World demand for oil is increasing. Here in the United States, production at the refineries has slowed, leaving rising crude inventories untouched and un-affecting the increased demand, allowing speculators to keep the price of gasoline futures high, sticking it to us at the pump. Consumers in the U.S. are understandably anxious and angry and are looking to find a piece of Big Oil to rip in to. But, it is becoming increasingly evident that Bush's militarism is the main factor fueling the rise.
There isn't one sector of the oil industry that doesn't deserve scrutiny and scorn, but when step up to chastise the nations the U.S. relies on for our oil supply, it's probably best to remind ourselves that we are competing consumers in a seller's market.
U.S. refineries produce over 90% of the gasoline used in the country. The U.S. gets the majority of its crude oil that our refineries process from foreign sources. Less than 40 percent of that crude oil was produced in the United States. About 50% of our petroleum imports are from the Western Hemisphere, 19% from the Persian Gulf, and 18% from Africa and 13 percent from other regions.
The top sources of US crude oil imports for February, according to the
U.S. Energy Information Administration, were:
"Mexico (1.774 million barrels per day), Canada (1.700 million barrels per day), Saudi Arabia (1.418 million barrels per day), Nigeria (1.342 million barrels per day), and Venezuela (1.175 million barrels per day). The rest were Angola (0.464 million barrels per day), Iraq (0.444 million barrels per day), Ecuador (0.222 million barrels per day), Brazil (0.164 million barrels per day), and Algeria (0.163 million barrels per day). Total crude oil imports averaged 9.860 million barrels per day in February, which is an increase of 0.147 million barrels per day from January 2006. The top five exporting countries accounted for 75 percent of United States crude oil imports in February and the top ten sources accounted for approximately 90 percent of all U.S. crude oil imports.
Canada was the largest exporter of total petroleum products again this month averaging 2.249 million barrels per day to the United States which is a decrease from last month (2.311 million barrels per day). The second largest exporter of total petroleum products again this month was Mexico (1.878 million barrels per day) which was an increase from last month (1.796 million barrels per day). Nigeria had a substantial increase in crude oil and total petroleum exports to the U.S. when compared to last months numbers."
If we start at the head of the list, Mexico, a non-OPEC producer, has it's obvious contradictions which could lead Americans to take their oil trade with us for granted. The top three imports from Mexico to the U.S. are transportation equipment, computer and electronic products, and oil. The first two are essentially sustained in the 'maquiladora', U.S.–Mexico trade relationship where unfinished materials are passed to Mexico and returned to the U.S. as 'cheap' finished goods. For example, computer and electronic products were the top U.S. export to Mexico, but also our second-largest import from Mexico. Transportation equipment was the second largest U.S. export to Mexico but also our top U.S. import from them.
Oil trade with Mexico, on the other hand, doesn't have the same give and take relationship, but it's reciprocal nonetheless. Oil sales account for about 40%, one-third, of Mexico's government
revenue. There was that 1995, $50 billion 'emergency stabilization loan' that the U.S. contributed to, but that was quickly repaid. A great deal of Mexico's economic recovery can be attributed to the rising oil prices.
After Venezuela, Mexico is said to have the second largest oil reserves in the Western Hemisphere. It is also reported that their growing population now consumes six out of every ten barrels produced in their country, unlike oil nations like Saudi Arabia who exports most of what they produce.
Despite their ranking as one of the world's fifth largest crude oil exporter, Mexico's proven reserves appear to be on the decline, and they are still a net importer of refined petroleum products. It would take more than jaw-boning to get the preoccupied and transitioning Mexico to adjust their prices to suit us, especially when the other major producers under OPEC control so much of the market with their manipulation of production. There might be room there, but it's complicated by disputes over the border and other trade issues. I imagine there's an overall American sense that Mexico is at our liege, but I doubt Mexico sees it that way. Although a U.S. case of sniffles can give them a cold, Mexico won't make any move which will affect their bottom line. There will have to be some in kind concession to get what would likely be a mere token decrease in price from them.
Canada is pretty cut and dry, in the tank. Canada is the world's largest producer of energy, after the United States, Russia, China, and Saudi Arabia. Canada's proven reserves have also shown some decline as in Mexico, but they have been able to increase production some through exploration and modifying drilling techniques. The increases have been mostly 'heavy' oil and synthetics.
Canada trades with the United States to the level of almost $400b a year. The United States account for about 85% of Canada's exports of everything. The U.S. accounts for 91% of all Canadian oil(67.4% of their energy supply), natural gas, and electricity exports. Heating needs push Canadian's consumption to high levels per person. Oil revenue remains critical to Canada's economy. Higher prices are a critical component in their economy. Indeed, the lower prices in '97 were a cause of Canadian concern about their overall economic health. There may be room to get Canada to increase production and help lower the overall price of oil, but they are subject to the same pressures as Mexico in their vulnerability to revenue changes and the relatively small impact any of their efforts to increase production would have against the major producers' abilities to band together and manipulate the supply.
That leaves us with export majors like Saudi Arabia, Nigeria, and Venezuela to service the rest of the United States' fuel needs. Lesser producers that we do business with include countries like Iraq, Angola, Brazil . . . Saudi Arabia, Nigeria, Venezuela, and Iraq represent the OPEC members in the bunch. OPEC is responsible for 40% of the world’s production of crude oil and holds more than two-thirds of the world’s estimated crude oil reserves.
Saudi Arabia. is the world's largest oil producer, and with about a quarter of the world's proven reserves they also have the world's largest spare production capacity. They have a range of oils, from heavy to very light. Most of their heavier oil is reportedly not in production. The Saudis claimed recently that world demand had not forced them to crack those reserves as some who believe their supply has reached a 'peak' have speculated.
Saudi Arabia is an important supplier to the U.S., but it also takes care of the oil needs of Europe, China, Japan, South Korea, and India. The country provides 20% of the U.S. crude oil imports and that represents about 10% of of what we consume. The U.S. has fostered a strategic relationship with Saudi Arabia which involves the sale and transfer of military equipment, planes and supplies to the monarchy.
In turn, the Saudis maintain an amicable trade relationship with us, often using their position in OPEC to lead other members to adjust their oil production to bring the price down. Conversely, when the price is seen as too low by producers, Saudi Arabia has been able to direct production among OPEC members to bring oil prices within what they consider a reasonable range ($40-$50 a barrel),
Finally, a country to kick. Certainly a monarchy which is on our government's hit list for prisoner abuse; detentions; assaults on the freedom of speech (on the press and on religion; discrimination against women and minorities; and assaults on workers' rights, is ripe for some imperious American bullying.
Yet, even as Saudi Arabia sits on all of the military largess we lavished on them, and even though their country benefits greatly from the influx of U.S. dollars, there is at least a hint that relations have been heading south - falling steadily from the cooperative heights our two countries reached during the Persian Gulf war, deteriorating to the removal of our unpopular troops from their soil following the ousting of Saddam from Kuwait, to the current strained expressions of support between our countries in the wake of the 9-11 attacks and Bush's invasions and occupations of Muslim-dominated Iraq and Afghanistan.
Still, the Saudis have not said that they won't encourage OPEC producers to increase production to bring the price down. Bush hasn't asked or signaled them in any public way since the nation's gas prices began to rise after a short respite. He seems to have settled on the
industry mantra about demand pressures, and tried on a progressive's suit of alternative fuels and alternative transport, jaw-boning about gouging, promising to investigate and act. But, there appears to be little interest from the Bush White House, at least publicly, in doing anything that would immediately affect the price.
Perhaps Bush is reflecting on the reactions of the OPEC leadership which expressed their 'concern' over the $70b price and their belief that the world supply should be sufficient to cover the increased demand. Officials seemed puzzled by the buzz that had developed pinning the high price of oil on producers' inability to keep up with demand. Reserves are depleting, the conventional wisdom has suggested, and oil producing nations have come to the 'peak' of their supply, limiting their ability to use increased production to offset rising costs associated with getting more oil to more customers.
This week, senior OPEC officials disputed that there was a shortage of crude oil, and repeated their pledge to keep their customers supplied with with oil at a 'reasonable' price.
"OPEC believes strongly that prices are too high and nobody wants to see these prices," a delegate told Reuters. "(But) it has nothing to do with fundamentals."
"Geopolitics are riding the price," the OPEC delegate said, stressing that there was no shortage of crude in the market.
It's all too convenient for the U.S. oligarchy and their foreign counterparts to keep the price high. OPEC says they want $50 a barrel (still too high), the IEA said this week that they want OPEC to increase production to curb the price rise. As far as I know, no one in the industry is claiming that they've come to a 'peak' in their supply. Most senior industry sources say the refinery issue shouldn't be holding up the price.
But, what foreign producers are beginning to say out loud is that Bush's militarism and the prospect of an Iran invasion are what's allowing the speculation in the stock market, and allowing the price of oil to float even higher.
The problem is that the foreign industries keep a close hold on data which would help determine who is telling the truth about all of the activity. That leaves us to speculate. I'll wager for the worst of motivations from both the industry and their enablers in government. Oil could be at a 'peak' and on the decline. They could be covering up a dire shortage and folding under 'demand'.
But, I think OPEC official is expressing a frustration with the inflated price and their reluctance to put the pedal down on production, only to have some breakthrough on Iran pop the bubble. I think OPEC leaders could encourage an increase in production - and may do just that soon - but there is a growing belief and acknowledgment that the U.S. meddling and militarism is pushing the price of oil through the ceiling.
"We are doing all we can to meet demand but prices are rising because of Iran, Nigeria and Iraq," Abdullah bin Hamad al-Attiyah said Sunday in Doha, Qatar.
"Even if prices reach US$70 a barrel, what can OPEC do?"
"International economies can absorb US$60 oil," said the
oil minister of Qatar. "I don't believe there's a shortage in the market as more than one million barrels a day are going into inventories," al-Attiyah said.
I wouldn't let producers completely off the hook, however. Record oil prices have reaped record profits for oil suppliers. There is concern that producers and refiners are holding back production to drive prices higher. Sen. Chuck Schumer (D-NY) questioned refiners this week, wondering if the tigers have changed their stripes.
"Given the past behavior of the oil companies who take advantage of natural or cyclical occurrences and raise prices even more than necessary, this requires scrutiny," Schumer wrote in a letter to the FTC.
The New York Mercantile Exchange, the International Petroleum Exchange in London, and the Singapore International Monetary Exchange, are the entities which actually set the price of oil, mindful of whatever OPEC manages to manipulate. It may have an impact on U.S. prices if U.S. refiners can be cajoled into handling more of the country's crude oil inventories which have been increasing in the past month. But, I think it will take more than jaw-boning to pry producers' hands off of their swelling bankrolls.
Besides, as the OPEC ministers assert, there doesn't seem to be evidence of market shortages which would cause demand to pressure prices to the record highs we're seeing. Nigeria has seen a disruption in some of it's production, but there are analysts who say that other suppliers should be able to cover the shortfall.
Nigeria will seem like an abstraction if Venezuela follows through on their pledge to sharply reduce the 60% of their nation's total oil exports that go to the United States and replace our interest there with China. In fact, the Bush regime's jibes against Venezuela are just jingoistic jealousy.
National Intelligence Director John Negroponte said in a Feb.2 hearing that a "combination of rising demand for energy and instability in oil-producing regions is increasing the geopolitical leverage of key producing states."
"Record oil revenues and diversification of its trading partners are further strengthening the Tehran government." Negroponte warned the senate committee.
Oil was also on Negroponte's mind as he blasted Venezuelan President Hugo Chavez for his increasing relationship with Iran. Chavez "is seeking closer economic, military and diplomatic ties with Iran and North Korea," he said. Negroponte worried aloud in his statement that Chavez is looking to dump the U.S. as an oil trading partner in favor of customers like Russia and China.
Venezuela has the largest proven oil reserves in the Western Hemisphere. High oil prices have enabled Venezuela to overcome a 2002 recession and develop a strong economy. Any notion of cajoling them into engineering a price decrease was dashed this week as leaders there asserted that the U.S. still wasn't paying enough for oil, in their view.
Hard to imagine why a country's leadership we have repeatedly threatened wouldn't want to step in and do everything they could to ensure that we are paying less for the product which is pulling their country out of economic distress. Venezuela provides eleven Central American and Caribbean nations (Barbados, Belize, Costa Rica, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, Panama and the Dominican Republic) with crude oil. Venezuela also supplies Cuba. Venezuela's president, Hugo Chavez, has spent recent months convincing his countryfolk that the U.S. is going to invade their sovereign nation, so, Bush obliges with staged war-games in the Caribbean expected to last two months.
It should be clear to everyone by now that Bush' militarism has alienated the very sources of oil that we rely on for a steady supply at a reasonable price. Just as a change in driving habits here in the U.S. could pressure the price, a decrease in Bush's saber-rattling would unquestionably bring oil prices back down to Earth, and not just for U.S. market. A decrease in militarism by this American regime would cause a revival of the international cooperation which marked past periods of relatively low oil costs.
On the other foot, a continuation of the present intimidation campaign against Iran could lead to an actual military attack which would ensure prohibitive oil prices would remain in place for years, marked by increases of over $100 a barrel. No amount of manipulation could wipe away that self-inflicted wound on our nation, come to pass as a result of the actions of this lame-duck loser.
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