Opinion Editorials, July  2008

Secrets, Lies, and Big Oil

By Will Hardiker

ccun.org, July 27, 2008

There exists a common perception that the world is running out of oil and as a consequence the price of petroleum will continue to rise inexorably. Various theories are put forward to explain the skyrocketing cost of petroleum. The Organization of Oil Exporting Countries (OPEC) is generally blamed for insufficient production which has led to a shortage in supply as well as demands from large emerging economies such as China and India. Geologist M. King Hubbert's 1956 theory of "Peak Oil", that the culmination in world production of oil and gas would occur within half a century, (i.e. 2006) is also resurrected though today's figures debunk it completely.

Middle Eastern oil reserves alone are estimated to total close to 7.5 billion barrels without consideration of reserves that may yet be discovered. If worldwide reserves estimated at 1.189 trillion barrels are taken into consideration, then clearly any perception of a global shortage is a false perception. OPEC President Shakib Khalil (in French Chakib Khelil) recently confirmed that there was also no shortage of oil on world markets: "As far as fundamentals are concerned, I think we have equilibrium between supply and demand….In fact right now we have more supply than demand" (1). There is also no shortage of oil on global markets. It was recently reported by 'Business Week' that worldwide production has risen 2.5% and demand by only 2% in the first quarter of 2008. These increases are expected to increase to 3.3% and 4.1% in the second and third quarter.

Though very little research is required to realize these facts, it is entirely understandable that such false perceptions are widespread. The reason being that quite simply this is precisely what the big oil companies want their customers to believe. After all, some explanation is required to justify the astronomical profits they are realizing at the expense of a world addicted to oil.

The administration of George Bush and his oil industry sponsors nurture such false perceptions for they deflect attention from what is an ugly truth; that the cost of oil has nothing to do with supply and demand but rather with war and geo-political instability in The Middle East. Media staged "talks" with Saudi Arabia ostensibly to push for greater oil production, are simply charades calculated to deflect attention from the real reasons for expensive oil.

So if oil is so plentiful why is it so expensive? The answer of course is Iraq. A quick skim over the history of Iraq's oil wealth will shed much light on recent US and British foreign policy. The story begins in 1928 when the world's major oil companies faced a crisis; falling oil prices due to over supply. Standard Oil (now Exxon), Anglo-Persian Oil (now British Petroleum), and their European counterparts met together in Brussels to address the problem and reverse their fortunes. They simply drew a red line around Iraq and signed an agreement declaring it a "No Drill" zone. All of Iraq's oil would remain in Iraq, underground and untapped.

The Brussels agreement held for some three decades until US President Eisenhower imposed quota's on Iraq's output in 1959. In the latter part of the century Saudi Arabia locked in a suppression policy and OPEC imposed quotas on Iraq's exports equal to Iran's.

In 1991 President Bush Senior, together with the British government continued the policy of containment (coined 'Desert Storm') dropping thousands of tone of explosives on Iraq. The United Nations also came up with its oil embargo (no legal exports) and further terrorized the population by imposing the inhumane "Oil for Food" programme which limited Iraq to 2 million barrels. Not much oil for world markets and a criminal deprivation of basic humanitarian aid to Iraqi's.

So how much oil does Iraq have? According to the US Energy Information Agency, Iraq's untapped reserves are estimated to be somewhere around 112 billion barrels. The industries respected 'Petroleum Economist Magazine' estimates 200 billion barrels and the Centre of Global Energy Studies, 300 billion –a number giving Iraq greater untapped reserves than the worlds largest producer of crude, Saudi Arabia. Clearly the prospect of so much oil somehow making its way onto world markets is an unthinkable scenario and unfortunately for Iraqi's, Saddam at this time was "not playing ball".

The solution to the problem was of course US government/military intervention. Oil industry players were quick off the mark. They ensured that their sponsored candidate, George Bush junior was able to steal the next Presidential election (through ballot box fraud with serious portents to 2008) in order that Saddam be put back in his place. Ironically, the tragic events of September 11, 2001 gave the Bush Administration that opportunity on a plate and equally unfortunately the so-called hard-liners or neo-conservatives got a little carried away (or megalomaniac if you like) and decided to declare war on a country.

Contrary to popular anti-war perception, the Bush team did not go to war to steal Iraq's oil. The comprehensively discredited justifications for what was a bloody pre-emptive attack on a sovereign State (i.e. threats from non-existent "weapons of mass destruction" and the moral urgency to remove former ally, now "Brutal Dictator" Saddam Hussein) were of course nothing but a smoke screen. In truth they went to war in order to ensure Iraq's oil stayed in Iraq, loyally serving the interests of US and UK oil giants.

Two years into the invasion those same signatories to the Brussels agreement sat back and watched as their profits tripled to some $87 billion. The motivation for the Bush/McCain surge also served the same purpose. The surge backed civil warring resulted in huge interruptions to Iraq's exports. The Wall Street Journal reported at the time that Iraq's exports were reduced by up to a million barrels a day.

In 2007, Exxon recorded the highest profit ($40.6 billion) of any enterprise…ever. This incredible feat was achieved before the price of a barrel rose above $100. Should anyone still have any doubts as to the real agenda of the Bush Administration in Iraq, they might keep in mind the following. Since the illegal, pre-emptive war on Iraq, the value of Exxon's reserves have risen by $2 trillion!

The George W Bush Presidency marked the beginning of what might aptly be called a "Golden Age" for big oil. The Administrations subsequent foreign policy debacles in The Middle East now begin to make some kind of sordid sense keeping in mind that Iraq's oil reserves could potentially fulfil market demand for decades to come. The events of September 11, 2001 unfortunately did nothing to awaken US Middle East foreign policy makers. Rather they responded to a crime with a war and since no specific country was involved the declared war was a "war on terrorism", whoever and wherever it might be. Such an abstract, almost metaphysical concept of war might best be described an oil mans wet dream. However the old adage "war is good for business" holds firm, particularly for the oil and armaments industry and vast fortunes have of course been realized. Artificial rises in the price of oil due to war and political chaos in the Middle East hand over to the oil industry huge windfalls; profits that can be seen as nothing less than war profiteering.

The bottom line is that oil, and as a consequence petrol prices have nothing to do with false perceptions of worldwide shortages in either reserves or supply and governments are all but impotent in the face of angry protest. Rather, oil prices are determined by the big oil companies unethical and immoral profiteering from war and geo-political instability in the Middle East. George W Bush, in the service of the oil industry has willingly sent thousands of young Americans to their graves. When he leaves office in a few months his record will show that he served his masters well. One might even say 'above and beyond the call of duty'.

(1) "No oil shortage in markets," Reuters (24 June 2008), http://www.financialexpress.com