Who really threatens world oil supplies?
U.S. Army troops guard the site of an oil pipeline expansion in Iraq, March 20, 2005, during the U.S. occupation. | Sasa Kralj / AP

The U.S. response to the Mideast crisis is not about protecting the world’s oil supply. It is to tighten control of the world’s oil supply, to protect profits for the U.S. oil monopolies, and to further control by U.S. global financial, military, and other corporations. This comes at the expense of the world’s working people, including those of the United States; it also comes at the expense of humanity’s future.

On Sept. 14, drone and missile strikes knocked out major oil processing facilities in Saudi Arabia. The Houthi rebels in Yemen claimed responsibility.

President Donald Trump, however, immediately blamed Iran, and got U.S. intelligence and some European allies to go along. Most of the mainstream media have uncritically repeated those claims, rarely pointing to the U.S. record of selecting and even manufacturing evidence to fit desired policy goals.

A healthy skepticism is called for. We should ask, what are the interests of the U.S. military, the administration, the foreign policy establishment, and the corporations they represent?

The easy answer is OIL! That is the answer to almost every question in Mideast policy. But that answer begs for more probing.

The Sept. 14 attack knocked out production of 5.7 million barrels per day—about 5% of the total world supply. Secretary of State Mike Pompeo tweeted in response that this was an “unprecedented attack on the world’s energy supply.” He is implying that the global oil supply is so critical that anyone or any country that reduces the global oil supply is an international outlaw and deserves punishment.

Let’s take Pompeo at his word. In the past decade, who has been most responsible for reducing the global supply of oil? That would be the United States of America.

U.S. economic and political warfare against Venezuela has reduced that country’s exports by well over a million barrels per day, with the biggest drop in the past year as Trump tightened the noose around that country. And since Trump broke the nuclear deal with Iran (the JCPA—Joint Comprehensive Plan of Action), he has effectively cut that country’s exports by over 2 million barrels per day, down to almost nothing. Earlier U.S. action helped knock out about a million barrels per day from Libya, although about 3/4 of that has recovered.

And, of course, the Trump administration’s actions to increase oil consumption in the U.S., including gutting EPA standards and promoting less efficient cars, leave less available for the global supply.

So, if the world, and particularly the American people, are to be stirred up over a threat to the global energy supply, it seems we have to look toward the culprits in Washington first.

It’s all about control

But U.S. policy is not about guaranteeing that the world has access to the oil it needs. U.S. policy is about controlling the world’s oil supply and manipulating the price. Not for the benefit of you and me, but on behalf of the U.S. oil monopolies and U.S. global corporations.

Let’s look at price. Over the past decade, world oil prices have fluctuated greatly. A barrel of oil cost above $105 from 2011-2014 but dropped below $40 by early 2016. It has been between $53 and $58 for the last four months.

But while the price of oil fluctuates widely, the cost of production at a given location is steady. If it costs $30 last week for an oil company to pump and transport a barrel of oil from a well in West Texas, it will cost $30 this week. But if market price for that oil goes from $55 to $65, the company’s profit goes up from $25 to $35—a 40% increase!

So U.S. oil companies have a direct interest, not in cheap oil, but in expensive oil. When the Iraq war and Mideast turmoil sent the price of oil over $100, it was great for U.S. oil companies. It was also great for the Saudi royal family. And it was great for the arms merchants and other U.S. companies whose sales to the cash-rich Saudis exploded.

It was too much of a good thing. With the price of oil over $100 per barrel at the beginning of this decade and the emergence of new fracking and shale extraction technologies, oil production boomed here, making the U.S. the world’s leading oil producer. Much of this new production was financed with high levels of debt. To repay the debt, companies need to get a high price for their oil. And the best way to do that is to cut production—preferably from countries that the U.S. ruling circles don’t like.

But U.S. oil policy is not only about restricting supply to raise prices. It is also, even primarily, about control.

With control of the world trade in oil, the U.S. can exact tribute from most oil-producing countries. This can take the form of direct ownership of their oil, or profits from lucrative contracts for technology, management, financing, shipping, etc. In addition, U.S. companies profit from supplying for military equipment and mercenaries to keep the regime in power and for luxury goods for the ruling elite.

Venezuela dared to take control of its own oil resources, using the profits for health care, education, and housing for the working class. Worse, they traded oil to Cuba, Haiti, and other countries of the Caribbean basin in exchange for goods and services produced by those countries. Not only was Venezuela escaping from U.S. corporate control, but it was also helping other countries to do so! These are the real reasons for U.S. sanctions against that country.

Since World War II, oil has been one of the main levers of U.S. foreign policy—not in the interests of the people of this country, but for the profits of the transnational companies and Wall Street investors. Using the Sept. 14 attack in Saudi Arabia as an excuse to further heighten tensions with Iran has no benefit for working people in the U.S. and runs the risk of a war even more damaging and destabilizing than the Iraq invasion of 2003. Only Wall Street vultures and arms dealers might benefit.

What about the climate crisis?

Trump’s escalation of sanctions and threats of war against Iran came as people around the world, led by youth, engaged in massive demonstrations to demand action to limit climate change. Rapidly phasing out the use of oil and other fossil fuels is essential to the future of humanity. But U.S. sanctions that reduce the oil exports of selected countries are not part of the solution: they make the problem worse!

A main goal of U.S. policy is to give U.S. oil companies effective control of (and profit from) global oil production. And while the oil companies are able to profit from sanctions and other disruptions by raising prices, their main strategy has been maintaining their power by increasing the world’s dependence on their product – oil.

It is necessary for every oil-producing country, including Venezuela, Iran, Saudi Arabia, Russia, and the USA, to rapidly transition to a non-oil economy. This will be difficult in any case and will require high levels of international cooperation. But it will be impossible as long as the likes of Exxon control the world’s oil, and U.S. policy is dictated by Exxon’s profits, rather than the interests of the people and the planet.


CONTRIBUTOR

Art Perlo
Art Perlo

Art Perlo lives in New Haven, Conn., where he is active in labor and community struggles. He does research and writing on economic issues in Connecticut, including work with the Coaltion to End Child Poverty in Connecticut which helped pave the way for the movement for progressive tax reform in the state. He writes on national economic issues for the People's World, and is a member of the CPUSA Economic Commission.

 

 

 

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