Big Profits for Big Oil:  A Bogus Rationale for The War in Iraq

Dr. Robert Dickson Crane

Posted Apr 2, 2006      •Permalink      • Printer-Friendly Version
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Big Profits for Big Oil:  A Bogus Rationale for The War in Iraq

by Dr. Robert Dickson Crane

  In his article, “Bush Didn’t Bungle Iraq, You Fools; THE MISSION WAS INDEED ACCCOMPLISHED,” published on March 20th in The Guardian, Greg Palast is reasoning ex post facto.  His thesis is that oil prices went up after the Third Gulf War (the U.S.-backed Iraqi attack on Iran was the First) and that therefore this was the reason for the war.  This is logical but simplistic.  Windfall oil profits are a risky bonus not a reason for attacking Iraq.

  One objective of the current Gulf War, not even the main one, was to maintain prices high enough to keep Alaska and North Sea oil profitable.  Iraq’s rogue regime was willing to flood the market and bankrupt these expensive oil production centers.  Recovering the “19th province of Iraq,” otherwise known as Kuwait, at the beginning of the Second Gulf War, would have given Saddam entirely too much leverage over prices, particularly if he were crazy enough, which he undoubtedly was not, to annex also the Eastern Province of Saudi Arabia. 

  Bush the Elder publicly stated that Kuwait must be saved in order to save the American way of life (our gas guzzlers) from high prices.  As an old oil and petrochemical industry analyst, I asked a high official in Treasury about this, who told me that everyone in the industry knew that the opposite was true, namely, that the American consumer would profit from the Iraqi aggression, but that this could never be admitted publicly because it would have undermined the war effort.

  My introduction into the real oil business was when I did consulting for Native American energy tribes thirty years ago as head of my own consulting company, NAEDC, which was used as the conduit to fund the staff of the Saudi-American Joint Commission on Economic Cooperation.  Dick McCormick (later Under Secretary of State for Economic Affairs) was the Director and I was the Deputy Director, operating out of offices in the U.S. Department of the Treasury.

  The oil industry likes high prices, but this is only a bonus, and could even be dangerous if they go too high, because then alternative energy sources might become competitive and undercut the hundreds of billions of dollars of investment in the oil and coal industries (which are to some extent jointly controlled by the same people). 

  The same rationale has blocked the processing of radioactive wastes from the nuclear power industry.  See my article, “The World’s Most Important Announcement of 2006,”  February 1, 2006.  Most of the investment in alternative energy research is funded by the oil companies, to be sure, but only so that they could benefit before anyone else from potential breakthroughs. 

  The bottom line is stable prices, not high ones, which is why OPEC is America’s best friend.  The Saudis and other OPEC members use the same long-term cost/benefit number crunchers as do the Seven Sisters.  Low prices would be catastrophic for everybody except the retail consumers.  High prices could be catastrophic for the oil industry if they get out of control.  OPEC is the perfect regulator. 

  Saddam Hussein thumbed his nose at OPEC, and so did the Shah of Iran, so they had to go.  Even King Faisal of Saudi Arabia got out of hand before he was assassinated.  Now, Chavez, the populist leader of Venezeuela, is doing the same thing by threatening to sell his oil to American consumers at half price merely to jangle nerves in the White House.  This is a risky game.  The oil business is not for amateurs.

  Many Iraqis want to privatize the Iraqi oil industry by issuing equal shares of stock to every resident of the country, so that every Shi’a, Kurd, and Sunni would hold equal stakes in the future of the country by owning equal shares of voting, non-alienable stock.  This would give them an incentive to cooperate in a political confederation and to support the confederal government that made this possible. 

  You can bet that the first thing they would want to do is to join OPEC.  This is why the oil industry titans should support such decentralization of economic power in Iraq, rather than uselessly worrying about power slipping out of their control.  Economic democracy is the only sure basis for political democracy, and political democracy is the soundest basis for partnership.

                              Dr. Robert D. Crane, President
                              Center for Policy Research