Oil-igarchies

In “Blood Barrels”, a recent Foreign Affairs article, Michael L. Ross notes the links of oil production and regional conflicts. Ross correctly identifies some of the causations for petro-wars; there are ample case studies to support his thesis. He also makes a number of suggestions for reforms that could reduce oil-igarchies embrace of conflict.

Most commodities react to purely supply and demand dynamics; oil prices on the other hand are complicated by emotions. Most notable is the emotion of fear which oil-igarchies manipulate for corporate and individual greed. When the well-head cost of a barrel of oil goes up there is an immediate consumer price surge although products of that barrel of oil may not reach the consumer for two or more months. When the well head cost go down however the consumer price takes months to lower and never returns to the previous level.

This is neither a unique or a recent trend. Oil has been the center of greed economics and politics for thousands of years. Consider olive oil as fueling the Greek and Roman wars, Competing whale oil fleets of 19th century led into the Great oil wars of the 20th century.

Scholars have noted that the Middle East was ignored by the world until oil was discovered in 1901 in what is now Iran. These discoveries coincided with oil fired technological advances. Britain locked up the oil fields of Iran, which they held on to until mid-century. Germany, twisting Ottoman arms and possibly using bribes as grease, pushed a rail line to the prospective oil fields of (now) Iraq. It was international oil-igarchies that led to the Middle-East campaigns of World War I. In the post war era the British and French divided the Ottoman region and locked out the Germans. A late comer to the great oil grab America had to pay a premium to play in the international oil puddle but it to soon converted from an oil exporter to an importer of cheaper foreign oil for greater profits. In World War 2 Germany reached for Soviet (Russian) oil fields while locked out Japan headed to Southeast Asia. Allied powers “protected” oil producers from the axis but not from their own exploitation.

In ruins of World War 2 protectors exploited producers but the times were changing as nationalist movements swept Africa and Asia. The overt explanation was to throw off colonial exploitation but the elites of the oil producers had learned their lessons well, oil produced great wealth. Great wealth enabled high ideals and low. There was much promised to the people of the newly independent nations but little delivered as income was diverted and negotiated away by new oli-igarchies.

The flaw in free market economies is that greed is insatiable and the greedy are experts in rationalizing self-interest as the greater good, manufacturing fear as a means to their end. The present conflict is justified by an obscure “Energy Security Initiate” which held that the powerful are entitled to “protect oil” anywhere in the world. The problem is that the measures of power are shifting and while oil remains supreme for the foreseeable future it will be alternative energy sources that will ultimately reduce petro-wars.