The Soaring Price of Oil and Terrorism
By Victor Comras
A few days ago, when oil was just $115.00 per barrel, Iranian President Mahmoud Ahmadinejad declared that the price of oil was still “unrealistically low,” and that “Oil … needs to discover its real value." And, within a few days the market seemed to comply driving the price up to $120.00 per barrel! The effects of this spiraling oil price on the US and world economy has been staggering, and the impact will continue to be intensified as the price of oil works its way through the international economic system. Al Qaeda and other terrorist groups could never had imagined that events they set off at the turn of the millennium could ever have caused such oil dislocation and demand around the world.
Against this background it is with great trepidation that I put my pen to addressing the link between the price of oil and terrorism. The factors involved in the pricing of oil are both extremely obscure and enormously complex, and few people can truly claim to understand them. I certainly am not one of them. But, broken down into its most basic components it apparently involves a mixture of the following factors: OPEC Oligarchy practices, intensified international competition for secure access to essential commodities, increased reliance on middlemen for oil lifting, profit-motive purchasing policies and upstream practices of major oil companies, the falling dollar, and intense speculative upward bidding of oil futures on the world’s merchantile exchanges. Taken together these factors have driven up the spot price of oil and pumped tens (dare I say hundreds) of billions of dollars into the coffers of countries known to either encourage or tolerate state and/or private funding for terrorism. One may well conclude, as I am beginning to believe, that mercantile speculation, greed, and corporate profit taking are as responsible as OPEC, if not more so, for the windfall profits that help fund terrorism.
Iran's Oil Minister Gholam-Hossein Nozari had a different answer. Speaking before the representatives of some 60 exporting and consumer countries at the bi-annual International Energy Forum, he blamed the spike in oil prices on “war and sanctions,” alluding to the measures the US had adopted toward both Iran and Iraq. But, this simplistic explanation doesn’t match reality. In fact, today’s oil prices don’t seem to have any direct relationship to the actual oil market conditions, demand and consumption. The fact is that oil output has generally kept pace with actual consumption rates, and bookings for oil transport ships and tankers are actually declining showing a slackening in demand. Speculation based on future worst case assumptions seems to be pressing the price of the oil, not past events. This includes anything from a projected heavy hurricane season to recent attacks on Nigeria’s Shell oil pipelines. But, the supply effect of such events in the past have been shown to be quite minimal and of short duration. Any reason to push oil prices higher seems to suffice for the oil traders.
Another explanation for today’s high oil prices is the declining value of the dollar. So why isn’t it that Europe is getting a bargain when it comes to buying oil? The fact is that the price of oil in Europe has also hit the roof, causing European leaders to consider extraordinary measures, such as drawing on their emergency oil reserves. The EU commission has just decided to launch its own “ public consultation” on whether changes should be made to the management of emergency oil stocks held by EU members in the face of these skyrocketing prices.
Today’s oil prices are considerably higher than anyone could have predicted a year or so ago. Look at what the International Energy Agency projected in their annual World Energy Outlook for 2007. They predicted that oil prices would now be the range of $45 to $56 per barrel, and would only reach $95.00 per barrel sometimes in 2030. Boy, are we ahead of that curve!. Remember, that in 2000, OPEC oil was selling for under $28.00 a barrel and oil consumption somewhere around 76 million barrels per day. Current estimates put oil consumption at around 84 million barrels, about the same as current production levels.
So, in actual fact, it is the oil speculators that appear to be responsible, more than any other group, for the high prices of oil, and the revenue boasts that may help support terrorism. Perhaps its time for governments to get a handle on such speculation by intervening in the oil market, as necessary to stabilize the price of oil. Just a thought!
Read more ...
A few days ago, when oil was just $115.00 per barrel, Iranian President Mahmoud Ahmadinejad declared that the price of oil was still “unrealistically low,” and that “Oil … needs to discover its real value." And, within a few days the market seemed to comply driving the price up to $120.00 per barrel! The effects of this spiraling oil price on the US and world economy has been staggering, and the impact will continue to be intensified as the price of oil works its way through the international economic system. Al Qaeda and other terrorist groups could never had imagined that events they set off at the turn of the millennium could ever have caused such oil dislocation and demand around the world.
Against this background it is with great trepidation that I put my pen to addressing the link between the price of oil and terrorism. The factors involved in the pricing of oil are both extremely obscure and enormously complex, and few people can truly claim to understand them. I certainly am not one of them. But, broken down into its most basic components it apparently involves a mixture of the following factors: OPEC Oligarchy practices, intensified international competition for secure access to essential commodities, increased reliance on middlemen for oil lifting, profit-motive purchasing policies and upstream practices of major oil companies, the falling dollar, and intense speculative upward bidding of oil futures on the world’s merchantile exchanges. Taken together these factors have driven up the spot price of oil and pumped tens (dare I say hundreds) of billions of dollars into the coffers of countries known to either encourage or tolerate state and/or private funding for terrorism. One may well conclude, as I am beginning to believe, that mercantile speculation, greed, and corporate profit taking are as responsible as OPEC, if not more so, for the windfall profits that help fund terrorism.
Iran's Oil Minister Gholam-Hossein Nozari had a different answer. Speaking before the representatives of some 60 exporting and consumer countries at the bi-annual International Energy Forum, he blamed the spike in oil prices on “war and sanctions,” alluding to the measures the US had adopted toward both Iran and Iraq. But, this simplistic explanation doesn’t match reality. In fact, today’s oil prices don’t seem to have any direct relationship to the actual oil market conditions, demand and consumption. The fact is that oil output has generally kept pace with actual consumption rates, and bookings for oil transport ships and tankers are actually declining showing a slackening in demand. Speculation based on future worst case assumptions seems to be pressing the price of the oil, not past events. This includes anything from a projected heavy hurricane season to recent attacks on Nigeria’s Shell oil pipelines. But, the supply effect of such events in the past have been shown to be quite minimal and of short duration. Any reason to push oil prices higher seems to suffice for the oil traders.
Another explanation for today’s high oil prices is the declining value of the dollar. So why isn’t it that Europe is getting a bargain when it comes to buying oil? The fact is that the price of oil in Europe has also hit the roof, causing European leaders to consider extraordinary measures, such as drawing on their emergency oil reserves. The EU commission has just decided to launch its own “ public consultation” on whether changes should be made to the management of emergency oil stocks held by EU members in the face of these skyrocketing prices.
Today’s oil prices are considerably higher than anyone could have predicted a year or so ago. Look at what the International Energy Agency projected in their annual World Energy Outlook for 2007. They predicted that oil prices would now be the range of $45 to $56 per barrel, and would only reach $95.00 per barrel sometimes in 2030. Boy, are we ahead of that curve!. Remember, that in 2000, OPEC oil was selling for under $28.00 a barrel and oil consumption somewhere around 76 million barrels per day. Current estimates put oil consumption at around 84 million barrels, about the same as current production levels.
So, in actual fact, it is the oil speculators that appear to be responsible, more than any other group, for the high prices of oil, and the revenue boasts that may help support terrorism. Perhaps its time for governments to get a handle on such speculation by intervening in the oil market, as necessary to stabilize the price of oil. Just a thought!
Read more ...
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