Page 1 of 4 Are they really oil wars? By Ismael Hossein-zadeh
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A most widely cited factor behind the recent US wars of choice is said to be
oil. "No Blood for Oil" has been a rallying cry for most of the war's
opponents. While some of these opponents argue that the war is driven by the US
desire for cheap oil, others claim 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.
Not only do the two arguments contradict each other, but each argument is also
wanting and unconvincing on its own grounds; not because the US 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. 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.
The view that recent US 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.
Not only is Peak Oil theory unscientific, unrealistic, and perhaps even
fraudulent; war and military force are no longer the necessary or appropriate
means to gain access to sources of energy - resorting to military measures can,
indeed, lead to costly, not cheap, oil. In fact, 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.
Behind the drive to war and military adventures in the Middle East lie powerful
special interests (vested in war, militarism, and geopolitical concerns of
Israel) that use oil as an issue of "national interest" - as a facade or
pretext - in order to justify military adventures to derive high dividends,
both economic and geopolitical, from war.
Has oil peaked?
The Peak Oil thesis 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.
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 anti-war forces that accept this
thesis and, therefore, "internalize responsibility for US foreign policy every
time they fill their gas tank. Thus they own the wars." [1]
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]
There is no hard evidence, however, 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.)
Peak Oil theory was originally floated around in the 1940s, arguing that world
oil reserves would be exhausted within the next two decades or so. It
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. It died down once
the price of oil fell back to pre-crises levels.
As recent geopolitical convulsions in the Middle East (especially the US 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]
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), US GDP expanded over 20% while
oil usage rose by only 9%. Before the 1973 oil shock, the ratio was about one
to one." [4]
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 20 years from less than 70% to over 80%. 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]
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 US$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]
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% 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 are investing heavily in
developing fuel cells for cars and other vehicles that would significantly
reduce gasoline consumption. [7]
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. The alleged disparity between supply and demand is said to
be due to the rapidly growing demand coming from China and India. But that
rapid growth in demand is largely offset by a number of counterbalancing
factors. These include slower growth in US demand due to its slower economic
growth, efficient energy utilization in industrially advanced countries, and
increases in oil production by members of the Organization of Petroleum
Exporting Countries, Russia, and others.
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. Contrary to the claims of the proponents of Peak Oil and champions
of war and militarism, the current oil price shocks are a direct consequence of
the destabilizing wars and geopolitical insecurity in the Middle East, not oil
shortages. These include not only the 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 US military threat against Iran, fuel
prices move up several notches.
The war also contributes to the escalation of fuel prices in indirect ways, for
example, by plunging the US ever deeper into debt and depreciating the dollar,
or by creating favorable grounds for speculation. As oil is priced largely in
US dollars, oil exporting countries ask for more dollars per barrel of oil as
the dollar loses value. 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.
As much as 60% of today's crude oil price is pure speculation driven by large
trader banks and hedge funds. It has nothing to do with the convenient myths of
Peak Oil. It has to do with control of oil and its price. 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]
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]
This has led to a steady rise in crude oil inventories over the past 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
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