[OPE-L:7974] Iraqi oil

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Sat Nov 09 2002 - 00:05:29 EST

James Kenneth Galbraith presents a version of what the oilism thesis 
in regards to US foreign policy; for example, JKG argues that US 
control of Iraq is needed to keep the price of oil within a certain 
band; he then argues (I think) that the strong dollar policy is an 
attempt for the US to corner declining oil supplies.


First excerpt:

  Nor is Bush's strategy necessarily irrational insofar as it affects 
oil -- in the short run. With a new Iraqi government, the United 
States will gain a client state that is prepared to help keep the oil 
price within the band that both U.S. consumers and the remaining U.S. 
oil producers can tolerate -- low enough so as not to fatally drain 
purchasing power from the former, high enough so as not immediately 
to ruin the latter. Given the George W. Bush-Dick Cheney commitment 
to unlimited oil consumption, this will prove useful in putting off a 
day of reckoning. As total world oil production declines -- credible 
scientific evidence suggests that this may start happening quite soon 
-- the Middle East's share of the remaining reserves will rise. So, 
too, would the potential for cartel control and price manipulation. A 
robust U.S. military presence in the oil fields, directly or by 
proxy, will naturally make higher oil prices less of a danger. This 
is part of the appeal of war with Iraq....

Second excerpt:

It is a straightforward fact that if global oil production starts to 
decline but U.S. consumption does not, everyone else will be required 
to cut purchases and uses of oil. But how can oil prices be held 
stable for Americans yet be made to rise for everyone else? Only by a 
policy of continuing depreciation in everyone else's currency. Such a 
policy of dollar hegemony amid worldwide financial instability, of 
crushing debt burdens and deflation throughout the developing world, 
is perverse. It will make our trading partners' exports cheap, render 
their imports dear and keep their real wages low. It will price 
American goods out of world markets and lead to unsustainable 
dependence on foreign capital. It will be a policy, in short, of 
beggar-all-of-our-neighbors while we live alone, in increasing 
idleness and inside the dollar bubble.

This is the policy that Bush and Cheney are actually imposing on the 
rest of the world. But they cannot make it last. It will make lives 
miserable elsewhere, generating ever more resistance, terrorism and 
military engagement. Meanwhile, we will not experience even gradual 
exposure to the changing energy balance; we will therefore never make 
the investments required to adjust, even eventually, to a world of 
scarce and expensive oil. In the end, therefore, that world will 
arrive much more abruptly than it otherwise would, shaking the 
fragile edifice of our oil economy to its foundations. And we will 
someday face a double explosion: of anger against our arrogance and 
of actual shortage and collapsing living standards, when the 
confidence of investors in the dollar finally gives way.

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