J'Accuse: Oil and Iraq
The Iraqi cabinet regarding the ownership of oil rights in Iraq has approved a new law. This law will open the oil fields of Iraq to private investment like no country in the Middle East has seen since the British Government held Iranian oil under BP. Liz Arnone, co-chair of the United States Green Party has said, ""The Iraqi hydrocarbon law, if approved by Iraqi lawmakers, will provide lucrative profits for U.S. energy corporations by placing up to 2/3 of Iraqi oil resources under foreign control."1 On the other hand Christopher Hitchens has praised the new law. Focusing on the distributive elements of the law Hitchens says, "The new law proposes a federalized control over oil and gas, with a distribution of revenue that would be in proportion to the population of each province."2 Whether it is a good law or an imperialist mandate for American energy firms is at issue here.
Here are the questions to be answered. Will the new law help American energy firms? How will this effect prices at the pump? Was the invasion exclusively over oil?
In a speech to the country George Bush called on the Iraqi government to pass the new oil law. He said, "To give every Iraqi citizen a stake in the country's economy, Iraq will pass legislation to share oil revenues among all Iraqis."3 But, he conveniently did not mention that the law would also give the Iraqi government the ability to create production-sharing agreements with foreign oil companies. These PSAs would be thirty-year agreements where the foreign oil companies would have exploratory and production rights unheard of in the region.
The region’s major oil/natural gas producers all own their own oil rights and contract out to foreign oil companies the tasks of drilling, refining, etc. According to what we know of neoliberal economic theory, this should actually make the country a slow growth country if the government owned the oil and controlled its production. Yet Iran, the most democratic of Middle Eastern countries has the greatest equality in income distribution. Meanwhile, Qatar and Kuwait have per capita GDPs that are off the charts for countries of such low industrialization.
So does this mean that these oil rich countries are doing something wrong by controlling their oil wealth? It would seem not, where the problem seems to lie is in the institutions. Saudi Arabia is a country with a petroeconomy that is the exclusive purview of the House of Saud – one giant fief. Here inequality is rampant and its per capita GDP is low. Meanwhile, the slightly more democratic Qatar and Kuwait have increased GDP per capita; and, the most democratic Iran has increased equality to that almost of the United States.4
So, this law will not assist a democracy in increasing equality. Instead it merely enriches the firms that pay for these PSAs. Meanwhile, less wealth will be transferred to the people as an army of 144,000 troops representing a government of neoliberal pro-big oil props up a weak democratic regime in Iraq. Of course it will help American oil firms; but, not exclusively, I’m sure BP will be helped as well.
How will this affect how much I pay at the pump? It won’t affect me at all as my Trek hybrid street bike takes no gasoline, but for many it is important. But one would have to say it would not affect the price your paying. In a perfectly competitive market where there are innumerable producers of a product, the more supply there is the cheaper it will be. Therefore, opening up Iraq’s oil fields would lower the price of gas.
However, the petroleum market is not a perfectly competitive market. Production is controlled by a cartel of nations and distribution is controlled by an oligopoly of firms. OPEC, the cartel, was eleven nations in 2002: Algeria, Indonesia, Iran, Iraq, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. In 2002, these 11 countries accounted for 78 percent of the world’s petroleum production.5 And, since 2002, Angola has joined.
The distribution is then controlled by an oligopoly of firms. An oligopoly is a market system whereby a small number of firms control the industry and compete with each other with advertising or creating brand loyalty rather than price. A perfect example of oligopoly is the soft drink market. There is Coke and there is Pepsi. Other firms either produce a lower quality soda or a high quality niche soda. (While Moxie and RC have the brand loyalty of those who don’t want to throw up once they’ve taken a sip). But, for most of the soda products out there one must give Coke or Pepsi money to drink high-fructose corn syrup.
The same goes for gas. What used to be known as the Seven Sisters are now the Four Horseman of the Apocalypse. ExxonMobil, Chevron, Shell and BP control the distribution of petroleum with other firms and small stations merely competing for the crumbs. In such an environment does one think any of these firms or countries not in OPEC would try to slow their gravy train by charging less for gasoline? No, what would happen is that those firms in Iraq would merely have to give fewer profits to the home government.
Now finally, was this war over oil? General Smedley Butler once complained that it was a shame that The United states had to invade Nicaragua to protect loans given by Wall Street Bankers. While the words of one dissident Marine General from the first half of the century is not enough to declare that invasions of Nicaragua and Haiti were wrong and it does not necessarily translate to today’s issues. It does open the door to questions of why interventions happen.
Let’s skip forward to the Project for the New American Century (PNAC). In a 1998 letter to President Clinton, this organization expressed its displeasure regarding Saddam Hussein. They listed three reasons why the United States should overthrow Hussein. His weapons of mass destruction threatened
1) "the safety of American troops in the region;"
2) "our friends and allies like Israel and the moderate Arab states;" and
3) "a significant portion of the world’s supply of oil will all be put at hazard"6
Now I am sure President Clinton and probably every President since George Washington got crazy letters about who to invade and why on a daily basis. What makes the PNAC letter so telling is who the PNAC are. The PNAC’s "Statement of Principles" from 1997 was signed by Jeb Bush, Dick Cheney, Steve Forbes, Dan Quayle, I. Lewis Libby, Donald Rumsfeld, and Paul Wolfowitz.7 The letter to President Clinton was further signed by Richard Armitage, Richard Perle and John Bolton.8
So, this organization that in 1998 thought the US should invade Iraq in order to, among other things, protect oil was made of some heavy hitters. In the Bush administration they are: the President’s brother and kingmaker in Florida, the Vice-President, a crazy rich man with a flat-tax, a former Vice-President, the Vice-President’s Chief of Staff turned fall guy turned jailbird, the Secretary of Defense, the Assistant Secretary of Defense, The Assistant Secretary of State, Chairman of the Defense Policy Board Advisory Committee and the US Ambassador to the United Nations. I quote C&C Music Factory: "Things That Make You Go Hmmm." (That’s a group you haven’t thought of in years.) So it was not about oil? Yet, oil is the reason seven members of the administration and the President’s brother gave for invading Iraq five years before it actually happened. Hmmm.
Now let’s move on to the National Energy Policy Development Group’s March 2001. This was the super secret group run by vice President Dick Cheney. The Vice President refused to give a detailed account who were the advisors of the group or what was said in any meeting. The group came to among other conclusions that the United States should pressure oil-producing companies "to open up areas of their energy sectors to foreign investment."9
So, let’s see, the United Sates is run by members of the PNAC who support the overthrow of Saddam Hussein to defend oil. One of those members then runs an organization that says the US should try to get countries to allow foreign investment. Who does this really help? The average American pays more for gas then when this whole thing started. The Iraqis have to live in fear of national compatriots. Well, the energy companies must enjoy the possibility of sweetheart deals.
But why would the administration want to give the oil companies sweetheart deals?
Dick Cheney was head of Haliburton which gave him million dollars of stock options which he has yet to exercise, meaning he could make tens of millions as Haliburton’s stock continues to rise.
Former White House Chief of Staff Andrew Card was head of the American Automobile Manufactures Association – the lobbying group for the big three automakers.
Former Secretary of Commerce Donald Evans was the CEO of oil and energy company Tom Brown, Inc. up until he took office.
Former Secretary of Housing and Urban Development Mel Martinez was the Orlando Utilities Commission.
Former Secretary of the Treasury John W. Snow was head of CSX, the railway company that sold its lines to the Carlyle Group, which has employed both President Bush and former President Bush, an energy finance group with links to the House of Saud and the bin Laden family. This sale immediately proceeded his appointment.
Secretary of State Condoleezza Rice served on the board of Chevron, even having a oil tanker named after her.
Former Deputy Secretary of State Richard Armitage left the office and became a director for the ConnocoPhilips oil company.
President George W. Bush was partner or CEO of Arbusto Energy, Spectrum 7, and, later, Harken Energy.
I am sure that not one of these people will make any money from the fact that oil companies would be able to have direct dealings with Iraq. Hmmm.
______________________
1. http://www.gp.org/press/pr_2007_03_05.shtml
2. http://www.slate.com/id/2161629/
3. http://www.whitehouse.gov/news/releases/2007/01/20070110-7.html
4. United Nations Development Program. 2006. United Nations Human Development Report 2006, Beyond Scarcity: Power, Scarcity and the Global Water Crisis. (New York: UN). Table 14, pp. 332-334 and Table 15 335-338.
5. "Organization of Petroleum Exporting Countries." 2003. Penguin Dictionary of Economics. 7th edition. (New York: Penguin). 287.
6. Project for the New American Century. January 26, 1998. "Letter to President Clinton on Iraq." http://www.newamericancentury.org/iraqclintonletter.htm
7. http://www.newamericancentury.org/statementofprinciples.htm
8. http://www.newamericancentury.org/iraqclintonletter.htm
9. National Energy Policy Development Group. 2001. Reliable, Affordable and Environmentally Sound Energy for America’s Future. P. 8-18.
Here are the questions to be answered. Will the new law help American energy firms? How will this effect prices at the pump? Was the invasion exclusively over oil?
In a speech to the country George Bush called on the Iraqi government to pass the new oil law. He said, "To give every Iraqi citizen a stake in the country's economy, Iraq will pass legislation to share oil revenues among all Iraqis."3 But, he conveniently did not mention that the law would also give the Iraqi government the ability to create production-sharing agreements with foreign oil companies. These PSAs would be thirty-year agreements where the foreign oil companies would have exploratory and production rights unheard of in the region.
The region’s major oil/natural gas producers all own their own oil rights and contract out to foreign oil companies the tasks of drilling, refining, etc. According to what we know of neoliberal economic theory, this should actually make the country a slow growth country if the government owned the oil and controlled its production. Yet Iran, the most democratic of Middle Eastern countries has the greatest equality in income distribution. Meanwhile, Qatar and Kuwait have per capita GDPs that are off the charts for countries of such low industrialization.
So does this mean that these oil rich countries are doing something wrong by controlling their oil wealth? It would seem not, where the problem seems to lie is in the institutions. Saudi Arabia is a country with a petroeconomy that is the exclusive purview of the House of Saud – one giant fief. Here inequality is rampant and its per capita GDP is low. Meanwhile, the slightly more democratic Qatar and Kuwait have increased GDP per capita; and, the most democratic Iran has increased equality to that almost of the United States.4
So, this law will not assist a democracy in increasing equality. Instead it merely enriches the firms that pay for these PSAs. Meanwhile, less wealth will be transferred to the people as an army of 144,000 troops representing a government of neoliberal pro-big oil props up a weak democratic regime in Iraq. Of course it will help American oil firms; but, not exclusively, I’m sure BP will be helped as well.
How will this affect how much I pay at the pump? It won’t affect me at all as my Trek hybrid street bike takes no gasoline, but for many it is important. But one would have to say it would not affect the price your paying. In a perfectly competitive market where there are innumerable producers of a product, the more supply there is the cheaper it will be. Therefore, opening up Iraq’s oil fields would lower the price of gas.
However, the petroleum market is not a perfectly competitive market. Production is controlled by a cartel of nations and distribution is controlled by an oligopoly of firms. OPEC, the cartel, was eleven nations in 2002: Algeria, Indonesia, Iran, Iraq, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. In 2002, these 11 countries accounted for 78 percent of the world’s petroleum production.5 And, since 2002, Angola has joined.
The distribution is then controlled by an oligopoly of firms. An oligopoly is a market system whereby a small number of firms control the industry and compete with each other with advertising or creating brand loyalty rather than price. A perfect example of oligopoly is the soft drink market. There is Coke and there is Pepsi. Other firms either produce a lower quality soda or a high quality niche soda. (While Moxie and RC have the brand loyalty of those who don’t want to throw up once they’ve taken a sip). But, for most of the soda products out there one must give Coke or Pepsi money to drink high-fructose corn syrup.
The same goes for gas. What used to be known as the Seven Sisters are now the Four Horseman of the Apocalypse. ExxonMobil, Chevron, Shell and BP control the distribution of petroleum with other firms and small stations merely competing for the crumbs. In such an environment does one think any of these firms or countries not in OPEC would try to slow their gravy train by charging less for gasoline? No, what would happen is that those firms in Iraq would merely have to give fewer profits to the home government.
Now finally, was this war over oil? General Smedley Butler once complained that it was a shame that The United states had to invade Nicaragua to protect loans given by Wall Street Bankers. While the words of one dissident Marine General from the first half of the century is not enough to declare that invasions of Nicaragua and Haiti were wrong and it does not necessarily translate to today’s issues. It does open the door to questions of why interventions happen.
Let’s skip forward to the Project for the New American Century (PNAC). In a 1998 letter to President Clinton, this organization expressed its displeasure regarding Saddam Hussein. They listed three reasons why the United States should overthrow Hussein. His weapons of mass destruction threatened
1) "the safety of American troops in the region;"
2) "our friends and allies like Israel and the moderate Arab states;" and
3) "a significant portion of the world’s supply of oil will all be put at hazard"6
Now I am sure President Clinton and probably every President since George Washington got crazy letters about who to invade and why on a daily basis. What makes the PNAC letter so telling is who the PNAC are. The PNAC’s "Statement of Principles" from 1997 was signed by Jeb Bush, Dick Cheney, Steve Forbes, Dan Quayle, I. Lewis Libby, Donald Rumsfeld, and Paul Wolfowitz.7 The letter to President Clinton was further signed by Richard Armitage, Richard Perle and John Bolton.8
So, this organization that in 1998 thought the US should invade Iraq in order to, among other things, protect oil was made of some heavy hitters. In the Bush administration they are: the President’s brother and kingmaker in Florida, the Vice-President, a crazy rich man with a flat-tax, a former Vice-President, the Vice-President’s Chief of Staff turned fall guy turned jailbird, the Secretary of Defense, the Assistant Secretary of Defense, The Assistant Secretary of State, Chairman of the Defense Policy Board Advisory Committee and the US Ambassador to the United Nations. I quote C&C Music Factory: "Things That Make You Go Hmmm." (That’s a group you haven’t thought of in years.) So it was not about oil? Yet, oil is the reason seven members of the administration and the President’s brother gave for invading Iraq five years before it actually happened. Hmmm.
Now let’s move on to the National Energy Policy Development Group’s March 2001. This was the super secret group run by vice President Dick Cheney. The Vice President refused to give a detailed account who were the advisors of the group or what was said in any meeting. The group came to among other conclusions that the United States should pressure oil-producing companies "to open up areas of their energy sectors to foreign investment."9
So, let’s see, the United Sates is run by members of the PNAC who support the overthrow of Saddam Hussein to defend oil. One of those members then runs an organization that says the US should try to get countries to allow foreign investment. Who does this really help? The average American pays more for gas then when this whole thing started. The Iraqis have to live in fear of national compatriots. Well, the energy companies must enjoy the possibility of sweetheart deals.
But why would the administration want to give the oil companies sweetheart deals?
Dick Cheney was head of Haliburton which gave him million dollars of stock options which he has yet to exercise, meaning he could make tens of millions as Haliburton’s stock continues to rise.
Former White House Chief of Staff Andrew Card was head of the American Automobile Manufactures Association – the lobbying group for the big three automakers.
Former Secretary of Commerce Donald Evans was the CEO of oil and energy company Tom Brown, Inc. up until he took office.
Former Secretary of Housing and Urban Development Mel Martinez was the Orlando Utilities Commission.
Former Secretary of the Treasury John W. Snow was head of CSX, the railway company that sold its lines to the Carlyle Group, which has employed both President Bush and former President Bush, an energy finance group with links to the House of Saud and the bin Laden family. This sale immediately proceeded his appointment.
Secretary of State Condoleezza Rice served on the board of Chevron, even having a oil tanker named after her.
Former Deputy Secretary of State Richard Armitage left the office and became a director for the ConnocoPhilips oil company.
President George W. Bush was partner or CEO of Arbusto Energy, Spectrum 7, and, later, Harken Energy.
I am sure that not one of these people will make any money from the fact that oil companies would be able to have direct dealings with Iraq. Hmmm.
______________________
1. http://www.gp.org/press/pr_2007_03_05.shtml
2. http://www.slate.com/id/2161629/
3. http://www.whitehouse.gov/news/releases/2007/01/20070110-7.html
4. United Nations Development Program. 2006. United Nations Human Development Report 2006, Beyond Scarcity: Power, Scarcity and the Global Water Crisis. (New York: UN). Table 14, pp. 332-334 and Table 15 335-338.
5. "Organization of Petroleum Exporting Countries." 2003. Penguin Dictionary of Economics. 7th edition. (New York: Penguin). 287.
6. Project for the New American Century. January 26, 1998. "Letter to President Clinton on Iraq." http://www.newamericancentury.org/iraqclintonletter.htm
7. http://www.newamericancentury.org/statementofprinciples.htm
8. http://www.newamericancentury.org/iraqclintonletter.htm
9. National Energy Policy Development Group. 2001. Reliable, Affordable and Environmentally Sound Energy for America’s Future. P. 8-18.
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