United States - May 10

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Playing the Iraq Oil Card
Robert Baer, TIME Magazine
If anyone had any doubt that Iraq was a lot about oil, they shouldn’t after the recent Capitol Hill appearance by our ambassador to Baghdad, Ryan Crocker. In a closed House hearing, Crocker put the fear of god in Congress. His message: If we leave Iraq, Iraq will destabilize the Gulf, and a destabilized Gulf equals unstable oil prices.

With oil bumping pushing past $120 a barrel, you can bet you could hear a pin drop in the room. But what exactly was he talking about? Iraqi Shi’a militias invading Kuwait and Saudi Arabia, burning their oil fields, driving the price of gasoline up to $10 a gallon and us into a depression? Crocker wouldn’t elaborate on his vague warnings, preferring to leave it at a sense of dread.

There was a time when we could count on Saudi Arabia to make up a shortfall in oil when something like Iraq came up.

… Today, Saudi Arabia either refuses or can’t increase its production. The peak oil Cassandras are convinced the Saudis can’t. Saudi Arabia’s mega fields like Ghawar are depleted, they say. And we’d better get used to gasoline at $4 a gallon and up.

But Crocker wasn’t all bad news. He said that if we were to stabilize Iraq, and attract investors to the oil sector, Iraq could become the largest producer in the world, surpassing Saudi Arabia. Crocker didn’t put it in terms this baldly, but he might as well have said: We keep an army in Iraq, and we go back to the days of cheap oil.

… What Crocker didn’t talk about was Iran – and its plans for Iraq’s oil. Months before retaking Basra, the Iraqi government started talks with Iran about running an oil pipeline to Abadan, Iran’s main export terminal. Iran also has said that it will have a say in Iraq’s mega field Majnun, which may contain 30 billion barrels of oil – a rival to Saudi Arabia’s larger field. I suspect, though, if he’d been asked about Iran, Crocker would have said it is simply one more reason we should stay in Iraq, to keep Iran at bay.

Robert Baer, a former CIA field officer assigned to the Middle East, is TIME.com‘s intelligence columnist and the author of See No Evil and, most recently, the novel Blow the House Down.
(9 May 2008)

Countdown to $200 oil (4) – It’s scheduled for 1/20/09
Jerome a Paris, Daily Kos
… the next president will come to power at a time, in all likelihood, of really high oil prices. While the list of urgent priorities to be tackled is sadly already very long, I don’t think that oil (or, more generally, energy) policy can fail to be near the top of that list, especially given the fundamental, if implicit, links with the foreign policy morass of Iraq as well as the tensions with Iran, Russia and Venezuela.

In addition, the economy will be in full meltdown mode by then, and oil and other commodity price increases are a large contributing factor – whether they are seen as a consequence of global world growth, or of the loose monetary policies of the past few years, they reflect inflationary pressures that have long been visible in asset prices and made tolerable to our policy makers because they did not translate into wage increases, thanks to global corpocratic/kleptocratic neoliberal economic policies. (In turn, wage stagnation was made tolerable by turning houses into ATMs and making everybody believe they could turn into a millionaire one day).

Oil price increases are just a real life manifestation of the precept that you cannot have your cake and eat it – real wealth – for the whole economy – needs to be created, not just shuffled around or looted (that only works for a few, and only for some time). Oil, and commodities, represent real wealth, and their price increases suggest that the rest of the economy is no longer producing as much actual value as it used to – a general depreciation of money.

I’ve already said that we’re actually lucky to have a recipe that can take care of both the economy and the energy crisis at the same time:

* launch a massive plan to subsidize home energy efficiency improvements – that will help the devastated construction sector, create lots of jobs, and help reduce the energy bill massively;

* reinforce efforts to build renewable energy plants. The current support system works, and needs not be changed, but massive investment in the grid, and in working but still-too-expensive technologies like solar power should be done or supported by government. Again, this will create plenty of jobs locally, and will help move away from oil and climate-deadly coal.

* massive investment in infrastructure – in particular focusing on intercity rail and local transit networks and a large scale would also appear to provide excellent bang for the buck.
(9 May 2008)

Up, Up, and Away?
Daniel J. Weiss, Center for American Progress
Two years ago, oil sold for just $70 per barrel. If you asked energy analysts back then what circumstances would lead to oil prices hitting $125 per barrel, they would have told you that only a catastrophe could lead to such unprecedented high oil prices such as a terrorist attack in the Saudi oil fields.

Yet this week oil closed at $124 per barrel without horrific events occurring. And this price climb could just be beginning. A Goldman Sachs analyst predicts that prices of “$150-$200 per barrel seems increasingly likely over the next six to 24 months.”

What is going on here? A confluence of events, including the low value of the dollar, increased demand, instability in some oil producing states, and speculation, have created a perfect petroleum storm that continues to drive prices up, squeezing low- and middle-income families in an oil vise that grips tighter every day.

… Some progressives and environmentalists believe that there is nothing wrong with high fuel prices because they will reduce oil consumption, increase efficiency, drive innovation, and reduce global warming pollution. All of these are valuable long-term benefits of higher prices. But these benefits are unlikely to occur in the short run.

… So although high prices have had only a little effect on demand, it has led to a giant transfer of wealth from American families to big oil companies. Families have doubled their spending on gasoline from 2001 to 2007 (measured in 2001 dollars). These dollars have bloated the coffers of big oil companies.

… Analysts suggest that there are five primary factors contributing to the year-long rise in crude oil prices: the low value of the dollar, increased demand from China and India, dwindling supplies, political instability in some oil producing nations, and an assumption from speculators that prices will continue to rise.

… Some scientists also believe that higher demand and dwindling supplies could soon lead to “peak oil.” This is the point at which supply is low enough that extraction becomes too expensive.
(9 May 2008)
The Center for American Progress is a liberal think tank. In the past, it wasn’t so good on energy issues. Now at least peak oil is mentioned, however briefly. Still, the emphasis is on scapegoating Big Oil.

The following article by Robert M. Sussman (The False Lure of Lower Gas Prices) seems more aware of resource depletion. -BA

The False Lure of Lower Gas Prices
Robert M. Sussman, Center for American Progress
The debate among the three candidates for president over a “gas tax holiday” is a timely reminder of the dilemma that has haunted U.S. energy policy since the first oil crisis in the early 1970s. Is our goal lower gasoline prices? Or is it greater efficiency, fewer miles traveled, increased reliance on non-petroleum fuels, and lower emissions?

In principle, we shouldn’t have to choose between the two. If we can take a big bite out of petroleum demand through more efficient vehicles and other measures, gas consumption and prices should in theory drop, and consumer energy bills should decline. But this happy result will not happen overnight.

The transition to a low-petroleum future is a long-term undertaking that requires far-reaching changes in technology, capital investment and consumer behavior. Thus far, despite fits and starts, hopeful rhetoric, and thoughtful policy proposals, this bright future has eluded us.

In the meantime, the economic and political pressures of higher gas prices have become more and more insistent. With prices at the pump nearing $4.00 per gallon and the price of crude nearly doubling in just a year, the economic pain to families and small businesses is palpable. No politician should be insensitive to this pain, particularly at a time when unemployment is rising, foreclosures are increasing, and health care costs are climbing.

With the political stakes so high, candidates or elected officials who emphasize only long-term solutions are at risk of being perceived as uncaring and out-of-touch. But how should politicians respond to the real and immediate hardship caused by high prices?

The most effective approach is to provide financial relief to consumers who are experiencing an erosion of real income and purchasing power from high energy costs amid overall increases in the cost of living and stagnant wage gains. There are many ways to provide this relief. One is a program of income tax credits for middle- and low-income consumers, which would increase their disposable income by $500 to $1,000 a year.

In lieu of (or in addition to) these tax credits, Congress could provide a “fuel price reliefbate” of up to $450, with low-income consumers receiving the largest benefits. This mechanism, proposed last week by my CAP colleagues, could be funded through a repeal of oil industry tax breaks or a windfall-profits tax on the industry.

But as we ease the financial pain of hard-pressed Americans, we need to be careful not to hold out the hope that gas prices will decline. Driving down prices by trying to change the operation of energy markets is a strategy that has been in vogue since President Nixon imposed price controls in the 1970s. Since then, politicians of all stripes have proposed a variety of price-lowering devices, yet crude oil and retail gas prices have climbed to levels unimaginable just two years ago.
(6 May 2008)

Gas prices hit USA hard – special report
USA Today
Record high gas prices are prompting Americans to drive less for the first time in nearly three decades, squeezing family budgets and causing major shifts in driving habits, federal data and a USA TODAY/Gallup Poll show.