Gwynne Dyer: The slow-moving conspiracy of an "oil war"

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      “Did you know there’s an oil war? And the war has an objective: to destroy Russia,” said Venezuelan President Nicolas Maduro in a live television speech last week. “It’s a strategically planned war…also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse.”

      It’s the United States that has started the war, Maduro said, and its strategy was to flood the market with shale oil and collapse the price.

      Russia’s President Vladimir Putin agrees. “We all see the lowering of oil prices.” he said recently. “There’s lots of talk about what’s causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”

      The evil Americans are at it again. They’re fiendishly clever, you know.

      We are hearing this kind of talk a lot these days, especially from countries that have been hit hard by the crash in the oil price. Last Thursday, Brent crude hit $55 per barrel, precisely half the price it was selling for last June. The Obama administration’s announcement last week that it is preparing to allow the export of some U.S. oil to foreign markets may send it even lower. (U.S. crude oil exports have been banned since 1973.)

      When the oil price collapses, countries that depend very heavily on oil exports to make ends meet are obviously going to get hurt. President Putin, who has let Russia get itself into a position where more than half its budget revenue comes from oil and gas sales (some estimates go as high as 80 percent) is in deep trouble: the value of the ruble has halved, and the economy has already slipped into recession.

      Venezuela, where government spending is certainly more than 50 percent dependent on oil exports, is in even deeper trouble—and, like Putin in Russia, President Maduro of Venezuela sees this as the result of an American plot. Various commentators in the West have taken up the chorus, and the conspiracy theory is taking root all over the developing world.

      So let us consider whether there really is an “oil war”. The accusation is that the United States is deliberately “flooding the market” with shale oil, that is, with oil that has only become available because of the fracking techniques that have become widespread, especially in the U.S., over the past decade. Moreover, Washington is doing this for political purposes, not just because it makes economic sense for the United States to behave like this.

      In order to believe this conspiracy theory, however, you really have to think that a rational U.S. government, acting in its own best economic interests, would do the opposite: suppress the fracking techniques and keep American oil production low, in order to keep its imports up and the oil price high. But why on earth would it want to do that?

      You will note that I am going along with the notion (a necessary part of the conspiracy theory) that all important business decisions in the United States are ultimately made by the U.S. government. That is ridiculous, of course, but we don’t need to refute this delusion in order to settle the question at hand, so let it pass.

      Hydraulic fracturing (“fracking”) as a means of recovering gas and oil, particularly from shale formations, has its roots in early attempts dating back as far as 1947, but it was the development of cheap and reliable techniques for horizontal drilling in the late 1980s that slowly began to transform the U.S. oil industry.

      By 2012, over a million fracking operations had been performed in U.S. wells—but in 2012, last year’s events in Ukraine were unforeseen and the United States and Russia were still on relatively good terms. Many oil-exporting countries were worried by the prospect that rising U.S. oil and gas production would shrink American imports and thereby cut their own profits, but it was still seen as a supply-and-demand problem, not a strategic manoeuvre.

      The operators wanted to make a profit, and Washington liked the idea that rising U.S. domestic oil production might end the country’s dependence on imported oil from unstable places so much that it gave tax breaks and even some direct subsidies to the companies developing the fracking techniques. But that’s no more than what any other government of an oil-producing country would have done.

      So did the U.S. develop fracking to hurt its enemies? The dates just don’t work for Russia: fracking was already making U.S. production soar years before Washington started to see Moscow as an enemy. As for Venezuela, it continues to be the fourth-largest exporter of oil to the United States, at a time when the glut of oil on the market would let Washington cut Venezuela out of the supply chain entirely.

      And Barack Obama is not opening the flood-gates for massive American oil exports that will make the oil price fall even lower. The U.S. still imports a lot of oil, and will go on doing so for years. He has only authorized the export of a particular kind of ultra-light oil that is in over-supply on the domestic market: only about one million barrels of it, with actual exports not starting until next August.

      If this is a conspiracy, it’s a remarkably slow-moving one.

      Gwynne Dyer is an independent journalist whose articles are published in 45 countries.

      Comments

      30 Comments

      JohnCan

      Jan 2, 2015 at 12:03pm

      Ah, but Uncle Sam is the necessary devil that makes sense of all conspiracies and lends excuse to all tyrants. Never mind the train of logic, the Yanks must be behind this and everything else.

      Michael Ambrozewicz

      Jan 2, 2015 at 1:11pm

      Hey you really need to do your research. Let me do it for you. Look supply and demand as very little to with oil.Everything is political.Ten days ago, Abdullah of Saudi Arabia, King of Saudi Arabia, cleaned house with the most sweeping cabinet shakeup in years. It is rumored that many of his cabinet ministers were outraged that they had to sacrifice their own economic stability as a bargaining ship for Iranian negotiations. Just last year, the BBC reported that Saudi Arabia invested heavily in the Pakistani nuclear weapons program and could easily acquire nuclear weaponry if Iran crosses that threshold of obtaining the bomb. The no-proliferation treaty in the Middle East is pushing Israel and Saudi Arabia to the brink of irritability. Ya'alon, Israel's Defense Minister, said that Israel must prepare for the possibility of striking the Iranian nuclear program on its own. Saudi Arabia's cabinet ministers endorse that stance and now feel that the collaboration with the US to bring down oil prices was a miscalculation. Defense Minister Ya'alon further added that he will do what needs to be done when it needs to be done.

      North Korea is a strategic partner with Iran by assisting their scientists with their nuclear initiative program. Congressman Tom Cotton told reporters on December 8, 2014, that "Iran is getting everything it wants in slow motion, so why would they reach a final agreement?" Mike Pompeo, the US Representative for Kansas, urged the United States and its allies to "strongly consider a pre-empted bombing campaign of Iranian nuclear sites." The Institute for Science and International Security is continuing to put up press releases that time is running out. December 12, 2014: "The US Should Stop Iran From Buying Material for the Arak Plant." December 8, 2014: "US Accuses of Iran of Secretly Breaching U.N. Nuclear Sanctions." December 8, 2014: "Speculation Concerning Israel's Pre-Emptive Strike on Iranian Nuclear Facilities Emerges." The Saudis brought down the price of oil because of Iran and US was involved because of Russia not because of supply and demand.

      Jay

      Jan 2, 2015 at 2:52pm

      If the American's are behind it good. That way dirty evil countries can'take flourish. Why should North America go under for countries like Iran to get ahead.

      Blah

      Jan 2, 2015 at 3:16pm

      Don't worry, the truthers believe it. Didn't you know the U.S. is behind everything bad. It's like Iran, Russia, Syria, North Korea, etc don't really exist. Paranoia will destroy ya!!

      P.Peto

      Jan 2, 2015 at 3:54pm

      Come on guys,history shows that oil prices have been manipulated and oil has been used as a geopolitical weapon. In fact,it's claimed that the collapse in oil prices in 1989 is what caused the collapse of the USSR.[Remember the 1974 Arab oil embargo?] In point of fact all prices are manipulated,gold,interest rates,currencies,etc,the "free market" is a myth. Bankers control everything and everybody including governments. Bankers do nothing but conspire to make profits and banker driven nations do nothing but conspire to defeat or take advantage of other nations. Conspiracy is the name of "The Game" and Anglos have perfected the art of conspiracy. So please spare us from your conspiracy theory bashing and your naive trust in the powers that be.

      SPY vs SPY

      Jan 2, 2015 at 4:12pm

      One - Saudi Arabia is trying to control the World with High Oil Prices!!!

      Two - Saudi Arabia is trying to control the World with Low Oil Prices?????

      Three - Nuclear Weapons are a threat to everyone in the Middle East - I strongly believe that a 10 - 20 or 50 day bombing Program would put an end to the Nuclear Threat in the Middle East -

      Four - Would you really need to Bomb Israel for 50 days to eliminate Israels Nuclear Weapons and it's Nuclear Weapons Manufacturing Facilities????????????

      I Chandler

      Jan 2, 2015 at 8:20pm

      Dyer: "The evil Americans are at it again. They’re fiendishly clever, you know."

      Would Dyer have us believe that governments don't lie and conspiracies don't exist? That’s implausible - eleven years after the invasion of Iraq and 50 years after the invasion of Vietnam /Gulf of Tonkin fraud:
      https://en.wikipedia.org/wiki/Bush–Blair_2003_Iraq_memo
      https://firstlook.org/theintercept/2015/01/01/north-koreasony-story-show...

      Dyer: "You will note that I am going along with the notion that all important business decisions in the US are ultimately made by the U.S. government. "

      Wow? World oil prices were set by the Standard Oil Co and then Railroad Commission of Texas (1930s to the 1960s ) and then OPEC for awhile:
      http://www.pagetutor.com/standard/chapter16_part1.html
      https://en.wikipedia.org/wiki/Railroad_Commission_of_Texas

      Dyer: "The dates don’t work: fracking was already making production soar years before Washington started to see Moscow as an enemy. "

      When did Washington stop seeing Moscow as an enemy? What dates don’t work?

      The US started investing in ballistic missile defense in the 90's and in 2002, withdrew from the Anti-Ballistic Missile Treaty. In 2007, the US announced plans to build an anti-ballistic missile defense installation in Poland along with a radar station in the Czech Republic.

      JMW

      Jan 3, 2015 at 2:16am

      @I Chandler
      "Would Dyer have us believe that governments don't lie and conpsiracies don't exist?"

      No. Just not THIS one.

      When did Washington stop seeing Moscow as an enemy? I believe it was right after they "converted" to "capitalism" and starting allowing McDonalds restaurants. Did they ever stop seeing them as a rival? Probably not.

      Greg

      Jan 3, 2015 at 8:02am

      A) Nobody thinks US oil production is a conspiracy. Its just normal industry doing what industry does. So I don't know the point of this article.

      B) If you were the Saudis and you were going to turn on the taps, you wouldn't go talk to the Americans first? At a minimum you would go and ask them for something in return, even if you were going to do it anyways. So there is no debating whether the Americans and Saudis at least talked about this beforehand. You can call that a conspiracy or whatever you like.

      C) US oil exports? Its called condensate and most of it is not going to end up your car.

      I hope everyone that believes these oil is dead stories sold their oil stocks a month ago... thanks.