I had
understood (never verified, probably impossible to verify) that in the midst of
the Vietnam war with US casualties mounting, Kissinger et. al., came up with the
idea that mideast oil countries should fight communism with their own armies and
their own armaments. They could finance such military buildup with
increased oil revenues. Hence the US looked the other way and OPEC was
born. And petro dollars, etc.
Does
anybody else have an opinion or view on this theory?
I
think that if the US wanted to destroy OPEC it could in open and covert
ways. It must fit with US policy or it would be
undermined.
arthur
-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]
Sent: Monday, October 20, 2003 9:17 AM
To: [EMAIL PROTECTED]
Subject: Re: [Futurework] The first oil shockKeith,Although I sympathize with your loss [and my guess, the loss of subscribers and future subscribers], quadrupling the price of oil may have been a good thing because it slowed oil's depletion and forced people to become more conserving. We probably need to quadruple it again to get rid of SUVs and the like. Also, as the Shah-en-Shaheh Iran said, oil is much too valuable to be burned up in engines and to be used for fertilizer. It's use in pharmaceuticals and the like is what it should be saved for.BillOn Sun, 19 Oct 2003 17:43:50 +0100 Keith Hudson <[EMAIL PROTECTED]> writes:In 1973, the price of oil went up four times. In doing so it meant that mail costs and paper costs -- both being energy-intensive -- also went up four times within weeks. In doing so, it meant that I had to liquidate an environmental magazine I had founded three years previously. I had worked it up from a small newsletter and, at the time it ceased, it had a subscription of 4,000 and was read in 14 countries. It was probably within 12 months of becoming viable. I had been subsidising it (Towards Survival) to some extent out of my day-job salary, but I couldn't afford to carry the extra costs.
The irony was that, in my magazine, I and fellow contributors had been warning that, sooner or later, the oil reserves of the world would be exhausted. However, there was still plenty of oil in 1973, and the price hike was not a result of a shortage of supplies but was a political decision by the Organisation of Petroleum Exporting Countries (OPEC -- mainly consisting of the Arab countries of the Middle East) as a weapon protesting against the Yom Kippur war in October of that year and intended to hurt the developed countries, particularly America.
A recent article in the Financial Times reminds me of the shock that OPEC delivered to the West 30 years ago. However, it didn't succeed in bringing America and other countries to their knees and it is most unlikely that it will ever be tried again as a political weapon. However, when oil prices start going up because of real shortages, then the effects will be much more serious -- and permanent.
Keith Hudson
<<<<
OIL WEAPON THAT ROCKED WORLD'S ECONOMY
Carola Hoyos
On October 17 1973, Henry Kissinger, then US secretary of state, told his staff after a meeting with four Arab foreign ministers that he saw little chance the Arabs would use the oil weapon against the US.
It was the height of the Yom Kippur war and unbeknown to Mr Kissinger, nine oil ministers were gathered in Kuwait City to discuss slashing oil supplies to the US and the Netherlands to punish them for supporting Israel.
The agreement they hammered out 30 years ago today -- to cut by 5per cent a month the oil they supplied to unfriendly states and, in the case of the US, progressively reduce oil supplies until they came to a complete halt -- was arguably the most far-reaching and jarring in the history of oil.
But since then the tables have turned. Saudi Arabia, the world's largest oil exporter, has put the oil gun back in its holster and transformed itself into the world's central bank for oil.
"They probably understood that they shot themselves in the foot, and that is why the oil weapon has never been used again," says Claude Mandil, executive director of the International Energy Agency (IEA), the organisation founded -- at Mr Kissinger's suggestion -- in reaction to the oil shocks.
The IEA brought the world's largest oil consumers together attempting to counter the power of OPEC to blackmail industrialised countries. For years the two bodies were sworn enemies, unwilling even to speak to each other.
Through the policies of the consuming countries and OPEC, the advancement of technology and increasing awareness of of the environmental cost of energy, the importance of oil in consuming countries' GDP has dropped by 25 percentage points, says Mr Mandil. Oil makes up 35 per cent, not 45 per cent of the energy mix, and OPEC's share of the market has dropped from 53 per cent in 1973 to 38 per cent today.
"The confrontation has been drained out of the oil market. The disagreement now is whether prices should be in the high 20s or low 20s," said Daniel Yergin, author of The Prize: the epic quest for oil, money and power.
"Consuming countries are now in a much better position than in 1973 to react to an oil crisis," Mr Mandil says. Meanwhile, many OPEC countries are still wrestling with large debts and economies that depend on oil and have not diversified.
This accounts in part for Saudi Arabia's decision in the 1980s to forgo billions of dollars in revenue by pumping below its capacity, thereby carving out a unique role as strategic supplier of oil to the west. This decision forms the basis of Riyadh's relationship with the US, which remains intact, despite strains since September 11 2001.
"This whole notion of energy security got turned on its head in the 1990s, to a large extent due to the Saudis' promise. Now it is embargoing the producing countries," says Roger Diwan, analyst at PFC Energy, the Washington-based consulting firm, referring to Iran, Libya and until recently Iraq.
The most public evidence of that change -- that the US-Saudi relationship has, at least for now, survived the US drive to diversify its oil supplies away from the Middle East and conservative administration officials' arguments that the Saudis were America's enemy rather than friend -- came at the beginning of the US invasion of Iraq. Despite pressure from US lawmakers, the US and its fellow IEA members let Saudi Arabia demonstrate that the oil weapon was truly buried. Instead of the US and IEA releasing oil they had hoarded in reaction to the 1973 oil shocks, they formed a "gentleman's agreement" with Saudi Arabia. This allowed Riyadh to make up for the almost certain shortfall of Iraq's 2.5m barrels per day of production, which would have squeezed an oil market already tightened by political unrest in Venezuela and Nigeria and the lowest commercial storage levels in the US for decades.
"The consuming countries decided that it was useful to let the producing countries act first. But for that we needed to make sure that they would do so," says Mr Mandil, who orchestrated the agreement with Ali Naimi, Saudi Arabia's oil minister and several other OPEC ministers.
It is a courtesy that may reduce the tensions between consumer and producer, but it has also allowed OPEC to keep prices at close to $30 a barrel - a level with which consumers are not totally comfortable, analysts say.
But high prices are not the only thing Mr Mandil admits he worries about. The next oil shock could come in the form of a price war.
If Saudi Arabia chose to snatch back the market share it has lost in the past 30 years by flooding the market, prices could plummet to single digits, wiping out many oil companies' expensive projects and undercutting the producers the US and other consumers are trying to diversify to.
"Every bust has the seeds of the next boom and every boom carries the seeds of the next bust," says Mr Yergin.
Financial Times; Oct 17, 2003
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Keith Hudson, Bath, England, <www.evolutionary-economics.org>, <www.handlo.com>, <www.property-portraits.co.uk>
