The economics of Opec

[Michael Pollak]

On Mon, 31 Mar 2003 s-t-t at juno.com wrote:

> Is this what 'blood for oil' would mean if true: With relatively low
> cost and high production, the Saudis are the major swing producer. With
> Iraq in the it's pocket, the US could both control the levels of Iraqi
> production (a major OPEC member) and have a client government that would
> serve as a credible threat to the Saudis, thus making them more
> compliant to Washington. ???

If Iraq broke the (limited) power of Opec, both by increasing its
production and leaving the organization, it would obviously diminish the
power and income and influence of Saudi Arabia.  But I can't conceive of
any scheme under which that would increase our leverage over Saudi Arabia.

I'm interested in the economics of oil.  But I don't think they can
explain this war for the simple reason that it doesn't matter whether you
wanted to raise or lower the price of oil, you could do it cheaper,
faster, more surely and less dangerously than this.

If you want to find a way in which the slogan "war for oil" makes sense
(and I have to admit, there's something about the slogan "blood for oil" I
find creepy) I think it's this.  For the first time in 30 years, we are
going to turn back the clock in the middle east.  We are going to
denationalize oil and return to the hated concession system (which is now
called the privatization system). And some lucky companies will reap huge
profits.

In that very crude way, this will be a war for oil.  We'll take control
from an Arab state and give it back to western companies again. And we
will be hated for it.  (And will no doubt be surprised by that.)

But it's not the motivation of the war, neither the original nor the
proximate nor the ultimate motivation.  It's rather the hovering
background illusion that has made all these wrong motivations plausible,
that gives even the craziest ideas the spurious feel of deep realpolitik.

If it makes any sense at all, in fact, it's negatively.  At the moment, it
doesn't matter who rules these countries in terms of oil.  Whoever it is
has the same interest in selling it.

But re-encumbering the US with the need to defend concessions against
future nationalizations seems like an excellent way of sucking the US into
the internal politics of the middle east for eternity.  Which some people
would like.

And people who would normally think that sounds mad are being sucked along
because of their unquestioned belief that "controlling" oil is somehow
essential to our security and having it controlled by other governments
somehow endangers us.

Michael