Oil and the war in Iraq

[daddyhominum]

I often read that the reason for the USA-led Coalition attack on Iraq was oil. From those readings I have surmised that many people believe that the war in Iraq , and especially the purpose of the USA in that war, was to secure the oil production output of Iraq for the USA and/or allies.

Some individuals on all sides of the political spectrum put this forward as the proximate cause of the attack and the reason for the occupation forces staying in Iraq. The claim is particularly favored by Arabic and Muslim writers and by those who find President Bush anathema.

I don't believe the charge can be supported by the facts concerning world trade in oil and the economic needs of people in both selling and buying nations.

I would welcome someone correcting my observation and reasoning in the matter.

My first premise is that all nations need to exploit resources available for income. That oil producing nations must produce and sell oil to support their people. Iraq, like other oil-rich countries, need to sell the oil it produces to provide income for citizens and government. Neither Saddam Hussein nor the current Iraqi government can avoid selling oil.

My second premise is that oil that is sold outside the borders of any producing nation is the property of the purchaser who is free to do whatever he wishes with the oil. Whether the oil is sold by Saddam or the current government, once the oil has left Iraq it may end up anywhere.

My third premise is that the international oil market is a free market in which oil is bought and sold for an agreed price between contracting bodies and that all contracts are determined primarily by market conditions as influenced by demand and supply in the usual manner.

My fourth premise is that negotiating a contract for oil based on a free market would not distinguish among possible sources except for those pertaining to economic value of the oil, including shipping and processing considerations.

I conclude that given that anyone can purchase oil from anywhere for an agreed upon contract with respect to price, no nation would engage in a war to obtain something freely available through normal trade.

Therefore, oil cannot be the reason that the US and the rest of the Coalition have engaged in a hugely expensive war in Iraq.

Dennis

[BubberMiley]

I conclude that given that anyone can purchase oil from anywhere for an agreed upon contract with respect to price, no nation would engage in a war to obtain something freely available through normal trade.

Therefore, oil cannot be the reason that the US and the rest of the Coalition have engaged in a hugely expensive war in Iraq.

But if Sadaam was unwilling to sell to the U.S., then invasion is the only means of getting the oil.

[ceemes]

I often read that the reason for the USA-led Coalition attack on Iraq was oil. From those readings I have surmised that many people believe that the war in Iraq , and especially the purpose of the USA in that war, was to secure the oil production output of Iraq for the USA and/or allies.

Some individuals on all sides of the political spectrum put this forward as the proximate cause of the attack and the reason for the occupation forces staying in Iraq. The claim is particularly favored by Arabic and Muslim writers and by those who find President Bush anathema.

I don't believe the charge can be supported by the facts concerning world trade in oil and the economic needs of people in both selling and buying nations.

I would welcome someone correcting my observation and reasoning in the matter.

My first premise is that all nations need to exploit resources available for income. That oil producing nations must produce and sell oil to support their people. Iraq, like other oil-rich countries, need to sell the oil it produces to provide income for citizens and government. Neither Saddam Hussein nor the current Iraqi government can avoid selling oil.

My second premise is that oil that is sold outside the borders of any producing nation is the property of the purchaser who is free to do whatever he wishes with the oil. Whether the oil is sold by Saddam or the current government, once the oil has left Iraq it may end up anywhere.

My third premise is that the international oil market is a free market in which oil is bought and sold for an agreed price between contracting bodies and that all contracts are determined primarily by market conditions as influenced by demand and supply in the usual manner.

My fourth premise is that negotiating a contract for oil based on a free market would not distinguish among possible sources except for those pertaining to economic value of the oil, including shipping and processing considerations.

I conclude that given that anyone can purchase oil from anywhere for an agreed upon contract with respect to price, no nation would engage in a war to obtain something freely available through normal trade.

Therefore, oil cannot be the reason that the US and the rest of the Coalition have engaged in a hugely expensive war in Iraq.

Dennis

The oil question is rather multi-facetted. Here is a Link that will give you lots of interesting reading and a few things to think about.

[daddyhominum]

But if Sadaam was unwilling to sell to the U.S., then invasion is the only means of getting the oil.

Why couldn't the USA, or anyone, simply buy Iraqi oil from any dealer willing to sell them the oil after it left Iraq? BP buys the oil in Iraq, loads it on a tanker and sells it to a refiery in New Orleans after it has left Iraqi waters. It is likely that tankerloads of oil are often sold by brokers as they journey across the ocean, perhaps sold many times, on the trip. That is what often happens with other commodities.

That is how trade normally operates in a free market.

[daddyhominum]

The oil question is rather multi-facetted. Here is a Link that will give you lots of interesting reading and a few things to think about.

My argument does not depend on the Iraq situation. My reasoning is based on facts about how the oil market works.

I should be very happy for you to describe one way in which the oil from Iraq can avoid the normal trade considerations. If there is one single instance of my prenmises or reasoning being in error, it would mean my argument is faulty. So I only need to hear one facet that would demonstrate my argument is wrong.

[KrustyKidd]

Your argument is not in error however, you are an idiot for wasting you time trying to convince people who are simply holding onto a sandwhichboard slogan that Michael Moore dreamed up while bloating himself up on beer and cheetos. Another fact, well prior to the invasion of Iraq when there was a clear cut plan that had a semblance of a timetable, US lives and money was factored in. If oil was the objective, the US could have simply offered Saddam a deal in which he stayed in power, got US support in return for money (which was the basis of all his moves apres the Iran war) and non aggression towards neighboring staes and an exclusinve deal for the oil on which he ruled over. This would have shut down all markets and grossely cheapened the price of oil the world over. And, left Saddam in charge of Iraq.

Another point, where morons say the same thing, the US could have simply bought oil off the world market at going prices and saved billions before the insurgency started. They did not. Why? Because oil was not the objective., installing freedom in Iraq to serve as an Arab example to other nations and, to provide the US with a forward ground operating base with which to put pressure on Saudi Arabia to deal with a very unpleasent task - taking on the Al Queda within their own borders before the US did it for them in cross border operations rather than a full scale invsion which was the worst alternative but the only alternative had they not invaded Iraq. At present, Al Queda is actually hunted rather than appeased and bribed to stay peaceful in Saudi Arabia. Who cares? I do. An Al Queda organization with backing from disgruntled members of the Royal Family without portfolio is a threat when acting as a shadow government with access to oil revenue and trade concessions from governments low on oil but heavy on weapons.

Oil. I think the morons know that one as I haven't heard a peep on that argument in quite awhile.

Oh, get ready for the other one. The Euro exchange one where Saddam was about to start trading in Euros rather than dollars. This one meant that all the nations currently using Dollars would have their trades in Euros. What is not mentioned is that as the dollars take a slide so does the savings of half the nations on earth. And, as it slides the US pulls in loans to third world countries which in turn, stop paying France, Germany and whomever including Saudi Arabia. Pretty much placing bacnkruptcy into half the world and, then, the US has to suddenly start selling their Euros to cover their dollars sending the Euro into a nose dive. At the end is the poor Arab Sheik with a mitt full of dollars and Euros now worth half of what they were a month before.

Nope. Another Left wingnut's dream of an argument.

[BubberMiley]

You have something against cheetos?

[Black Dog]

Your argument is not in error however, you are an idiot for wasting you time trying to convince people who are simply holding onto a sandwhichboard slogan that Michael Moore dreamed up while bloating himself up on beer and cheetos. Another fact, well prior to the invasion of Iraq when there was a clear cut plan that had a semblance of a timetable, US lives and money was factored in. If oil was the objective, the US could have simply offered Saddam a deal in which he stayed in power, got US support in return for money (which was the basis of all his moves apres the Iran war) and non aggression towards neighboring staes and an exclusinve deal for the oil on which he ruled over. This would have shut down all markets and grossely cheapened the price of oil the world over. And, left Saddam in charge of Iraq.

And thus the reason why such a strategy was not pursued. Why would the oil industry want low prices?

Now, saying that Iraq's vast oil reserves was the sole motivation for the U.S. invasion of Iraq simplifies a complex issue, but ignoring it altogether is even stupider.

Another point, where morons say the same thing, the US could have simply bought oil off the world market at going prices and saved billions before the insurgency started. They did not. Why? Because oil was not the objective.,

U.S companies were not in the running for Iraqi oil, which means buying oil on the market would have mainly benefited foreign (ie. Russian, French, ie. the wrong) interests.

installing freedom in Iraq to serve as an Arab example to other nations and, to provide the US with a forward ground operating base with which to put pressure on Saudi Arabia to deal with a very unpleasent task - taking on the Al Queda within their own borders before the US did it for them in cross border operations rather than a full scale invsion which was the worst alternative but the only alternative had they not invaded Iraq.

So wait: the U.S. pulled troops out of Saudi Arabia and put them in Iraq to...deal with Saudi Arabia? Now, I don't doubt ending reliance on the terror-funding House of Saud is a consideration. Why does the U.S. rely on the House of Saud anyway, and what does Iraq have to offer that could have made ending that relationship a little easier...hmmm. (I will say this much: the foreign operating base notion is correct, even if the rationale is screwy.)

[daddyhominum]

And thus the reason why such a strategy was not pursued. Why would the oil industry want low prices?

Now, saying that Iraq's vast oil reserves was the sole motivation for the U.S. invasion of Iraq simplifies a complex issue, but ignoring it altogether is even stupider.

The oil companies do not determine oil prices in the world market. The price of oil is controlled by production rate which is determined by the OPEC Cartel by controlling production. There is sufficient elastic in oil production to offset any lost production from any single producer except Saudi Arabia. If the cartel wanted the price to drop, they simply increase production. The role of OPEC is to protect the oil producing nations from competitive production that would drive down price.

As the price of oil is determined by OPEC production rates, the US invasion can't affect price or oil company profits.

Another point, where morons say the same thing, the US could have simply bought oil off the world market at going prices and saved billions before the insurgency started. They did not. Why? Because oil was not the objective.,

U.S companies were not in the running for Iraqi oil, which means buying oil on the market would have mainly benefited foreign (ie. Russian, French, ie. the wrong) interests.

It doesn't matter who bought oil from where because all oil is available to the entity willing to pay for it once it is on a ship or in a pipeline. The producing country can't determine the final user of their oil production.

[theloniusfleabag]

Dear daddyhominum,

It doesn't matter who bought oil from where because all oil is available to the entity willing to pay for it once it is on a ship or in a pipeline. The producing country can't determine the final user of their oil production.

Well, let's suppose a country was intensely interested in procuring oil for their own domestic consumption.

I should be very happy for you to describe one way in which the oil from Iraq can avoid the normal trade considerations. If there is one single instance of my prenmises or reasoning being in error, it would mean my argument is faulty. So I only need to hear one facet that would demonstrate my argument is wrong.

Then, we'll look at your wording of 'normal trade considerations'. What would happen if a 'player' did not come from a place where the 'normal parameters of trade' applied? Now, let's pick a country...say...China.

They are attempting to secure contracts for supply (never minding the price) far and wide...from...

http://www.brazzilmag.com/content/view/3258/

Brazil's government owned Petrobras announced Monday, July 18, the signing of a contract for the export to China of 12,000 barrels per day (bpd) of crude oil adding that it expects sales of petroleum products to reach US$ 1 billion annually in five years.

The deal valued at US$ 600 million was sealed with China's government managed Sinochem International Oil Company, Petrobras said in a statement.

The Chinese firm will be supplied from offshore fields in Brazil's Campos Basin, where Petrobras largest deposits are located

China is also not squeamish to pick up where Talisman left off in Sudan, crushing the local population to ensure favourable oil contracts with the local militia.

from...(and why)..

http://www.chinadaily.com.cn/en/doc/2003-1...tent_289499.htm

China will see an increasing dependency on crude oil imports, with the amount of crude oil imported rising from 31 percent in 2002 to 50 percent four years later in 2007, according to official research released in Beijing Thursday.

Research by China's Ministry of Communications on marine oil transportation predicted that the country would import 100 million tons of crude oil in 2005, 150 million tons in 2010 and in 2020 the number would soar to 250 to 300 million.

http://www.eia.doe.gov/oiaf/ieo/oil.html

In the IEO2006 reference case, world oil demand increases by 47 percent from 2003 to 2030. Non-OECD Asia, including China and India, accounts for 43 percent of the increase.

http://www.thenation.com/doc/20021230/hiro20021216

A consortium of Russian companies, led by the state-owned Lukoil, took a 75 percent share (with the state-owned Iraq National Oil Company taking 25 percent) of a joint corporation to develop the West Qurna oilfield in southern Iraq, which holds 11 billion barrels--a third of the total US oil reserves--and extract oil over the next twenty-three years. Then came the China National Petroleum Corporation and its agreement to develop the Adhab oilfield.

Their lead was followed by Total Societe Anonyme of France (now TotalFinaElf), which agreed to develop Nahr Omar oilfield in the south--almost as bountiful as the West Qurna. Then Ranger Oil of Canada secured a $250 million contract for field development and exploration in the Western Desert, followed by India's Oil & Natural Gas Corporation and Reliance Petroleum's signing of a deal to develop the Tuba oilfield.

Since then, the Saddam government has accelerated the pace of allocating oil contracts to foreign companies, with some of these deals expected to yield a 20 percent rate of return, according to oil experts at Deutsche Bank.

So, you are right, the price doesn't matter, what matters most is who is doing the selling, and to whom. China is in a position to 'illogically affect the markets', if they don't care what the price is.

[Black Dog]

It doesn't matter who bought oil from where because all oil is available to the entity willing to pay for it once it is on a ship or in a pipeline. The producing country can't determine the final user of their oil production.

This only works when there is more oil available than there is a need for. We're in a period of increasing demand and decreasing supply, thus controlling tehsuppply at its source is increasingly important.

Second: oil is only fungible once it leaves the ground and enters the market. There's big bucks to be made for anyone who gets to decide when to take the stuff out. That's why were seeing a lot more states (like China) trying to tie up reserves.

[daddyhominum]

It doesn't matter who bought oil from where because all oil is available to the entity willing to pay for it once it is on a ship or in a pipeline. The producing country can't determine the final user of their oil production.

This only works when there is more oil available than there is a need for.

Economic theory and observation both firmly agree that a shortage of supply increases price in an open market. Oil markets are clearly free markets because one can purchase oil at any time from a multiple supplier source.

We're in a period of increasing demand and decreasing supply, thus controlling tehsuppply at its source is increasingly important.

That is what OPEC does...it controls the supply to maintain a price range preferred by producers and eliminate price competition among large suppliers. That is supply management.

A nation might restrict usage to its own nationals (there is no practical way to enforce a trade restriction once a commodity has been shipped outside the national boder) thus removing itself from the world market. However, the consequence would inevitably be prices above the world free market and consequent loss of competitiveness.

Second: oil is only fungible once it leaves the ground and enters the market. There's big bucks to be made for anyone who gets to decide when to take the stuff out. That's why were seeing a lot more states (like China) trying to tie up reserves.

Opec determines the rate of production for all producers whose production can seriously affect the world price for oil. Forward contracts are subject to price fluctuations.

Oil markets operate on forward contracts because of the infra structure expenses. Chinese companies can't afford to build a pipeline to Iran unless they know the will have sufficient product to pay for the expense of construction and operation. China has always had forward contracts. What has changed over the past 20 years is the level of demand form China particularly, also India and all the other Asian countries with burgeoning development.

Almost certainly, all forward contracts are subject to the world price as determined by Opec or a benchmarh like the price of West Texas Crude. So the reserves are really advanced sales at whatever price the amrket demands. There is also likely a "subject to prior sale" clause that is common for advance sales to protect the seller from a buyer who refuses shipment. Contracts are not guarantees of shipment under all conditions.

Controlling a supply when a free market exists can also reduce supply and increase the market price at the cost of reduced production. The National Energy policy proposed by the Trudeau government was intended to control production and prices but was firmly and vehemently resisted because it would reduce production, therefore earnings, for the producers, while reducing competitiveness.

Canada manages any number of agricultural products through supply management and the result is increased cost to the Canadian consumer and a ruination of agricultural competitiveness in free world markets.

In summary, the function of the free market is to balance supply and demand through the mechanism of price changes . The function of OPEC is to set the supply by controlling production. Part of the market is the existence of forward contracts that provide security for the cost of infrastructure investment but do not alter the role of the pricing/production mechanism for oil nor guarantee supply under all conditions. Forward contracts are an essential part, past and present, of oil production financing. Supply management of oil or gas within a single nation is possible but more costly then buying from the world market at a competitive price.

National governments usually do restrict the supply of some portion of national oil reserves for strategic reasons, that is, world events where the supply of oil is severly restricted or stopped. Even nations with no oil would have strategic reserves in storage. Strategic reserves are not part of the world oil reserves calculations because they are not ever available to the free market.

For oil to be an income earner it must be sold by the producing country to fill the human needs of citizens. So it really doesn't matter who owns the oil because you can't eat it. And once you sell it to buy some beans you have no control over the final destination. If you don't sell it, you don't get beans.

[gc1765]

My first premise is that all nations need to exploit resources available for income. That oil producing nations must produce and sell oil to support their people. Iraq, like other oil-rich countries, need to sell the oil it produces to provide income for citizens and government. Neither Saddam Hussein nor the current Iraqi government can avoid selling oil.

I thought Iraq wasn't allowed to sell their oil because of the sanctions?

As the sanctions faced mounting criticism of its humanitarian impacts, Iraq was in 1996 allowed under the UN Oil-for-Food Programme (under Resolution 986) to export $5.2 billion (USD) of oil every 6 months with which to purchase items needed to sustain the civilian population.

Link

Link

I conclude that given that anyone can purchase oil from anywhere for an agreed upon contract with respect to price, no nation would engage in a war to obtain something freely available through normal trade.

Therefore, oil cannot be the reason that the US and the rest of the Coalition have engaged in a hugely expensive war in Iraq.

One argument is that even though you can buy oil, it's much cheaper to get it out of the ground yourself. Of course, I don't think the difference in money is $300 billion, so it would be pretty stupid of the U.S. to spend that kind of money on the war only to get part of that money back. I did find this though:

After the period of economic sanctions many of Iraq's state-owned enterprises were next to collapse. In 2003 the US led Coalition Provisional Authority drew up a framework for largescale privatization and opened up state-owned services to foreign investors. As of 2005, 64% of Iraq's oil reserves are being developed by multinational corporations, based on contracts with the Oil Ministry known as Production Sharing Contracts.[14] The insurgency campaign over recent years has hugely dampened US and British efforts to bring in such foreign investment and frequent attacks on the oil infrastructure have also had a major economic impact.

Link

and

In early 2005, there was much discussion of U.S. and European firms gradually privatizing Iraq’s state-owned oil industry, despite Iraqi resistance to such a foreign presence. Shell Oil, British Petroleum, and Exxon Mobil have signed agreements to study Iraq’s reserves, and in December 2004 an international consortium signed a small-scale oilfield development agreement with the Ministry of Oil.

Link

[theloniusfleabag]

Dear daddyhominem,

National governments usually do restrict the supply of some portion of national oil reserves for strategic reasons, that is, world events where the supply of oil is severly restricted or stopped. Even nations with no oil would have strategic reserves in storage. Strategic reserves are not part of the world oil reserves calculations because they are not ever available to the free market.

I have read that some 50+% of Iraq's oil was sold to the US in the month before they invaded to 'top up the US' strategic reserve'.

In summary, the function of the free market is to balance supply and demand through the mechanism of price changes . The function of OPEC is to set the supply by controlling production. Part of the market is the existence of forward contracts that provide security for the cost of infrastructure investment but do not alter the role of the pricing/production mechanism for oil nor guarantee supply under all conditions. Forward contracts are an essential part, past and present, of oil production financing. Supply management of oil or gas within a single nation is possible but more costly then buying from the world market at a competitive price

This is based on the assumption that nomal conditions are present.

For oil to be an income earner it must be sold by the producing country to fill the human needs of citizens.

Again, here is where I differ on what a 'non-traditional' player in the game might do...your sentence could be re-written: "For oil to be an income enabler it must be consumed by a country to fill the human needs of citizens." Which is all the more urgent for a country expecting, or fomenting, rapid growth on an unprecedented scale.

[KrustyKidd]

And thus the reason why such a strategy was not pursued. Why would the oil industry want low prices?

Well Black Dog. You're going to have to make your mind up here. Was it so the oil companies such as the Chinese, French, Russians and US could have the avbility to drive up prices or so the US could once again not have control over oil in Iraq (80% which is controlled by non US interests?

Now, saying that Iraq's vast oil reserves was the sole motivation for the U.S. invasion of Iraq simplifies a complex issue, but ignoring it altogether is even stupider.

Exactly. So, since we know it was more expensive for the US to invade rather than bribe, oil was not the reason. We also know that because other nations benifitted far more than the US that is not the reson. We do know that for democracy to work in Iraq oil would pay for it in the form of fueling the Iraqi economy.

U.S companies were not in the running for Iraqi oil, which means buying oil on the market would have mainly benefited foreign (ie. Russian, French, ie. the wrong) interests.

Who would have boght their oil off Iraq and allowed the US to buy off Saudi. All at the going rate. Point is?

So wait: the U.S. pulled troops out of Saudi Arabia and put them in Iraq to...deal with Saudi Arabia? Now, I don't doubt ending reliance on the terror-funding House of Saud is a consideration. Why does the U.S. rely on the House of Saud anyway,

Because if the House falls to Al Queda then you really have a problem. Maybe this is what you don't undersnnad and why you take the war on terror so lightly.

[Toro]

The oil companies do not determine oil prices in the world market. The price of oil is controlled by production rate which is determined by the OPEC Cartel by controlling production. There is sufficient elastic in oil production to offset any lost production from any single producer except Saudi Arabia. If the cartel wanted the price to drop, they simply increase production. The role of OPEC is to protect the oil producing nations from competitive production that would drive down price.

This is true when OPEC has excess capacity. Currently, it has none, and the price of oil is now being set solely by the market.

As the price of oil is determined by OPEC production rates, the US invasion can't affect price or oil company profits.

Not in the long run, but it can and has in the short run since the market bids up the price of crude due to war.

Another point, where morons say the same thing, the US could have simply bought oil off the world market at going prices and saved billions before the insurgency started. They did not. Why? Because oil was not the objective.,

Or paid Saddam off rather than spend $200+ billion invading a country.

[Toro]

Your argument is not in error however, you are an idiot for wasting you time trying to convince people who are simply holding onto a sandwhichboard slogan that Michael Moore dreamed up while bloating himself up on beer and cheetos.

You might convince a few of them, but the debate is not directed at them - its directed at the undecideds.

Another fact, well prior to the invasion of Iraq when there was a clear cut plan that had a semblance of a timetable, US lives and money was factored in. If oil was the objective, the US could have simply offered Saddam a deal in which he stayed in power, got US support in return for money (which was the basis of all his moves apres the Iran war) and non aggression towards neighboring staes and an exclusinve deal for the oil on which he ruled over. This would have shut down all markets and grossely cheapened the price of oil the world over. And, left Saddam in charge of Iraq.

Absolutely correct.

And thus the reason why such a strategy was not pursued. Why would the oil industry want low prices?

That's a very interesting question. Lord Browne CEO of BP says that the long-term price of oil will go back to $40 and lower. Exxon says the same thing. Why? Oddly enough, because the higher the price of oil goes, the more Big Oil's reserves go down. This is because when the oil companies were negotiating reserves with these third world countries, the price of oil never went above $40, and stayed in a band between $15 and $30 most of the time. Thus, in a concession to the countries, the oil companies negotiated that the reserves in the countries would be booked to the company with a royalty paid to the country at a constant rate. However, if the price of oil were to rise above $40 - something that had never happened before - the countries would receive an escalating royalty. That's a great sell to the countries, while the oil companies, smug in their belief that they knew more about oil markets than the rubes on the other side of the table, never thought the price would get above that level. Now, the way accounting works for oil companies, the higher the concession that must be paid to host country, the lower the amount of bookable reserves. (Or something like that. I'd have to go back and check.) Wall Street pays a higher multiple for growing reserves, not declining reserves. Its not a problem currently, since the companies are making money hand over fist. But there will be an effect when Wall Street starts seeing the decline in reserves. To offset this, what the companies will do, and are doing, is buy other energy companies to hide the decline.

Now, saying that Iraq's vast oil reserves was the sole motivation for the U.S. invasion of Iraq simplifies a complex issue, but ignoring it altogether is even stupider.

America is involved in the Middle East because there is oil in the region. However, the US did not invade to secure a source of supply. What matter to the United States is that the flow of oil is not restricted.

[Toro]

Oh, get ready for the other one. The Euro exchange one where Saddam was about to start trading in Euros rather than dollars. This one meant that all the nations currently using Dollars would have their trades in Euros. What is not mentioned is that as the dollars take a slide so does the savings of half the nations on earth. And, as it slides the US pulls in loans to third world countries which in turn, stop paying France, Germany and whomever including Saudi Arabia. Pretty much placing bacnkruptcy into half the world and, then, the US has to suddenly start selling their Euros to cover their dollars sending the Euro into a nose dive. At the end is the poor Arab Sheik with a mitt full of dollars and Euros now worth half of what they were a month before.

This is an utterly bizarre argument propogated by people with little knowledge about capital markets, oil markets, capital flows and central banking.

FYI, the daily value traded in the currency market is estimated at $2 trillion. Roughly half of that is in US dollars. Global trade is something like $20 trillion per year. The oil market is somewhere around 5-10% of global trade, or $1-$2 trillion. In other words, currency markets trade US dollars about the same value in two days as all the international trade in oil for one year. Better yet, Iran pumps out about 4 million barrels a day, around 5% of the 85 million barrels produced each day around the globe. Thus, dollar currency traders will have traded the annual production of Iran in 2.5 hours.

And Iran's oil bourse is supposed to collapse the dollar. Right.

[Toro]

But if Sadaam was unwilling to sell to the U.S., then invasion is the only means of getting the oil.

Since, one day, Saddam will be dead, this statement can only be perceived in the short term.

Iraq was producing about 1-1.5 million barrels of day. The world produces 85 million. Yet the US was going to spend over $200 billion to secure that short term supply.

[daddyhominum]

The oil companies do not determine oil prices in the world market. The price of oil is controlled by production rate which is determined by the OPEC Cartel by controlling production. There is sufficient elastic in oil production to offset any lost production from any single producer except Saudi Arabia. If the cartel wanted the price to drop, they simply increase production. The role of OPEC is to protect the oil producing nations from competitive production that would drive down price.

This is true when OPEC has excess capacity. Currently, it has none, and the price of oil is now being set solely by the market.

The Table for current production indicates a surplus capacity for Saudi Arabia of 1300 t0 1800 thousand barrels per day for Saudi Arabia.

(Energy Information Administration\Short-Term Energy Outlook -- August 2006)

As the price of oil is determined by OPEC production rates, the US invasion can't affect price or oil company profits.

Not in the long run, but it can and has in the short run since the market bids up the price of crude due to war.

There is an effect on oil price by war, hurricane and many other events. I view that as due to fear rather then oil production or real change of demand and supply but there is an effect

Another point, where morons say the same thing, the US could have simply bought oil off the world market at going prices and saved billions before the insurgency started. They did not. Why? Because oil was not the objective.,

Or paid Saddam off rather than spend $200+ billion invading a country.

I agree. And it may have been a better strategy to do that accompanied by an aggressive campaign to improve human rights. I wonder what would have happened if sanctions had been reduced in a quid pro quo for a slow increase in human rights for Iraqis.

[daddyhominum]

Wall Street pays a higher multiple for growing reserves, not declining reserves. Its not a problem currently, since the companies are making money hand over fist. But there will be an effect when Wall Street starts seeing the decline in reserves. To offset this, what the companies will do, and are doing, is buy other energy companies to hide the decline.

I am glad you brought up this issue. Oil in the ground is like money in the bank. The faster it goes out, the quicker you become broke whether oil company or producing country. At the same time, as price goes up, more oil becomes available as higher cost oil becomes economic as has happened with the Alberta Tar Sands.

And that suggests that, longer term, higher oil prices are necessary to replace diminishing reserves.

Now, saying that Iraq's vast oil reserves was the sole motivation for the U.S. invasion of Iraq simplifies a complex issue, but ignoring it altogether is even stupider.

America is involved in the Middle East because there is oil in the region. However, the US did not invade to secure a source of supply. What matter to the United States is that the flow of oil is not restricted.

OTOH, the US led in the fight to sanction Iraqi oil sales and suggestions have been made that the USA will eventually call for restrictions on the sale of Iranian oil. I believe that the US wants a free flow of oil up to the point where it sees a strategic danger of harm to itself. I would rather believe that the USA went into Iraq to provide people with the human rights their citizens enjoy but I believe their claim that Iraq under Hussein was an imminent danger to peace in the region.

[theloniusfleabag]

Dear Toro,

And Iran's oil bourse is supposed to collapse the dollar. Right.

No, the argument of matter of currency is that the US dollar is a house of cards, and if confidence in it is compromised, it could be a long fall.

However, the US did not invade to secure a source of supply. What matter to the United States is that the flow of oil is not restricted

I agree, but that is also my point. The flow could be retricted without the ability to out-bid.

QUOTE

Another fact, well prior to the invasion of Iraq when there was a clear cut plan that had a semblance of a timetable, US lives and money was factored in. If oil was the objective, the US could have simply offered Saddam a deal in which he stayed in power, got US support in return for money (which was the basis of all his moves apres the Iran war) and non aggression towards neighboring staes and an exclusinve deal for the oil on which he ruled over. This would have shut down all markets and grossely cheapened the price of oil the world over. And, left Saddam in charge of Iraq.

Absolutely correct.

This was 'the status quo', and many have charged in the past that this ( and selling war materiel to Iraq) was 'prima facie' collusion with Saddam's regime which is now facing war crimes charges.

daddyhominem,

OTOH, the US led in the fight to sanction Iraqi oil sales and suggestions have been made that the USA will eventually call for restrictions on the sale of Iranian oil. I believe that the US wants a free flow of oil up to the point where it sees a strategic danger of harm to itself. I would rather believe that the USA went into Iraq to provide people with the human rights their citizens enjoy but I believe their claim that Iraq under Hussein was an imminent danger to peace in the region.

Every sentence herein has been thoroughly deunked. Any one in particular you need a link to?

[daddyhominum]

daddyhominem,

OTOH, the US led in the fight to sanction Iraqi oil sales and suggestions have been made that the USA will eventually call for restrictions on the sale of Iranian oil. I believe that the US wants a free flow of oil up to the point where it sees a strategic danger of harm to itself. I would rather believe that the USA went into Iraq to provide people with the human rights their citizens enjoy but I believe their claim that Iraq under Hussein was an imminent danger to peace in the region.

Every sentence herein has been thoroughly deunked. Any one in particular you need a link to?

Dear theloniusfleabag,

Yes.

Only the first sentence contains statement of fact so links that establish that the USA did not lead the struggle to sanction Iragi oil and another that establishes that the USA has no intention of calling for sanctions against Iran would be helpful

As the rest of my words that you quoted are clearly opinion, it is not possible to debunk them.

[jbg]

Therefore, oil cannot be the reason that the US and the rest of the Coalition have engaged in a hugely expensive war in Iraq.

Dennis

Without repeating your premises, I strongly agree with all of them. That being said, the civilized world has a vital interest in, overall, preserving the access to varied and abundant supplies of oil. To that extent, any effort to maintain oil production, or the navagability of the seas, is "about oil" and properly so.

[Black Dog]

Well Black Dog. You're going to have to make your mind up here. Was it so the oil companies such as the Chinese, French, Russians and US could have the avbility to drive up prices or so the US could once again not have control over oil in Iraq (80% which is controlled by non US interests?

????

Exactly. So, since we know it was more expensive for the US to invade rather than bribe, oil was not the reason.

Ah, but it wasn't supposed to be expensive, remember? We're talking about why they invaded, so you can't use post facto developments as evidence.

We also know that because other nations benifitted far more than the US that is not the reson.

What nations would have benefited more than the U.S.if their scheme had actually worked?

We do know that for democracy to work in Iraq oil would pay for it in the form of fueling the Iraqi economy.

Wow. insightful.

Who would have boght their oil off Iraq and allowed the US to buy off Saudi. All at the going rate. Point is?

You seem to forget the part about how the oil gets out of the ground and onto the market. Think about it.

Because if the House falls to Al Queda then you really have a problem. Maybe this is what you don't undersnnad and why you take the war on terror so lightly.

If you're worried about the Saudi regime falling to Al Qaeda (ooooo!!!!), then it makes more sense to have troops in country to deal with such an occurrance.

Toro

Yet the US was going to spend over $200 billion to secure that short term supply.

They weren't going to spend $200 billion, remember? Y'all have amnesia?

"There’s a lot of money to pay for this that doesn’t have to be U.S. taxpayer money, and it starts with the assets of the Iraqi people…and on a rough recollection, the oil revenues of that country could bring between $50 and $100 billion over the course of the next two or three years. … We’re dealing with a country that can really finance its own reconstruction, and relatively soon."-Paul Wolfowitz 3/27/03