Tuesday, May 13, 2008

The Fall of the Oil-Addicted Humpty-Dumpty

This article by Michael T Klare is worth a reading...

Since it is a long article, I have edited it substantially (the full text is available here)

...Less than a month ago, the United States... lost its claim to superpower status when a barrel of crude oil roared past US$110 on the international market, gasoline prices crossed the $3.50 threshold at American pumps, and diesel fuel topped $4... an ex-superpower-in-the-making.

That the fall of the Berlin Wall spelled the erasure of the Soviet Union's superpower status was obvious to international observers at the time... The relationship between rising oil prices and the obliteration of America's superpower status is, however, hardly as self-evident. So let's consider the connection.

The fact is, America's wealth and power has long rested on the abundance of cheap petroleum..... Abundant, exceedingly affordable petroleum was also responsible for the emergence of the American automotive and trucking industries, the flourishing of the domestic airline industry, the development of the petrochemical and plastics industries, the suburbanization of America, and the mechanization of its agriculture. Without cheap and abundant oil, the United States would never have experienced the historic economic expansion of the post-World War II era.

No less important was the role of abundant petroleum in fueling the global reach of US military power. For all the talk of America's growing reliance on computers, advanced sensors, and stealth technology to prevail in warfare, it has been oil above all that gave the US military its capacity to "project power" onto distant battlefields like Iraq and Afghanistan. Every Humvee, tank, helicopter, and jet fighter requires its daily ration of petroleum, without which America's technology-driven military would be forced to abandon the battlefield. No surprise, then, that the US Department of Defense is the world's single-biggest consumer of petroleum...

....When it came to reliance on imports, the United States crossed the 50% threshold in 1998 and now has passed 65%.... this represented a significant erosion of sovereign independence... transferring such staggering sums yearly to foreign oil producers, who are using it to gobble up valuable American assets.....

...the United States is importing 12-14 million barrels of oil per day. At a current price of about $115 per barrel, that's $1.5 billion per day, or $548 billion per year....

....at a moment when credit is scarce and economic growth has screeched to a halt, the oil regimes... are depositing their mountains of accumulating petrodollars in "sovereign wealth funds" (SWFs) - state-controlled investment accounts that buy up prized foreign assets in order to secure non-oil-dependent sources of wealth. At present, these funds are already believed to hold in excess of several trillion dollars; the richest, the Abu Dhabi Investment Authority (ADIA), alone holds $875 billion.

The ADIA first made headlines in November 2007 when it acquired a $7.5 billion stake in Citigroup, America's largest bank holding company. The fund has also made substantial investments in Advanced Micro Systems, a major chip maker, and the Carlyle Group, the private equity giant. Another big SWF, the Kuwait Investment Authority, also acquired a multibillion-dollar stake in Citigroup, along with a $6.6 billion chunk of Merrill Lynch. And these are but the first of a series of major SWF moves that will be aimed at acquiring stakes in top American banks and corporations...

....Foreign ownership of key nodes of our economy is only one sign of fading American superpower status. Oil's impact on the military is another.

Trailer of Michael T Klare's documentary Blood and Oil

Every day, the average GI in Iraq uses approximately 27 gallons of petroleum-based fuels. With some 160,000 American troops in Iraq, that amounts to 4.37 million gallons in daily oil usage, including gasoline for vans and light vehicles, diesel for trucks and armored vehicles, and aviation fuel for helicopters, drones, and fixed-wing aircraft. With US forces paying, as of late April, an average of $3.23 per gallon for these fuels, the Pentagon is already spending approximately $14 million per day on oil ($98 million per week, $5.1 billion per year) to stay in Iraq. Meanwhile, our Iraqi allies, who are expected to receive a windfall of $70 billion this year from the rising price of their oil exports, charge their citizens $1.36 per gallon for gasoline.

When questioned about why Iraqis are paying almost a third less for oil than American forces in their country, senior Iraqi government officials scoff at any suggestion of impropriety. "America has hardly even begun to repay its debt to Iraq," said Abdul Basit, the head of Iraq's Supreme Board of Audit, an independent body that oversees Iraqi governmental expenditures. "This is an immoral request because we didn't ask them to come to Iraq, and before they came in 2003 we didn't have all these needs."

Needless to say, this is not exactly the way grateful clients are supposed to address superpower patrons.

Certainly, however, our allies in the region, especially the Sunni kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) that presumably look to Washington to stabilize Iraq and curb the growing power of Shi'ite Iran, are willing to help the Pentagon out by supplying US troops with free or deeply-discounted petroleum. No such luck....

...As far as they're concerned, we're now just another of those hopeless oil addicts driving a monster gas-guzzler up to the pump - and they're perfectly happy to collect our cash which they can then use to cherry-pick our prime assets...

Worse yet, the US military will need even more oil for the future wars on which the Pentagon is now doing the planning... the future US war machine will rely less on "boots on the ground" and ever more on technology.

... To put this in perspective: The average GI in Iraq now uses about seven times as much oil per day as GIs did in the first Gulf War less than two decades ago. And every sign indicates that the same ratio of increase will apply to coming conflicts; that the daily cost of fighting will skyrocket; and that the Pentagon's capacity to shoulder multiple foreign military burdens will unravel. Thus are superpowers undone.


The rest of the article goes on to describe the rise of Russia since the fall of the Berlin Wall, and ends with:

....Whether we know it or not, the energy Berlin Wall has already fallen and the United States is an ex-superpower-in-the-making.

1 comment:

crazyBugga said...

OK. From wat I understand, USA buys oil from the Middle East and the Middle East uses that money to acquire stakes in American companies.

But the alternative perspective to this wud be the fact that the US is gonna use up the oil reserves of Iraq, and possibly other countries it plans on invading. This wud ease the burden of buying oil from the countries u have mentioned, atleast temporarily, till the US troops move out of Iraq (and even then, utilization of Iraqi resources may not cease)