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Tuesday, December 13, 2016
Caleb Maupin -- The Oil Siege Is Over, “The Cartel” Looks East
13.12.2016 Author: Caleb Maupin
Region: USA in the World
Oil prices are back up and rising. The low oil spell that started in 2014 has concluded. This sudden rally, like its sudden decline, is not accidental. The new situation has definite implications for the ongoing international tension.
Who Sets The Oil Prices?
Way back in January of 2008, Donald Trump was interviewed by MSNBC’s Jim Cramer. At the time, oil prices were hovering between $90 to $100 per barrel. The man who is set to become the next President, 8 years later, explained why, saying, “The illegal monopoly raises the oil prices. So the monopoly, that’s what it is, it’s a total illegal monopoly. If businesses ever formed OPEC, everybody would be put in jail… It’s a disgrace…. They lower it, they raise it. They lower it, they raise it. Now you have oil that’s going to be close to a hundred, and nobody in this country calls and says ‘get that goddamn oil price down, you get it down.’ And they can do it!
Donald Trump was describing the reality of the international oil markets, where a few key players get their way and can pretty much set prices. British Petroleum, Chevron, Royal Dutch Shell, and Exxon-Mobil are the power players when it comes to petroleum. Most of the OPEC member-states, especially the Arab monarchies whose roots can be found in the Sykes-Picot agreement (Kuwait, Bahrain, United Arab Emirates, etc.), function merely as their vassals.
This “cartel” doesn’t operate in a vacuum, and often coordinates with the US government. As Trump went on to explain, “In the old days, our people, our presidents used to call. We don’t call anymore… and you know what, if spoken to properly, those prices would come down like you wouldn’t believe. Nobody calls!” Indeed, the key think tank behind US foreign policy, the Council on Foreign Relations, is funded primarily by Exxon-Mobil, the Ford Foundation, and other trusts linked to the Rockefeller family. The influence of the oil and banking elite can be found all over the US political establishment, and the fingerprints of the big oil monopolies can be found all across American policy.
“The Cartel” Enforces Its Rule
The dramatic shifts in oil prices can largely be interpreted as a struggle between the oil monopolists and various competitors. In recent years, the big oil companies involved in what Trump dubbed “the cartel” have faced two major sources of competition:
1. The first set of rivals challenging the Wall Street oil monopoly is made up of independent, socialist or nationalist states who have seized control of their oil resources. Since the 1979 revolution, the Islamic Republic of Iran has also been exporting oil and developing their economy outside of Wall Street’s sphere of influence. The largest independent oil exporting state is the Russian Federation, where Putin has used public control of oil and natural gas to repair the country from the disasters of the 1990s. The Bolivarian bloc of Marxist-led Latin American countries, including oil- rich Venezuela, Bolivia, and Ecuador also function as independent rivals, exporting oil and competing with “the cartel.”
2. The second source of competition facing the big four petroleum giants have been “the frackers,” i.e. small, independent oil extractors who have sprung up due to the development of shale extraction technology. Due to the abundance of oil pulled from shale rock, initially by a variety of independent tycoons, the USA is now “energy independent” and the 1975 oil export ban has been lifted by congress.
Starting in 2014, “the cartel” intentionally dropped the prices. This was both a military siege and a classic Wal-Mart scheme. The hope was to drop the prices as low as possible and beat out the competition. This meant forcing the independent oil extractors out of business at home while weakening and toppling the independent oil producing states around the world.
The price drop was carried out via Saudi Arabia, a country that could be described as big oil’s favorite business partner. The country’s authoritarian Wahabbi dynasty was first propped up by the British bankers, and came to an understanding with the United States during the Second World War.
The latest price drop isn’t the first time the Saudis have manipulated markets for Washington’s benefit. According to Michael Reagan, the son of former US President Ronald Reagan, the same thing was arranged during the 1980s, “Since selling oil was the source of the Kremlin’s wealth, my father got the Saudis to flood the market with cheap oil.”
Crushing “Fracking Cowboys” & Nationalist States
When Aubrey McClendon died, it appeared to many people that, like Ancient Rome’s Mark Antony, he had fallen on his own sword rather than face the mercy of those who defeated him. Amid low oil prices, business failures, and a pending criminal trial, this top “fracking cowboy” was killed in a car crash. Though his death was officially ruled as accidental, the Oklahoma Police Department described the accident saying “he pretty much drove straight into the wall.” The day before, he had been indicted for having illegally conspired in buying natural gas and oil rigs.
McClendon’s demise was quite dramatic, but he was just one of many heartland oil tycoons to go under during the price-drop. The Wall Street Journal may have dubbed them “The Shale Revolutionaries,” but like those who mounted the barricades in Victor Hugo’s Les Miserables, these bold rebels fighting against the market status quo have been crushed. Booming oil and natural gas colonies across the USA like Williston, North Dakota have been reduced to ghost towns.
The brigade of new entrepreneurs is out of the picture. Oil extraction via fracking continues, except now BP, Exxon-Mobil, Shell, and Chevron are running the show, without serious competitors.
Beyond US borders, it’s a different story. The intention with the drop (siege) was to put Russia, Venezuela, Iran, Ecuador, and Bolivia out of business. The social spending and state sectors of these countries depends on oil revenue. If these centrally planned, state-centered economies could be cash starved, the basis for regime change could be established. But this did not happen.
The low oil prices resulted in only one solid political victory for Wall Street on the global stage—the ousting of Dilma Rousseff in Brazil. Though Venezuela has faced a domestic crisis, the United Socialist Party and its state-owned oil apparatus remains intact. The nuclear deal has not really weakened the Islamic Republic of Iran. According to Foreign Affairs, Putin is actually more popular in Russia than prior to the price drop.
Five years of bloody civil war in Syria has temporarily halted the construction of a pipeline connecting Iran to the Mediterranean Sea, killed hundreds of thousands of people, and displaced millions more.
The various Middle Eastern oil autocracies have poured billions of dollars into weapons and foreign fighters hoping to bring down the Syrian Arab Republic. Yet despite the endless chorus that Bashar Assad, the leader of the Baath Arab Socialist Party, “must go,” many voices now recognize that he isn’t going to be brought down.
China: A Lifeline for Independent Countries
During the low oil spell, why didn’t the Bolivarians fall? Why didn’t Russia face a much bigger domestic crisis? Why didn’t Iran’s economy crash? One key factor is China, which continues to buy oil and loan money to the targeted countries.
While the USA worked to barricade Venezuela with sanctions after the rise of Hugo Chavez, China made a point of buying oil from the Bolivarian countries. China’s trade with Latin America, mainly in the form of purchasing natural resources, multiplied 22 times between 2000 and 2014. China is also the primary purchaser of Iranian oil exports. Imports of Russian oil to the Chinese mainland have drastically increased in the past year, and new pipelines connecting China to Russia are in the works.
During the Obama years, while there has certainly been tension with China, the main target of US foreign policy has been Russia. While President Obama and the Democratic Party were publicly aiming their verbiage at Russia, the Pentagon was beefing up its forces in the Pacific. Well known Australian film-maker John Pilger is raising the alarm about “the coming war with China.” Pilger predicts that the US will soon move to cut off China’s oil supply. (With the help of the United States, a missile system threatening Russia and China is being established in southern part of the Korean Peninsula. Despite mass protests against her, President Park Guen-Hye, daughter of the infamous military dictator, intends to continue erecting the THAAD system.
Contrasting himself to Clinton’s Russophobia, Trump’s campaign spoke of restoring the relationship with Moscow, while “standing up” to China with tariffs and more aggressive foreign policy. Since being elected, before even taking office, Trump appears to have almost reset Henry Kissinger’s compromise regarding Taiwan, talking on the phone with Tsai Ing-Wen, a fanatical enemy of the Chinese Communist Party.
Throughout the oil price drop, the People’s Republic effectively kept international competitors with “the cartel” alive. Xi Jinping’s “One Belt, One Road” policies have brought a number of countries into China’s camp. China recently joined with Russia in vetoing a resolution on Aleppo at the UN Security Council.
The new President of the Philippines has settled the dispute in the South China Sea, and brought the two countries much closer together. Due to the compromise regarding the small disputed islands and the fishing waters surrounding them, China now has a much greater ability to protect oil tankers bound for the mainland.
The Failure of Western Capitalism
The top oil producing country on the African continent, Nigeria, is now on the brink of a famine. The United Nations is warning the world that amid the counter-insurgency against Boko Haram, 2.1 million people have been left homeless. The malnutrition and homeless situation in Nigeria is designated by international bodies as “the largest crisis in Africa” with 4.5 million people in need of food assistance. According to the World Food Program, farmers in Nigeria are not growing their crops due to the war, and 49,000 children in the region could die “within a few months.” )
While Nigerians are on the verge of starvation, the country has already negotiated with OPEC to increase its oil output starting on January 1st, 2017. How is it possible that a country could be facing a crisis of malnutrition, yet at the same time, being exporting over 2 million barrels of oil onto the international market every single day?
The answer lies in the fact that despite its vast natural resources and huge output, and the fact billions and billions of dollars are made from the wealth found in Nigeria, all of this doesn’t really belong to Nigerians. Shell, ExxonMobil, British Petroleum, and Chevron control the African country’s market. Nigerians don’t really make profits from Nigerian oil, Wall Street bankers do.
The oil rich Niger Delta region, probably the most financially valuable place on the African continent, is home some of the poorest people in the entire world. In response to persistent poverty and pollution, residents of the impoverished region have started bombing pipelines and other infrastructure, targeting the western monopolies.
Libya was once the top African oil producer and exporter. The Islamic Socialist government of Moammar Gaddafi provided the highest life expectancy on the continent. Libya also had a very high rate of literacy, free college education, universal healthcare, and a low rate of poverty. That was all eliminated in 2011 when NATO aligned with the insurgents and toppled the government. Today Libya is home to ISIL and Al-Queda terrorists, and thousands of refugees have died while fleeing the country, as rebel factions battle each other for control.
In his recent remarks in Florida, outgoing President Barack Obama spoke of how during the Second World War, the Americans “bled and died to build an international order” and how “we depend on that international order to protect our own freedom.” Essential to the “international order” of which he spoke is the power of certain financial monopolies, controlled by wealthy families with names like Rockefeller, Carnegie, Rothschild, and Morgan. This international order is being indicted by an ongoing global rebellion. The revolt comes in response to western capitalism’s real failure to improve people’s lives. Despite the US victory in the Cold War, the monopolists do not have the unipolar world they desire.
The oil siege may have brought down the “fracking cowboys” but it failed to starve out the independent oil exporting states. Now it seems the Pentagon could be shifting its aim. With the new administration, the target may no longer be the independent countries that produce and sell oil, but rather the huge Communist-led center of manufacturing that buys it from them: The People’s Republic of China.
Caleb Maupin is a political analyst and activist based in New York. He studied political science at Baldwin-Wallace College and was inspired and involved in the Occupy Wall Street movement, especially for the online magazine “New Eastern Outlook”.
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