Wednesday, June 18, 2008

The Iraq War, Oil Industry War Profiteering, and High Gas Prices

Greg Palast, in his article of several weeks ago, discussed the 500-pound elephant that is still in the room: Driving the Surge in Gas Prices? The Bush-McCain surge in Iraq. Even the Democrats, who have called for a "windfall profits tax" (what Greg Palast says should be called a "war profiteering tax"), seem to talk mostly about the increased demand for oil (mainly in China) as the dominant factor in the recent increase in world oil prices, and the resulting increase in gas prices at the pump.

But a huge factor over the past five years has been on the supply side as well, and the decrease in the supply in Iraq in particular. It was not until the end of 2007 that oil production in Iraq had finally returned to its early 2003, pre-war level. During the past five years, production from Iraq has been way, way down, and world prices have gone up, up, up. Had supply from Iraq been higher, prices would not have risen as fast.

Remember, the Bush neocon Wolfowitz told us that after we invaded Iraq, we would be able to pump enough oil in Iraq essentially to pay for the war and for reconstruction? Well, of course that didn't happen. That was just one of the many big lies of the Bush administration. Instead, we have been paying in many sad, painful ways for this war, and future generations in this country will pay most of the financial costs of this terrible war.

Meanwhile, Big Oil (which, together with the neocons, brought us into this war) has made out like bandits, as relative supply and demand have continued to bring oil prices up and up and up. Then of course there are the other big corporations, such as Blackwater, Halliburton/KBR, CACI and Titan, that are making a more direct killing onsite in Iraq; for dirty details on this direct war profiteering, see Robert Greenwald's documentary Iraq for Sale: The War Profiteers.

It is apparent from the right side of the chart above, from the site created by economist Steve Stoft, that there has been a dramatic increase in gas prices from 2003 to date, precisely the long years of the most recent Iraq War. Yes, China has been booming during that period, and worldwide demand for oil has increased. But supply from Iraq, which is home to the world's second largest proven oil reserves and is still controlled in fact by the United States, has been way down because of the war we started there and which we are still conducting there.

I wonder if the Democrats refuse to make this obvious connection - to talk about the elephant in the room - for fear of how it will sell politically. I do want Obama to be elected. I support him, and I assume he has great advice as to what he should say and shouldn't say. But his silence on this issue makes me wonder if our whole nation is still unable to accept the depressing realities of Big Oil, the war, and windfall profits, or "war profiteering." More likely there is a more depressing reason for the silence: the Democratic Party still lacks the courage to challenge the war industry and Big Oil. One thing is for sure, however: the Republican Party, and McCain, have completely sold out to Big Oil, and the war establishment, just like the Bush Family has done long ago. We have no choice but to go with a Democratic President if we want to have any hope of ever ending the madness.

In 2002, after Bush Junior took power, the top ten oil companies took in a nice $31 billion in profits. But then, a miracle fell from the sky. Or, more precisely, the 101st Airborne landed. Bush declared, “Bring’m on!” and, as the dogs of war chewed up the world’s second largest source of oil, crude doubled in two years to an astonishing $40 a barrel and those same oil companies saw their profits triple to $87 billion.

In response, Senators Obama and Clinton propose something wrongly called a “windfall” profits tax on oil. But oil industry profits didn’t blow in on a breeze. It is war, not wind, that fills their coffers. The beastly leap in prices is nothing but war profiteering, hiking prices to take cruel advantage of oil fields shut by bullets and blood.

I wish to hell the Democrats would call their plan what it is: A war profiteering tax. War is profitable business – if you’re an oil man. But somehow, the public pays the price, at the pump and at the funerals, and the oil companies reap the benefits.

Indeed, the recent engorgement in oil prices and profits goes right back to the Bush-McCain “surge.” The Iraq government attack on a Basra militia was really nothing more than Baghdad’s leaping into a gang war over control of Iraq’s Southern oil fields and oil-loading docks. Moqtada al-Sadr’s gangsters and the government-sponsored greedsters of SCIRI (the Supreme Council For Islamic Revolution In Iraq) are battling over an estimated $5 billion a year in oil shipment kickbacks, theft and protection fees.

The Wall Street Journal reported that the surge-backed civil warring has cut Iraq’s exports by up to a million barrels a day. And that translates to slashing OPEC excess crude capacity by nearly half.

Result: ka-BOOM in oil prices and ka-ZOOM in oil profits. For 2007, Exxon recorded the highest annual profit, $40.6 billion, of any enterprise since the building of the pyramids. And that was BEFORE the war surge and price surge to over $100 a barrel.

It’s been a good war for Exxon and friends. Since George Bush began to beat the war-drum for an invasion of Iraq, the value of Exxon’s reserves has risen – are you ready for this? – by $2 trillion.



bh0314 said...

I would be interested to see what your take is on the increase of gasoline prices since the democrats took over Congress compared to the rate of gasoline price increase from the start of the Iraq war to the last Congress took over.

Unknown said...

Well, I would ask you to give me one reason why Democratic control of Congress is relevant. The Democrats, including Clinton, share the blame for bringing us into, and keeping us in, this foolish war. Numerous analysts show a link between the instability, and resulting decreased oil production in Iraq, and the rising oil (and hence gas) prices. To understand this better, perhaps you should start with the book by economist and Nobel laureate Joseph Stiglitz, The Three-Trillion Dollar War: The True Cost of the Iraq Conflict.

Michelle Morgan-Coole said...

So if I follow your theory, shouldn't oil (and therefore gas) prices start to fall now that Iraq oil production is back to its 2003 level? Something tells me not hold my breath.

I am neither a Democrat nor a necon (not even an American) and while I don't disagree that there's likely a kernel (maybe even a large size kernel) of truth in what you say, I have to wonder about the logic that says A happened and then B happened, so A caused B ...
maybe not so much.

You mentioned China's increased demand for oil. Isn't it possible that there might be other factors at work as well? I don't have the answer - I'm just asking.

As to the rest of it, even though I didn't agree with the American invasion of Iraq, now that you're there I think you will find that whomever you elect (includig Obama) will realize that it won't be as simple as just 'cut and run'. If there weren't before, you cerainly do have national security interests at stake there now, me thinks.

And the last point, since the Dems took over Congress, despite alot of noise and smoke, not much has happened in the line of real change, has it? Ah, politics, ain't it grand ...

Oh yeah, speaking of gas prices, personally, I tend to think that Americans complain too much. It could always be worse you know. The price of gas here today works out to roughly $5.80 a gallon.

Unknown said...

Iraq should be producing much more, and if it were, the price would be lower. If they had produced more (as they should have) in the past five years, the price would have been lower in the past several years, and it would be lower now. That was my point, and there are several economic analysts who have made this basic point before.

Whether Iraq can now again produce nearly three million barrels a day is not the question, if we have more demand now, and Iraq should be producing six million barrels per day, as earlier predicted would be possible by this time. Yes, there are many other factors at work. Of course. And saber rattling toward Iran is also one.

Once again, I agree that the Democrats in Congress have not done their job in opposing the insanity of this war. They should have blocked, or stopped, the invasion of Iraq, and they should now be pushing for us to get out of Iraq. It is conventional wisdom that we should not "cut and run." But why the hell not? What strategic interests do we have there besides the oil? Why is it that nobody requires the Bush administration to explain why we have to stay, after all the lies about why they went in there in the first place. We're not questioning the liars, and demanding explanations; instead we're still taking the Pentagon and the White House at their word.

I am not personally that concerned with the high price of gas, but I think it offers the Democrats, and those who want to throw out the corrupt Republican regime, a good political opportunity. I do think higher oil prices that lead to higher gas prices may be good for Americans if higher prices finally force us, consumers and businesses alike, to change our consumption patterns.

But I think we need to be concerned with the real facts behind why we went into Iraq, why we are still there, and how American oil found itself beneath Iraqi soil, to quote an antiwar slogan. That slogan seems not to be so silly now, given recent news of no-bid contracts for Exxon-Mobil and other Big Oil players.

As someone said, we (meaning Exxon and company) may not have gone into Iraq for the oil, but we sure ain't leaving without it.

Michelle Morgan-Coole said...

My concern with the US making a quit exit from Iraq is two-fold: first, I think that a quick exit now (which doesn't necessarily make a lot of sense at the moment given that things are actually starting to look a little better) might well show what some would perceive as a "weakness" among the American people to follow through ... I would just hate to see any more attacks arise out of that.

The second thing is the potential bloodshed among the "locals", which although it was never a "nice" place to live, I think the American invasion made things worse in Iraq in many ways and you now have a moral obligation to finish what you started and not just pull out and leave things in a worse way.

It's not that I think the US is all lilly-white in this or anything like that. Frankly, I am glad that we didn't send soldiers to Iraq because, like I said, I disagree with the initial invasion. But now that you are there, I think you have to look realistically at the reality on the ground.

Just my thoughts.

I would be curious to know your thoughts on the situation in Afghanistan. But as you said, this has 'Nothing to do with Family Law' so I will understand if you don't want to continue the conversation. Interesting blog BTW. I check it out periodically.

Unknown said...

MMC, thanks for your thoughtful comments and for reading my blog.

I agree we have made things worse in many ways and we have an obligation, as occupiers, not to continue to do so.

US occupation was never, and is not now, primarily about the welfare of the Iraqis. That is one reason the Iraqis have not wanted us there.

Instead of moving toward immediate elections as General Garner wanted us to do, Bush fired Garner and delayed the creation of the semblance of democracy while solidifying political and economic control, working to privatize state owned industry and to guarantee longterm American dominance of Iraqi oil. Meanwhile it's no wonder Iraqi victims chose sides and fought among themselves while also fighting us as the occupiers.

Now the occupiers want permanent bases while they give no-bid contracts to their Big Oil Buddies. I say enough.
Leave Iraq, and its oil, to the Iraqis. The US presence should be replaced by an international peacekeeping force not directly answerable to Big Oil in the US.

But I fully expect the public will continue to follow the script written by the Pentagon and Big Oil experts such as Cheney and Rumsfeld, who have a long history of being wrong in several administrations, wrong on war and foreign policy issues.

Those of us kooks who opposed the war before it was popular to do so (I was one of the Massachusetts attorneys whose open letter to Bush opposing the invasion was published in the Boston Globe the first day of the invasion) I will go back to my area of expertise, while the "experts" on war continue to carry it out in our name.