring from settling there. Now we can criticize that, but on the other hand we ought to be glad he’s there because if it were left to the Iranians it would be a great deal more than $80 a barrel. Unfortunately, again, it is not a free market. Those free market factors like supply and demand, like profit margins, like overhead costs, are simply not in play. And we are being dictated to by this number of countries, some of whom don’t share our ideals, many of whom do not share our ideals, again on an annual basis.” (A link to a pdf of his speech is here.)
General Conway is wrong in all of this, all of it; and his prediction was completely wrong as the graph shows. Oil was $103 as he spoke. By February of 2016, oil was $32.74. How mistaken can one be? I explain the reasons for my radically different view in my article.
If oil producers and/or oil states “dictate” the price of oil, they do an awfully poor job of holding prices up. The long-term graph shows some very large fluctuations, much like those of other commodities traded in international markets. A 70-year history of oil’s price shows that one of the two largest upward moves in the price of oil began when Nixon took the U.S. and the world out of gold to settle international accounts in 1971. The oil market is more freely subject to supply and demand than it may seem to hear all the talk about the cartel.
Who cares? Every American should care, because U.S. policy in the Middle East reflects the General’s view that oil is a national security risk, that Iran is an antagonist, that the U.S. needs Saudi Arabia as a military ally, that it was a good idea to attack Iraq, and so on. The U.S. continues to botch up the entire Middle East and Libya, another oil producer, out of the mistaken notion that national security is at stake unless oil is available when we want it, without inconvenience to us, through thick and thin, no matter what; and out of the mistaken notion that such national security is obtained via military measures, sanctions, aggression, dominance, arms sales, deposing dictators, controlling governments, etc.
The costs of these policies have been astronomical, far in excess of any number of alternatives. I’ve previously expressed my dissent from the prevailing U.S. view typified by Conway. I’ve written
“America does not require political control in order to buy oil. The Russian empire never conquered the Middle East any more than the American empire has or can. If it tried, it would run into the same kinds of problems we have. If America withdraws, the oil in all probability will remain in the hands of Arab countries and Iran. They may fight with one another and rearrange their borders. This is not important. They will still have to sell their oil if they want revenue, and we and others are the market. We do not need literally to control the governments of the Middle East in order to have secure oil. There are a hundred other countries smaller than we are that buy oil and don’t care who runs the Middle East. Why do we?”
The U.S. intrusions into Middle East countries and politics have bi-partisan support. They are not the subject of a major conservative-liberal divide. The “war party” cuts across party lines. Votes to sanction Iran and to pay for one war after another find broad support. Behind this is a misapprehension of the oil market. Behind it is a fear of being cut off from oil and an animal urge to control oil at its Middle Eastern sources rather than to rely upon other peaceful means and other options that we could invoke in both normal times and emergencies.
The quest for national security disguises a quest for empire. If oil is to be controlled by intrusion into foreign countries because it is deemed essential, how many other resources need to be controlled? If security is the overriding aim, how many domestic organizations and voices need to be stilled and placed behind bars who might destabilize the system? How many threats must be neutralized here and abroad before the elusive security is achieved? How much freedom must be sacrificed at the altar of security?
Oil reserves on this continent are said to surpass those of Saudi Arabia and Russia. This is a mere two years after the General spoke. How wrong can one be who is supposed to be an expert on energy security?
Trump promises energy independence of America. If that is the case, he promises “We will become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.”
The result will be a further decline in energy prices.
What I want to see is that this independence results in a vast reduction in military expenditures associated with securing oil from international sources. If this independence actually occurs, then the U.S. should be able to remove itself from every Middle Eastern country and many in Africa. It should be able to stop interfering in South American countries. The excuse of national security was faulty to begin with, but it should become totally obsolete.
1:44 pm on November 13, 2016 Email Michael S. Rozeff
