July 18, 2008
Skyrocketing Oil Prices Force Bush to Negotiate with Iran
"There's been a lot of talk about what the administration would have to do to lower oil prices. Making a peace overture to Iran is doing the job.'' - John Kilduff, vice president of risk management at MF Global Ltd. in New York.
Crude oil fell for a fourth day, capping the biggest weekly decline in more than three years, as the Bush administration's decision to participate in nuclear talks with Iran eased concern of a possible military conflict.Prices tumbled 11% this week on reduced tension between the US and Iran, which holds the world's second- largest oil reserves. A slowing global economy, faltering US fuel demand and rising supplies helped push futures to their biggest weekly dollar decline ever.
``There's been a significant lessening of tensions with Iran in recent days,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``A feared imminent attack on Iranian nuclear facilities helped push prices to records. The meeting in Geneva is a significant step.'' - [LINK}
And from the AP (Oops, the link has mysteriously disappeared):
Analysts said that news the United States' direct involvement in talks with Iran about its nuclear activities was helping to dilute some of the pressure from geopolitical factors which had been reinforcing the energy market's bullish sentiment."We are for now a bit far away from the atmosphere of imminent confrontation that was fueling the market fire a few weeks ago," said analyst Olivier Jakob of Petromatrix in Switzerland.
U.S. Undersecretary of State William Burns will attend talks in Geneva, Switzerland, on Saturday and meet with a top nuclear negotiator from Iran, a sea change from Washington's policy which until now had avoided direct contacts with Iran.
Iran’s recent missile tests sent a clear message and removed all doubt that an attack by either the United States or Israel would have disastrous consequences.
Bush originally tried to shrug off the Iranian missile tests, siting it as as yet another example of Tehran's rogue behavior in an attempt to suppress the fact that it was relentless saber-rattling by the U.S. and Israel's war games that finally provoked Iran to respond with a show of force). But resulting oil spikes and its effects on the U.S. economy couldn't be shrugged off for long. Like an aching tooth, they scream for attention. The meteoric rise of crude oil prices on the commodities exchange and its effect on the financial markets finally forced the administration to sit up and listen to the clear and resounding message oil prices were sending: "IT'S THE WAR, STUPID!"
Like money, oil talks, and when it does the world is obliged to listen. With each and every word threatening an attack on Iran, oil prices spiked. As much as the American media has tried to overlook the fact that an unmistakable pattern was developing, making it clear that war and threats of war were the prime movers in the oil market, the truth has finally seeped through the cracks.
In early June, Israel's Deputy Prime Minister stated that an attack on Iran was unavoidable. That same day, oil prices made a historic rise of $10 a barrel. Days later, when the New York Times reported Israel had conducted war games over Iraq in preparation for a possible air strike against Iran, oil prices soared another $5 dollars. These prices were rattling the equities markets. With the Dow plummeting and the value of the dollar sinking, something had to be done to bring down these prices in order to avert an economic collapse. But what could anyone do? Nobody seemed to have the answer. While Congress dithered with numerous, pointless hearings and finger pointing at Big Oil and "evil" speculators, Bush, who must surely have been shaking in his boots with public anger rising and the financial markets roiling, got a real kick in the pants from the oil market. Oil prices were not only forcing the nation to change its driving habits, they were also forcing Bush to change his warmongering attitudes.
The decision to hold talks with Iran this weekend in Geneva, represents a startling reversal from the Bush policy against talking to "our enemies." Only last May, in his speech to the Knesset in Israel, Bush suggested that statements from Democrats –including Barack Obama – about talking to America's enemies were akin to appeasement of Hitler.
George W. Bush is now eating his words. Talking with one's "enemies" is proving to be the wiser course, as Barack Obama has repeatedly stated, for now we see that war, threats of war, and a rigid policy of bullying one's enemies into submission can have grave consequences. No one should be surprised that the war that was "fought over there so that we don't have to fight it here" is coming to our shores, striking at our economy. The blowback effect is as devastating as any terrorist attack. It's almost mythical that the war for "cheap oil" would have the reverse effect. Talk about unintended consequences!
Let this be a lesson to the warmongers and, hopefully, the start in a new and more sensible direction for our foreign policies.
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I suspect this move by Bushco has more to do with striking while the iron is hot: Ultra-conservative factions in the U.S. & Iran had to be primed to allow negotiations, and the time was ripe for both sides, after careful manipulation of the media in this phony run-up to a war neither side wants, and the world cannot afford.
Bushco & Big Awl are getting what they want: more drilling, no royalties, higher profits. They've reached their price-point, and then some. If they let it go any further, the deleterious effects on the U.S. dollar could erase any advances in oil profits.
Meanwhile the OTHER big businesses in the U.S. were beginning to scream about energy costs and the resultant rise in all basic good & services as measured in diminished dollars, cutting THEIR profits painfully. The Oilco greedfest might be over temporarily, just to give the rest of our industries time to catch up. But it will never stop.
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Of Course, Iran working towards Nuclear weapons.
Can you blame them for it? Two national governments on their borders have been overthrown. Israel has threatened them with air strikes…
A Nuclear Weapon is a defensive weapon.
Ever notice that North Korea and Pakistan can resist the United States,,, What do they have in common?
They are both Nuclear Powers.
It is simple bigotry that Iran is not being allowed to develop atomic weapons. Why shouldn’t an Islamic hereditary theocracy be allowed to build I.C.B.M.s?
A nuclear middle-east will be a peaceful middle-east because of Mutually assured destruction. Mutually assured destruction kept the peace between the United States and the Soviet Union for decades.
Atomic bombs are defensive weapons because they make victory impossible for anyone.
Nuclear proliferation is going to happen sooner or later any way.
Technology always spreads. Gunpowder was invented by the Chinese, but now everyone has it. Even the most isolated illiterate tribesman carrys an assualt rifle when he goes to war.
In the future, every Mullah, Latin American Generalismo, and African Warlord will have the ability to hurl nuclear weapons at one another. But, they will also be threatened with the same thing coming back at them. War shall become obsolete and peace shall prevail.
Support Iran, Support Nuclear Proliferation, Support World Peace.
Posted by: Thinking Dove at July 20, 2008 01:37 PMAs Lord Cornwallis surrendered to Gen. Washington at Yorktown, it has been written that his marching band played "The World Turned Upside Down."
Have we come full circle?
Posted by: Richard at July 21, 2008 01:12 AMThinking Dove, I agree about the "mutually assured destruction" of nuclear weapons, and Iran's right to have them, since Israel, the U.S., Pakistan, and others do. I just don't believe Iran is building weapons, since I haven't seen evidence to prove that they are.
The paranoid mentality of Israel and the U.S. is simply diseased and dangerous.
Why is everyone so fixated on Big Oil? Oil companies functions just like any other U.S. corporation. They serve the stock holders, they try to increase their profits. The CEO's are geologists and engineers. They find the oil where they can, drill if they can, transport what they buy, refine it and deliver it to market. There's nothing illegal or unusual about what they do, they just do it on a larger scale because they have millions of customers who need their product. If you really hate big oil so much, pray for oil prices to go up, because when no one can afford to buy gas, they'll go bankrupt.
Meanwhile, $140 a barrel and rising is enriching our (so-called) enemies. Venezuela, Iran, Iraq, Saudi Arabia, Kuwait, Barain -- they've hit the mother lode, they're being flooded with petrodollars. Chavez is giving free oil to the poor in New Hampshire so they don't die in the freezing winter, Iraq's Maliki is handing out thousands in cash on the streets of Baghdad. Now that money is flowing into Iraq's coffers, Maliki is telling the U.S. to leave. Who needs America when your national oil wealth is practically outstripping the U.S. GNP?
The crazy thing is, while Republicans rail against Islamofascists, their leader-in-chief is (inexplicably) doing everything possible to flood them with petrodollars, while impoverishing the U.S. We're headed towards third world status. Sheesh, the whole idea was to suppress the price to keep OPEC nations in check. Impoverish them so that we can profit more. It's the same zero sum game we've always played to ensure Third World nations are poor and powerless, and remain that way.
"Why if we're so rich are we so poor?" Saddam Hussein asked of his oil producing arab cousins at that fateful meeting of the Arab League in February 1990, six months before he invaded Kuwait, which along with Saudi Arabia was overproducing and flooding the market with oil, thus artificially suppressing the price to $10 a barrel. This at the behest of Bush Sr. to help the U.S. out of a recession, while bankrupting Iraq. In order for the U.s. to maintain its wealth and power, Iraq, along with other third world nations have to remain poor. That's how we control other nations and maintain geopolitcal dominance in the Middle East.
Cheap oil is the matrix of the American Empire. It's what makes us so rich and powerful.
Why is this so hard to understand?
Posted by: Diana at July 21, 2008 03:02 PMBO is generally the retailer.
Crude oil prices affect the wholesale cost of the petrol and diesel paid for by the major retailers. The retailer passes on the price to the consumer.
Same as any other retail business.
Posted by: Joshua at July 22, 2008 12:10 PM.
Big Oil is nothing like any other retail business. Even Wal-Mart does not produce most of its' own products. Powerful as they are, Wal-Mart does not dictate US foreign or domestic policy, or foment wars, as Big Oil always has.
Cheap oil has never been a goal of any oil producer. Duh. Why would it be? Demand will obviously stretch along with any price increases. There may be a bit of a slowdown in sales at the pumps when they hit the limit, but Americans forget quickly, and once they get used to the higher prices, they'll be guzzling again.
What you're all forgetting is that they have no choice. It'll be DECADES before any large-scale alternative to oil & gas comes along, if ever. There simply isn't any infrastructure for renewables, and there may never be. This country is literally built on gas and cars and freeways and suburbs, and that ain't changing easily or soon.
Watch what happens with Obama and the almost-all Democratic Congress next year: Nothing. The price of gas will dip below $4/gal, Americans will heave a sigh of relief, forgetting that gas was only $1 or $2 just a few years ago, and the pressure will be off. Meanwhile, the oil money will be flowing into Congress and the White House. Think they can resist that? Well, if they do, there's always a nubile intern, a hostage crisis, or an assassin's bullet waiting.
Read a little history and stop quoting family anecdotes of life in the friendly neighborhood oil business. It's NOTHING like any other business in the world. Snap out of it.
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Joshua has said it more succinctly than I have, but since you still won't accept that "Big Oil" is now the retailer, I'll just cut and paste from my comment to you in a previous post to provide more detail:
http://www.democracyforcalifornia.com/blog/archives/002529.html
I feel as though I'm about to repeat myself by reasserting that "Big Oil" does not profit from $120-$150 barrels of oil, since they don't own that oil, the foreign oil companies do. They profit from the mass consumption of the refined product, which is gas.
I've been trying to figure out why an intelligent person like you isn't taking that in, no matter how many ways I try to explain it, or how often I repeat it. Now that you've mention the "Seven Sisters" I think I'm getting a clearer understanding of your vantage point. And I think it goes back to what I said earlier -- your premise is based on erroneous assumptions, or at least old facts, and this is what is skewing the larger picture.
It's true that "Big Oil" used to be the "Seven Sisters." Standard Oil (which became ExxonMobil), Royal Dutch Shell, BP, Chevron, and ConocoPhillips, and Texaco, controlled the oil & gas industry after World War II. But things have changed in the last few decades, my friend, as the "old" seven sisters became marginalized by the "new" seven sisters -- they are, Saudi Aramco, Russia's Gazprom, CNPC of China, NIOC of Iran, Venezuela's PDVSA, Brazil's Petrobras and Petronas of Malaysia.
The New Seven Sisters control about one-third of the world's oil production and reserves. By contrast, descendants of the Seven Sisters -- ExxonMobil and Chevron of the U.S. and Europe's BP and Royal Dutch Shell -- produce only about 10% of the world's oil and hold just 3% of its reserves.
This new group of oil producers, all nationalized, have become today's Titans of energy. Their production dwarfs "Big Oil" many times over. The only area where "Big Oil" still corners the market is in the production, distribution, and sale of gas, hence their big profits in that sector of the energy market.
The root of the oil fix we're currently in is that these government-owned oil companies are not willing to allow foreign investment and technology to modernize and increase production, since increased production lowers their revenues, which they use to improve the living standards of their own people. Their oil revenues are helping them transition from Third World to Second World Status, and are ever more quickly threatening the West's First World status. To offset what the U.S. government sees as an imbalance that can in the very near future seriously impinge on our economic and political world dominance, the goal of the Iraq war was to denationalize their oil after Saddam (who was trying to protect Iraq's vast oil resources from foreign exploitation), in order to gain access to oil drilling, so that more supply would lower the price of oil and bolster the U.S. economy.
Since the game has changed, the pejorative term of "Big Oil" is no longer relevant to an understanding of the current energy market. Moreover, a fixation with the "evils" of BIG BAD OIL distracts, or even blinds, us from our ability to see the big picture.
Obama, in one of his speeches, said "I don't want to just end the war in Iraq, I want to change the mindset that got us into it."
Big oil is part of that old mindset. Let it die in the funeral pyre of old-century ideas.
The U.S. has to look at the new and broadly changing world realities with clear eyes and learn how to grapple with them in a more even-handed, and cooperative way. We are going to have to deal with these new "Seven Sisters" as equals and as partners as we transition to a new energy paradigm. The old mindset is standing in the way, to our peril. Constantly harping about "Big Oil" is like wearing blinders. It keeps our minds stuck in the old century. We have to start looking at the future in a new way to keep our place in the 21st century. Not as an empire that bullies its way to the top, stomping and clubbing anyone that gets in our way, but as a partner in a world community.
I know you'll agree with that :) That's the high note that can bring the world together.
Posted by: Diana at July 25, 2008 03:52 PMIt's ALL about -cheap- oil, Cosa.
Maybe these links will help you understand my perspective, since my own words seem to be falling short.
Africa: The Next Victim in Our Quest for Cheap Oil
The new book Curse of the Black Gold shows how Nigeria may be the epicenter of the full-blown resource wars to come.
The country is a classical petro-state dependent upon one resource. The book shows how this vast wealth has been stolen: Estimates from the World Bank vary from $100 (billion) to $200 billion. It has also been wasted. The International Monetary Fund says that oil has probably not added to the standard of living of average Nigerians. This is a stunning indictment.
http://www.alternet.org/audits/89692/
Johann Hari: Our cry for cheap oil is crude and deadly
"When you cry for cheaper oil, do you know what you are really asking for? Gordon Brown has just shown us. He has unwittingly exposed the pipeline that runs from your petrol station to the poisoned people of the Niger Delta. The more you howl for cheap oil, the more they will be Shell-shocked into submission."
The Niger Delta should now be an oasis of riches. But the people live with nothing
Environmental issues in the Niger Delta
http://en.wikipedia.org/wiki/Environmental_issues_in_the_Niger_Delta
There is a new weapon-of-mass destruction in the world, against which the U.S. has no defense. Its ICBM's are as arcaine and useless against this weapon as throwing sticks at an elephant.
That weapon is oil.
And guess who has the weapon?
"THE -NEW- SEVEN SISTAHS!"
They have no intention of ending up like the Niger Delta.
It just goes to show, the energy problem is much more complex than people think.
They should teach courses on it.
Americans need to know that our quest for cheap energy is causing devastation to other people in the world.
No wonder they hate us.