The Source of High Oil Prices

[Juice.]

This article is not a short read, but it is a MUST read. It identifies the culprits of crude oil price escalation and tells how those same culprits are profiting from it in the futures markets and hedge funds.

In short, the world energy markets are being manipulated for excessive profits while at the same time advancing the agenda of militarist policies in the Middle East. The author makes the point that the current price of oil can not be justified by supply and demand fundamentals like the neocons are saying. Probably as realistic an explanation of what's actually driving the escalation in energy prices as you'll ever find in the media. Here's the link:

Asia Times Online :: Asian news and current affairs

Some quotables for those not willing to read the article:

The fact that the skyrocketing oil prices of late have been accompanied by a surplus in global oil markets was also brought to the attention of President George W Bush by Saudi officials when he asked them during a recent trip to the kingdom to increase production in order to stem the rising prices. Saudi officials reminded the president that "there is plenty of oil on the market. Iran has put some 30 million barrels of oil that it can't sell into floating storage. 'If we produced more oil, it wouldn't find buyers,' says the Saudi source. 'It wouldn't affect the price at all.'"

And why would producing more oil not "affect the price at all"? Because what is driving the soaring oil prices is not shortage but speculation: "with so much investment money sloshing around in the commodities markets, the Saudis calculate they have no hope of controlling short-term price fluctuations. They blame the recent price run-ups on speculation and fear of shortages [not real shortages], factors they say are beyond their control.

The Peak Oil thesis serves as a powerful trap and a clever manipulation in that it lets the real forces of war and militarism (the military-industrial complex and the pro-Israel lobby) "off the hook; it is a fabulous redirection. All evils are blamed on a commodity upon which we are all utterly dependent".

Let us assume for a moment that the neoconservative militarists are sincere in their alleged desire to bring about democratic rule and representational government in the Middle East. Let us further assume that they succeed in realizing this purported objective. Would, then, the thus-emerging democratic governments, representing the wishes of the majority of their citizens, be as accommodating to US economic and geopolitical objectives, including its oil needs, as are its currently friendly rulers in the region? Most probably not.

To the extent that competitive oil markets and/or prices are occasionally manipulated, such subversions of competitive market forces are often brought about not so much by OPEC or other oil producing countries as by manipulative speculations of financial giants in New York and London. Wall Street financial institutions have accomplished this feat through "innovative" financial instruments such as establishment of energy hedge funds and speculative oil futures markets in New York and London.

Contrary to the claims of the proponents of Peak Oil and champions of war and militarism, the current oil price shocks are a direct consequence of the destabilizing wars and geopolitical insecurity in the Middle East, not oil shortages. These include not only the wars in Iraq and Afghanistan, but also the threat of a looming war against Iran. The record of soaring oil prices shows that anytime there is a renewed US military threat against Iran, fuel prices move up several notches.

In today's economic environment of giant corporations, many of the major industries try and often succeed in controlling supply in order to control price. Take, for example, the automobile industry. Theoretically, automobile producers could flood the market with a huge supply of cars. But that would not be good business as it would lower prices and profits. So, they control supply, just as do oil producers, in order to manipulate price.

Big Oil interests also know that not only is war no longer the way to gain access to oil - it is an obstacle to gaining that access. Exclusion of US oil companies from vast oil resources in countries such as Russia, Iran, Venezuela, and a number of central Asian countries due to militaristic US foreign policy is a clear testament to this fact. Many of these countries (including, yes, Iran) would be glad to have major US oil companies invest, explore and extract oil from their rich reserves. Needless to say, US oil companies would be delighted to have access to those oil resources. But US champions of war and militarism have successfully torpedoed such opportunities through their unilateral wars of aggression and their penchant for a Cold War-like international atmosphere.

It is no secret that the major force behind the Iran-Libya Sanction Act was the America Israel Public Affairs Committee (AIPAC), the main Zionist lobby in Washington. The success of AIPAC in passing ILSA through both the Congress and the White House over the opposition of the major US oil companies is testament to the fact that, in the context of US policy in the Middle East, even the influence of the oil industry pales vis-a-vis the influence of the Zionist lobby.

But the major reason for the persistence of this pervasive myth seems to stem from certain deliberate efforts that are designed to perpetuate the legend in order to camouflage some real economic and geopolitical special interests that drive US military adventures in the Middle East. There is evidence that both the military-industrial complex and hard-line Zionist proponents of "greater Israel" disingenuously use oil (as an issue of national interest) in order to disguise their own nefarious special interests and objectives: justification of continued expansion of military spending, extension of sales markets for military hardware, and recasting the geopolitical map of the Middle East in favor of Israel.