Friday, June 13, 2008

Cold Oil... Cold War

I'm not the type given to conspiracy theories. Aw hell, sure I am. Oswald was set up; SOMETHING happened in the Roswell skies, and we know where Osama Bin Laden is -- at least we did until we killed him. One thing along those lines occurred to me several days ago: gasoline prices.

We now know that in the 1970s, when America had a gas shortage, it was because OPEC, the Orgzanization of the Petroleum Exporting Countries, tightened gaskets in their oil fields and deprived us. It was all about profits, but we learned two things that year; OPEC can play god with the energy markets and America can be brought to its knees with a turn of a wrench.

That is history, but history seems to be repeating itself. Here we are in 2008, oil production is slow and demand is high with gas prices to match. But there might be a problem. As recently as 2005, OPEC was pumping oil at a record rate. Even, Saudi Arabia, the largest producer of oil and the only one with any extra production capacity was running at 90%.

Jump to this past May when President Bush basically pleaded with the House of Saud to increase production to alleviate our high gas prices. The Saudis said they would increase supply by 3%. At first blush, we all thought this was America getting told to go *&%/@ ourselves, but that might have been the most honest answer they could have given. 3% may be all the extra production they can possibly muster.

It was postulated in the late nineties that OPEC lost control of oil due to the privatization of nation's oil concerns and market forces dictating prices. While that may have happened, OPEC didn't seem to have had any problems weathering that storm. However, I'll bet it tolled a bell, and they heard it clearly. Ever since, I think they have been scrambling to get back their former power. But if they feel everything slipping though their fingers, where is it all going?

We might have a problem here. Something is lurking under the black pools that control our existence. We think we know what it is, where the danger lies, but we really don't.

While OPEC may have flexed their muscles a few times in their forty plus years of existence, we all knew their primary motivator was money. Yes, they are raking it in hand over fist right now, but they are smart enough to know that, especially in an economy, what goes up, must come down... and it will come down hard.

Changing tack to a different angle that, I promise, will coincide with the previous line of thought, let's talk about the Soviet Union. In 1982, Gorbachev become the leader of the USSR. By 1985, he and Ronald Regan began a standoff of sorts, where war was fought everywhere but in the open, or in any official capacity. There were many battles with many countries involved, but all was kept "under the radar" to avoid the very real mutually assured destruction that both sides could deliver with their vast nuclear arsenals.

The way the cold war ended and the USSR was defeated boils down to the difference between two fundamental schools of thought: Capitalism and Communism. Basically, one worked and the other didn't, especially when the two were pitted together. Communism, or the sharing of all resources equally, is simply not setup to be anything but a non-profit. Capitalism has a lot more wiggle room.

In an opening move, Regan spoke with OPEC and got them to open the oil floodgates, dropping the price per barrel. While this would make it more feasible to keep the Soviet war machine going, it also trashed their income; the Soviet Union's primary export was oil. After that, we built up our military, then they did the same. We assembled thousands of nuclear missiles and they matched ours. By the late eighties, the Soviet Union was pouring all of their resources in the their war factories to keep up with the U.S. This meant that their food and other essential infrastructures suffered greatly. Eventually they were forced to quit so as to avoid economic ruin and collapse.

We hit them hard where they were weak and brought them crashing down.

OPEC has always maintained that they do not control the world's oil, but that hasn't really been true until recently. Therein lies the rub... who does? The importance of this question can be seen every time you go to put gas in your tank, every time you buy milk, every time you look at your electricity bill. Gasoline is the primary drive of our economy and way of life. It takes gas to power factories and power plants. It takes gas to power farm machinery and deliver food to... everywhere. When gas prices go up, so does everything else.

What better way to tank a Capitalist country than to make it too expensive to run properly?

Gasoline is our weakness. Raising its cost so very high is the exploit. So who is doing this to us? Not OPEC. They may be on different cultural or religious grounds, but their lifestyle and livelihood is tied tightly with ours. Like the war on terror, I don't think this can be attributed to a country, or group of countries. It has to be individuals. I'm not saying some countries aren't contributing, even consciously. Take Venezuela for example. They hate us -- at least the President does.

To fully exploit our fatal flaw, several things would have to happen. OPEC would need to weaken its grasp, as well as come close to running at capacity. Other nations would have to produce their own oil supplies enough to take up the slack. Finally, oil would have to be highly reactive to trading, both as a commodity and in futures. All of which has happened.

What would it take then to push us to our knees? Money, lots of money. Money controlled by individuals working together, or separately toward the same cause. Money that, ironically enough, may have even come from us that we spent on oil. If these individuals work the stock market smart enough, they can continue to drive up prices until we are in the same position the Soviet Union once was. We will have to choose between military or food, security or survival

Some "out of the box" thinking inspired a small group of individuals to attack America in a way that was never done before by flying planes into buildings. Since then, we have made it all but impossible to attack us in a similar fashion. Well, some people may have done more out-of-the-box thinking again. This time, it could be more devastating than we ever feared.

You don't have to blow-up the United States of America, you can marginalize it into to a gasping, impotent, harmless bystander.

The solution to keep us strong? That's going to take some more thought.

Sorry for the delay. I've had a lot on my plate...