The Oil Weapon and the Fight for Hegemony of the Middle East

Saudi Arabia’s efforts to get OPEC to raise production has foundered on opposition, mostly from those on the other side of the fight for hegemony of the Middle East and the world, starting with Iran. The vote came down to Saudi Arabia, Qatar, Kuwait, and UAE against Iran, Iraq (!), Libya, Algeria, Angola, Ecuador, and Venezuela.

But as that breakout makes clear, this is as much about making things difficult for the US as anything else.

Analysts said that while there were opposing views on whether markets required more crude, the backdrop to the disagreement revolved around political tensions in the Middle East and North Africa and differences over how to respond to consumer demands.

“One factor is a diverging market view. Another is politics,” said analyst Samuel Ciszuk at IHS. “At times of heated politics/ideological debate, Saudi struggled to dominate as much as it could have given its size vis-a-vis others in OPEC.

Gulf Arab producer Qatar has given support to Libyan rebels fighting the government of Libya’s Muammar Gaddafi. And Saudi Arabia has angered Shi’ite Iran by using force to support the Sunni Bahraini government in suppressing a Shi’ite rebellion.

Easily OPEC’s biggest producer, Saudi Arabia normally gets its way.

But this time those in OPEC politically opposed to the United States — led by Iran and Venezuela — found enough support to block Riyadh.

“Saudi is the cartel member most interested in earning political points’ with consuming countries, and maintaining its image as a reliable supplier of last resort,” said Katherine Spector at CIBC World Markets.

“Venezuela and Iran likely feel they have less to gain politically by increasing quotas as a symbolic gesture.”

The IEA responded by begging Saudi Arabia to increase supply anyway.

“Of course what really matters is actual supply, which should move in line with seasonally rising demand, and we urge key producers to respond accordingly,” the IEA said.

It also once again made oblique reference to the only real tool it has at its disposal to battle high prices — the 1.5 billion barrels of government held oil inventories that it coordinates on behalf of its 28 members, a reserve meant to be used only in the event of an emergency outage.

“The IEA stands ready to work with its member governments and others to help ensure that markets are well supplied,” the agency said in an email.

And Ed Markey was the first member of what will surely be many members of Congress advocating to tap the Strategic Reserve.

“OPEC, led by Iran and Venezuela, has snubbed its nose at the United States and the rest of the Western nations addicted to OPEC oil,” said Markey, the top member of the minority party on the Natural Resources Committee in the House of Representatives, said in a release.

“This is a clear sign that America must engage in a long-term plan to break our ties to this OPEC-controlled market, and prepare to deploy America’s oil reserves now to head off an economic collapse from continued high gas(oline) prices.”

Well, if there was any doubts Congress would find the Libyan war legal yesterday, those doubts will be dispersed today. And fracking? Expect more of it in your local drinking water.

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  1. Scarecrow says:

    And what is Markeys long run plan? If you want to relieve the macro effects, then recapture the profits attributable to above market prices. Rebate them to the economy, or spend them on non oil alternatives and rebates for highly fuel efficient autos. Why draw down reserves that can only have a higher value later, only to suppress prices?

  2. 1der says:

    I smell GS and the greedy street. Here’s an opposing view on those market requirements:

    “Ten years ago oil speculators controlled about 30 percent of the oil futures market,” Sanders explained. “Today Wall Street speculators control over 80 percent of that market.”

    “Their sole function in life is to speculate to drive oil prices up and to make money,” he added.
    http://www.rawstory.com/rawreplay/2011/06/sanders-oil-speculators-behind-high-gas-prices/

    Wanting it all. They screwed us out of the equity we have in our homes, now it’s every-greedy-fucker-for-themselves trying to get the consumers change hiding under the sofa cushions before we buy the kids a sno-ball. Deflation.

    • PeasantParty says:

      You said that so well. I couldn’t have said it any better.

      Over half of America is no longer a consumer other than the very basics needed to survive. The speculators and greedy corps have actually priced themselves out of the market and just don’t want to admit it. As a matter of fact, they are slowly finding out that India and China are not purchasing enough of the goods they are manufacturing there. They have lost the American market in many sectors and will continue to lose even the oil while more and more become jobless.

  3. earlofhuntingdon says:

    Funny how the only “cartel” American news organizations mention is the one run by Arabic and other oil-producing countries. They never seem to mention the oil companies themselves or other significant price drivers.

    Oil may be over $100/barrel. What portion of that is owing to market speculation, what portion to oil company operations and profits, what portion owing to production restrictions agreed by OPEC? As for the latter, what part is managing a scarce resource, what part pique at the warmaking preoccupation of the US?

  4. MadDog says:

    OT – The ACLU released some documents today:

    Government Releases OPR Report and Other Documents

    June 8, 2011

    On December 4, 2009, the ACLU filed a FOIA request for a report written by the DOJ’s Office of Professional Responsibility examining whether the authors of the OLC’s torture memos had violated their professional responsibilities in drafting the memos. The ACLU filed suit to enforce the request on January 22, 2010, and the government released the report a few weeks later, on February 19, 2010.

    Five months later, on July 19, 2010, the government released to the ACLU slightly less redacted versions of seven pages in the report. The government’s letter explaining those declassifications, as well as the report (updated with those 7 pages), are available below…

    And:

    Detainee Deaths FOIA—CIA documents released March 11, 2011

    June 8, 2011

    On October 16, 2009, the ACLU filed a FOIA request for documents relating to the deaths of detainees in U.S. custody. The ACLU filed suit to enforce the request on September 15, 2010, and on March 11, 2010, the CIA released five heavily redacted documents in response to the request. You can view them below…

    • sailmaker says:

      On my computer it looks like the DOJ has switched from black highlighter to whiteout on the March 11th document.

      On my machine these look so redacted as to be useless until Marcy comes up with a timeline (or points to an already existing one) that can be cross referenced to the routing slips on the March 11th document.

        • tambershall says:

          I don’t even think it matters.
          They will all have some sort of immunity OR the DOJ will just not investigate and/or prosecute.

        • MadDog says:

          Ok, this is a new torture technique that I didn’t know about. From page 78 of the updated OPR report (289 page PDF):

          A contemporaneous report to the FBI General Counsel by [redacted 10-12 words] listed these JTF techniques but included an additional Category I technique (“gagging with gauze”) [redacted half paragraph] report also stated that he believed some of the Category II and III techniques might consitute violations of the torture statue. [redacted 10-12 words]

          I’m guessing here, but I don’t think the folks who used this authorized Category I technique just taped a piece of gauze across the detainee’s mouth.

          Instead, I’m guessing the folks who used this authorized Category I technique took a roll of gauze and wrapped it entirely around the detainee’s head thereby shutting off sight, muffling hearing, and making it almost impossible to actually breathe.

          The detainee would look like the Mummy and I’m guessing the folks who did this to a detainee would have thought it was funny.

          • MadDog says:

            The next part that was updated in the OPR report (289 page PDF) is on page 116-117 and has to do with when Goldsmith was read into the NSA warrantless surveillance program and then read the OLC opinions (November 2003).

            This update identifies that within the DOJ at that time, only Philbin, Ashcroft and James Baker were briefed into the NSA warrantless surveillance program.

          • bobschacht says:

            Instead, I’m guessing the folks who used this authorized Category I technique took a roll of gauze and wrapped it entirely around the detainee’s head thereby shutting off sight, muffling hearing, and making it almost impossible to actually breathe.

            But this does not comport with “gagging.” I think they just took a wad of gauze and stuffed it down the detainee’s throat with their fingers.

            Think of the murders in the secret Gitmo camp. Weren’t some of those bodies found with gauze or some other cloth stuffed down their throats? Those were incompetent attempts to use this method (“If the detainee dies, then you’ve done it wrong.”)

            Bob in AZ

    • emptywheel says:

      Interesting points I see:

      1) It confirms that Ted Olson was not briefed into the illegal wiretap program when he argued In Re Sealed Case in 2002.

      2) It shows that Goldsmith got back in the loop of torture again after the Principals Meeting on July 2 at which he was not present.

      3) It shows Carl Levin asked for the CIA IG report just before they destroyed the torture tapes.

      • MadDog says:

        And the update on page 129 of the OPR report (289 page PDF) shows that just 10 days before Goldsmith left the OLC:

        On July 7, 2004, Goldsmith notified CIA GC Muller by letter that the Department approved the use of the nine techniques [redacted – 3-4 words] described in the Classified Bybee Memo, and the twenty-four methods then approved for use by the Defense Department in the Secretary of Defense’s April 15, 2003 memorandum. Goldsmith noted in his letter that the approval was subject to the specific assumptions, limitations, and safeguards described in those documents.

  5. nomolos says:

    “OPEC, led by Iran and Venezuela, has snubbed its nose at the United States and the rest of the Western nations addicted to OPEC oil,” said Markey, the top member of the minority party on the Natural Resources Committee in the House of Representatives, said in a release.

    Maybe, just maybe if the almighty USACorp would stop being so damn belligerent with Venezuela and the other SA countries that have had the temerity to eschew capitalism as the “only way” they woud get more cooperation from the SA oil producers. It would seem that oil producing countries being run by vicious dictators friendly to the USACorp are the only friends left.

  6. AitchD says:

    Isn’t Canada the largest source of US fuel oil, Saudi Arabia second, and Mexico third? Canada and Mexico aren’t part of OPEC. Why can’t they increase production, or are they already at capacity?

    • croghan27 says:

      Canada, basically the tar sands, is going flat out to provide oil to the US – the companies who’s motto is “Securing Canada’s oil future” ships it’s total product south. There is a major plan afoot to ship the unrefined synthetic crude to the Gulf States for refining, rather than keeping the hi-tech (as in well paying) jobs at home. The refining capacity is just not built, yet.

      There is somewhere around $40 billion in projects underway or on the books.

  7. workingclass says:

    Who will be the hegemon in the ME? Will it be Imperial America or will it be Iran?

    My money is on Iran. The Empire is in it’s last throws. Americans will learn to live within their means and within their borders. It’s called peace and it’s not all bad.

    It’s a shame however that the Democrats and Republicans sold us out to the Robber Barons who gutted our economy and destroyed our manufacturing base. Now we is all po-folk.

  8. tambershall says:

    For the Record:
    http://theliepolitic.com/2008/12/saudi-oil-minister-exposes-opec-lie-on-60-minutes-segment/
    Saudi Oil Minister Exposes OPEC Lie On 60 Minutes Segment
    Dec 7th, 2008

    “Ali Al-Naimi, the Saudi oil minister and de facto head of the OPEC oil cartel said, when asked directly what the cost of extracting the oil in Saudi Arabia is, “It is probably less than $2.00 to produce a barrel”, but then 60 minutes stated Saudi Arabia needed $55 a barrel to support the cost of running their country. Not to run the business, to run the country! This clearly demonstrates what we have been saying. They are a one product nation. If oil dies, their economy dies.”
    “New fields that have been in development for years are coming online in early 2009. They will produce nearly 2 million barrels a day. This is more oil in these two fields alone than the entire daily production of Indonesia and Qatar combined.”
    “The manager of the project, in an interview with Lesley Stahl, stated that the new reserves would last the world 50 years at 2 million barrels a day. The price of oil isn’t just plummeting because of the slow down in the US. It is plummeting because the supply that is about to come online is huge!
    Ali Al-Naimi admitted in the interview they have 260 billion barrels currently accessible with the potential to nearly double that amount!! Read that again, please.”
    “What kind of evil and greed would have concealed this information, supporting a rise in oil to $147 a barrel, and tipping the world’s economy into a recession, if not a depression?? Had they informed the world of this supply last year, oil would never have broken $100 a barrel!! They, along with billionaire hedge funds and other lying speculators, manipulated us all. And 60 minutes is evidence of the lie!
    Could this be a conspiracy with the oil companies? Could it be a conspiracy with large commodity traders? Certainly many of the insiders had to know!! This project has been ongoing for years. The projected output was well known to these experts. They just didn’t tell us!”

  9. independentvoternews says:

    I am absolutely amazed that stuff like this is reported as “NEWS”… and “reporters” buy the charade hook line and sinker.

    Let’s get this straight. There was NO debate among oil cartel members… the decisions were ALL made behind closed doors and included American and foreign mulitnational oil companies… and Wall Street Criminal speculators and criminal bankers. All the events described in this article are a show… a big fake show.

    The oil criminals are intent on LOOTING the world while they can. They want as much money and as quickly as they can get it. I guarantee you that there was unanamous agreement to continue to loot the planet.

    Our government is completely aware of all of this… and because they are representatives of this group of crimials… they play along with the charade and continue the show.

    As usual the only way to ever really change any of this is to vote out our entire elected government. Unfortunately too many “progressives” are still loyal to 1/2 of our corrupt government… the Democrats… and are still have the braindead, convoluted thinking of voting for the lesser of two evils… as if that will ever change anything… which it wont. Of course all that does is reward evil… and continue the corruption.

    The time has come to take a stand progressives…

  10. Cynthia says:

    Even though it’s true that Bennie and the Fed putting their pedal to the metal, both in terms of quantitative easing and dropping interest rates to near zero, didn’t alone cause food and fuel prices to shoot up, they did set this ball in motion. Ben Bernanke is the invisible man behind the eight ball in terms of rising commodity prices. And he’s probably also the invisible man behind the eight ball in terms of social unrest in the Middle East. When the cost of food eats up roughly 80% of your income, as is the case for most people living in the Middle East, and when food prices around the world have increased by roughly 30% over the past year or so, you too would be all fired up and ready to kick some dictator butt!

    So it shouldn’t take someone with a PhD in economics to realize that the recent parabolic rise in oil prices, including most other commodity prices, is largely due to the folks at the Fed pumping out reams and reams of freshly minted dollars to the TBTF banksters, enabling them to go on a drunken binge speculating on oil and other commodities. So why is the White House and why is the mainstream press trying to mislead us into believing that the oil companies and the oil speculators are mostly to blame for this?

    All I can figure is that our bankster-owned White House and our bankster-owned press are still trying to hide that fact that our banksters are still too far into debt to function without taxpayer-backed handouts from the Fed. What the oil speculators and the oil companies are doing is merely symptomatic of a diseased banking system created by Bennie and the Fed…

    • speakingupnow says:

      Everything can be traced back to the Fed Chairman’s actions of flooding the market with liquidity at almost zero percent interest. As you said, this has resulted in a drunken binge by speculators on commodities, especially oil as has been stated by Senator Sanders and even Goldman Sachs! I just think this discussion about oil production by OPEC is to try and take the conversation away from the real culprits of high oil prices and once again imply that it is all about supply/demand (demand is actually down in the U.S). The President, after all, wants to justify his “drill, baby, drill” philosophy.

      • PierceNichols says:

        I think commodities prices are going to crater before the 2012 election, because the Chinese construction bubble will pop. I have regular conversations with folks in China or who go to China regularly, and the accounts of fin de siecle madness they give me are getting more and more intense.

        When the crash comes, it’s going to crash the price of essentially every commodity. China is currently chewing through over 40% of the world’s production of steel, concrete, copper, and host of related commodities. Their oil consumption is rising quickly and fueling the run-up in prices. When they’re economy goes over the cliff, their demand for all of these things is going to plummet… and take the world prices with it.

        All this rot about the Chinese overtaking us economically reminds me of the talk back in the early 90s about how Japan was going to overtake the US.

        Prediction: the Chinese crash is going to get Obama re-elected. We might even learn something useful, and get enough breathing room from it to fix our most serious problems.

  11. potsdam602 says:

    Why aren’t Canada and Mexico involved in these discussions? The US gets approx 80% of oil from North America. And, oil consumption is down all around. The all male gaggle of drama queens in robes from the Middle East can fork off as far as I am concerned. Why aren’t the Wall Street bricks sitting at the meeting? Bernanke and Geithner should be at each headd of the table.

  12. potsdam602 says:

    The oil from OPEC is only important for oil for the Pentagon which is only concerned about oil for the military. Take the oil for the military (only necessary for the military–not US) out of the equation and there is no need for mid east oil or wars. Again, expensive cyclical BS from the military to give themselves expensive glory and job security. Getting. Very. Old.

    • PierceNichols says:

      Interestingly, the military is investing very heavily in getting away from petroleum and towards algal biofuels. They’re starting with jet fuel… but all their gear runs on jet fuel these days.

  13. phred says:

    I’m not surprised that Markey took the lead on this at all. As a member of the Dem leadership he knows that they need to get gas prices down asap. He also knows that banks “own” Congress, so that meaningful reform that would curtail speculation is a non-starter. That leaves you one place to go, increase production, even though we already know from the last spike in oil prices that increasing production is pointless (there are no buyers) when the problem is speculation.

    Markey is, as he always has been, a complete tool for the elite. Alas, I have been in the minority of voters in his district who have tried repeatedly and unsuccessfully to vote his worthless kabuki-painted face out of office.

  14. PierceNichols says:

    What should really catch your attention is that the countries that voted for the increase in production are the ones with the least to fall back on once the oil age ends. That’s incredibly important, because the oil age will be ending, one way or another, in the not too terribly distant future. Once that happens, every country that voted for the production increases is completely and irreversibly screwed. None of them have anything else. The countries that voted against have other resources and other industries, and will survive the end of the oil age with not particularly more pain than any of the rest of us.

    And the thing that can bring that about faster than anything else is persistently high and/or unstable oil prices. The Saudis fear high and/or unstable oil prices, because they mean their rich lifestyle is not long for this world.