Politics, The Economy

Tom Dispatch has two very important articles about oil:

  1. Saudi promises to cut oil prices (as reported by Bob Woodward) should be taken with a grain of salt:

Note the complete exclusion of U.S. energy companies in all prominent new Saudi energy ventures; this is hardly consistent with an ostensible pledge to flood the market with oil around October to guarantee the election of a President viewed to be fundamentally hostile to Islamic interests by the vast majority of OPEC nations. It is equally salient that the officially stated OPEC price range of $22-$28 per barrel has largely been ignored by virtually all OPEC members (judging from the extent to which they are producing above agreed quota numbers) — not only because higher prices can be sustained in spite of this widespread cheating” on quotas, but also because of growing opposition among its members to American policies in the Middle East.

…Given that the Saudis and the Russians are two of the world’s largest oil suppliers, the effects of their de facto alliance cannot be overestimated.

  1. The administration’s stated goals of removing oil subsidies for Iraqis could worsen the already volatile situation:

Many of the ethnic and religious tensions — among Kurds in the north, Shia Arabs in the South and Sunni Arabs in between — have traditionally revolved around the control of major oilfields. But there is one thing all Iraqis can agree on — the country’s oil belongs to Iraqis. Last August, when shortages drove up gas prices in Basra, the until-then peaceful Shia population took to the streets in a violent, deadly, weeklong protest against Coalition troops. Removing the subsidy for good would certainly incite far worse.

This has already led to disagreements between CPA planners and the Iraqis in its hand-picked Governing Council over when and how to remove the subsidy.

And there is reason to worry, look at Haiti and Nigeria, for instance:

In 2003, the IMF urged Haiti to eliminate its petroleum subsidies and to allow the price of gas to be determined by market forces. Because the IMF promised a $50 million loan as a reward, the small, coup-prone country obliged. The price of gasoline and cooking fuel promptly soared 130 %, causing nationwide strikes and violent protests against the government of Bertrand Aristide in which a student was killed.

Similarly, riots threatened to interfere with President Bush’s trip to Nigeria last July after the oil-rich West African country dropped its gasoline subsidy in an attempt to woo the IMF back into a lending relationship with it. Indonesia? The same pattern occurred there in 1998: Fuel prices surged 71 % after subsidies were cut at the behest of the IMF, triggering street riots, which left two dead.

Of course, the war in Iraq is about freedom,” not oil, so none of this really matters.