Latest Epidemic: Gas Pain Syndrome!

by Philip Greenspan

June 7, 2004   


Posters such as "NO BLOOD FOR OIL" and "HOW DID US OIL GET UNDER IRAQI SAND?" have appeared at many anti-war rallies.

Many people, whether or not they approved the war in Iraq, have felt that a major reason -- and attraction -- for the war had to do with crude oil. Numerous commentators and pundits have echoed that feeling.

A successful US campaign would provide treasures -- primarily from the sizeable oil reserves -- that would likely pay for the war itself; and, it was thought, low petroleum prices in the U.S. would be assured.

The assets of the oil industry -- the oil ministry, the fields, etc. -- were protected as soon as they were captured by the American military while much of the rest of country was looted and trashed.

Why then are gasoline prices rising continually to new highs? What are the causes?

Browsing through the Internet will reward the searcher with many possible answers. Some may have validity and perhaps there is some truth to all. A combination probably reveals why.

Three basic possibilities exist, none necessarily excluding the others: an excess of demand; a shortage of supply; and/or unconscionable business practices to limit the supply. Let's review them.

Increasing Demand

Record sales of the gas-guzzling SUVs have helped push consumption up almost five percent over last year. China has become the second largest oil consuming country (after the good old US of A) with a ten percent increase in 2003 and eight percent more predicted for this year. Increases in the rest of the world should mean consumption of an additional two million barrels per day -- the greatest annual increase since 1988.

SUVs and China's increased consumption can be attributed to political failures of successive US administrations. The federal government has allowed greedy corporations to override the intent of environmental regulations to cut harmful emissions. Had stricter controls forced increased engine efficiency, fuel consumption would have been reduced. Furthermore, it ignores the abominable human rights violations of the supposedly communist government of China so that corporate America can pour billions of dollars there to obtain the lowest worldwide slave-labor wages. Their resulting "slaving prosperity" allows China to industrialize and drink up gas.

Decreasing Supplies

Iraq's oil production has declined over the years from a peak of about 3.5 million barrels per day (mbpd) in 1979. Its war with Iran dropped it to a maximum of 2.9 mbpd just prior to Gulf War I. The subsequent horrendous sanctions drastically cut production further and drastically limited technical maintenance of the oil infrastructure. But by 1998 it was raised to a little more than 2 mbpd. The current hostile situation has caused a further drop to 1.5 mbpd below last year's 2.2 mbpd. A substantial increase in production appears quite questionable in the short term.

Two attacks within a month on Saudi Arabia, the largest supplier, add additional worries. Can that formerly reliable swing producer maintain current production, let alone increase it?

Political problems in Venezuela -- a major US supplier -- and in other areas as well (Africa), are undermining confidence in maintaining reliable supplies.

The foreign policy machinations that the U.S. employed caused or exacerbated these supply problems. The Iraqi government was cunningly sucked into all its wars -- with Iran, Kuwait, U.S. (Gulf War I and II) -- each of which caused erosion of its oil production. The attempted coup and strikes against the Chavez government, supported -- if not instigated -- by the CIA, resulted in a diminution of Venezuela's petroleum output for quite some time.

The US support of the abominable Israeli government's policies against the Palestinians and the US military's atrocious actions against the Iraqis have so enraged the people in the Middle East that terrorist sabotage against foreign oil interests may be expected. With the extra precautions that have been adopted to foil new terrorist attacks, the terrorists will be searching for and hitting soft targets. Oil and gas facilities -- pipelines, refineries, tankers and oil fields -- of foreign interests are readily available on their home territory. A successful hit can result in a tremendous cut in the oil supply and boost prices accordingly.

Business Practices

The permanent Senate subcommittee on investigations uncovered many unconscionable industry practices during its investigations on gas prices in April 2002. Companies would use various tactics to create shortages (eliminating competition, limiting refining capacity, maintaining low inventories...) causing prices and profits to rise.

Here again, the US government failed to protect the public. Its laissez-faire attitude toward big business has allowed the oil industry to consolidate both vertically and horizontally, leaving a few mega-corps without effective competition.

The Outlook

On Tuesday, June 1, world oil prices rose to new highs. Crude prices in New York ended above $42 a barrel. If these ominous conditions continue, $50 or more may soon be reached, entailing a possible major economic recession -- and without any doubt further destabilizing the entire world, especially the underclass world (all the poor countries, the Third, Fourth and Fifth Worlds) .

If you're troubled you may want to open a window and shout I'm mad as hell and I'm not going to take it anymore! -- It won't help much but it might make you feel better... Or you may come to terms with the fact that we all need to change our daily lives, act accordingly, and vote for people into elective offices whose values reflect our own.

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(All links valid as of June 1, 2004.)

Latest al-Qa'ida attack puts Saudi oil industry in question

Oil prices seen moving higher on latest Saudi attack

Higher oil prices should help the region's economies

Terror's Next Target

How Gas Companies Manipulate Prices

Gas prices continue up, up and away!

Oil prices surge due to higher demand, insecure supply: paper

In Iraqi War Scenario, Oil Is Key Issue

Iraq's Postwar Oil Opportunities

N.Y. Crude Oil May Rise as Saudi Attack Raises Supply Concern

Table 1.1a World Crude Oil Production (Including Lease Condensate), 1990-Present

Iraq on Swans

America the 'beautiful' on Swans


Philip Greenspan on Swans (with bio).

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Published June 7, 2004
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