Weaponized Oil. A new way to fight economic war?

There have been plenty of wars where the objective is to control resources, as we all know, oil really is black gold, it brings huge wealth and power to those who control it. Here however, I want to look at things from a slightly different perspective.

I have been watching the plummeting price of oil with great interest over the last few months. This year we have seen the price drop from a high of over $105 per barrel to a low, so far, of about $81 per barrel for WTI Crude. It seems the price still has further to go before it bottoms out. There are two immediate reasons for this, the first is the global economy, it isn’t particularly robust at the moment, the second, is the fact there is a now a glut of oil. Oil production in the USA is now at the highest it’s been in decades. The world is now awash with the black stuff.

Oil as a weapon

Oil as a weapon

So where does economic war come into all of this? Market share and geo-politics is the simple answer. The producers are having to battle to maintain their market share in this time of abundance and falling prices. OPEC, led by Saudi Arabia, has decided for the time being not to cut production as a way of pushing up prices. It appears it is happy to let the price fall rather than risk losing customers, add to this the fact that its cost of production, for the moment, is the lowest of all the oil producing nations. It can afford to see the price fall for a while as a way of squeezing other producers.

The boom in Fracking in the USA doesn’t come cheaply. Evironmental concerns aside, it costs a fortune to produce oil this way. The vast majority of Fracking companies are taking on huge amounts of debt, billions of Dollars, to finance their operations. As the global price of oil falls the pressure is being increased. If the price of oil remains this low for any period of time then it would appear many of these companies could become bankrupt. Could it be the next big bail-out in the USA will be for these companies? Will taxpayers be expected to take another hit as they did when the banks were given their money for free? I wrote in more detail about the economics of Fracking in the article, Fracking a Ponzi scheme?

The US government might decide helping them to keep producing and building energy independence is a price worth paying as it wants to see Russia’s Vladimir Putin suffer. For sure, current prices are now below breakeven costs for Russian oil. With sanctions now biting in Russia, it is more than ever dependent on oil revenues to prop up its system. It is developing closer ties with China to aid economic development, but there too its economy is slowing. If anything China will be the senior partner in that relationship, its economy is so much bigger and can dictate the terms. Russia will have little choice but to go along, it needs the cash too much. Looking ahead, I don’t see Russia making any big gains out of this partnership.

What this all amounts to is economic warfare. Saudi Arabia wants prices to fall in the hope of putting severe economic pressure on those countries whose production costs are much higher, maybe forcing them to close operations so it can increase its market. The USA is happy to see prices fall because of the huge financial burden it puts on Russia, even if it could well mean a bail-out for its own Fracking industry. There is a race to the bottom going on, to see who will blink first, with the winners being able to take the spoils. If that isn’t war by other means then I don’t know what is!

The Ultimate Futility of The Longitude Prize

The Longitude Prize this year has the very best of intentions. Offering a $10 million prize to anybody who can create solutions in the fields of antibiotics, dementia, food resource, helping people with paralysis, water distribution, and environmentally friendly flight. These are all issues of our time that need addressing and I am curious to see what the results of this competition will be. At the same time it also struck me that ultimately, even with the best of intentions, any progress in these fields will not benefit the vast majority of people. Why?

We live in a world that is driven by profit and power at the exclusion of all else, even governments are run along the lines of business even though their responsibility is to govern. I’m not sure they understand what that means though. If there are any breakthroughs in the above areas the question is always going to be, how can the most profit be made from them. That unfortunately means that in many areas of the world they would not recieve any benefits, for the reason that there is no profit to be made from the poor. In the field of medicine it is sometimes discovered that an old drug whose patent has expired can be used to treat an entirely different condition. When this happens the Pharma company that makes the discovery, has the drug re-certified for different usage and then sells it at a hugely inflated price even though the drug itself has not been modified, simply rebranded. This then means that people in poorer parts of the world are no longer able to get hold of the original drug that they need so much. Where is the morality in that?

Looking at food, making sure that everybody has enough, which must surely be a human right, is a huge issue today. It is laudable that the Longitude Prize wants to address this issue but to be honest there is already enough food in the world for everybody. The problem is distribution. Again, there is no profit in the poor and it is the poor who are hungry. This is something which should be a function of government, after all it is their responsibility to look after their people. Governments also allow business to pervert food supplies. For example, genetically modified corn, did you know that a farmer is not allowed to keep seed from the last harvest to plant the next year? Why? Because so doing infringes the patent of the company which owns the modified corn. Therefore farmers in poorer and dryer parts of the world who were happy that they could grow corn that needs less water then discover that they are locked into buying new seed every year. If they hold back some of the seed to plant later the business will hit them with huge fines, and be supported by the governments in their actions, fines they cannot afford. So instead of helping people to grow food that needs less water they end up being effectively owned by a conglomerate because they use the modified corn. Where is the morality in that? The governments, where are they? In the pockets of the conglomerates. Don’t get me wrong, I’m not anti business, I simply take the view that morality has a part to play, life is not just about hugely inflated profits. The same goes for water, a part of the prize wants to look at the development of desalination as a way of addressing water shortages. But who will pay? It is an expensive business and those who are most thirsty tend to have the least money. It will never occur to the minds of global businesses and politicians to supply food and water to those areas which desperately need it, simply because there is not the profit to be made. No mater the suffering of those who live in those areas.

The only way to address these issues is through global governance. Instead, politicians are more interested in lining their own pockets and looking after those who are closest to them. Even if somebody goes into politics with good intentions they ultimately fail. Why? Because in the end it is always the deeply embedded political establishment which changes the person, the person will never be able to change the system. The global political system is designed to perpetuate itself and protect itself from those who might be altruistic. Throughout human history we have tried every form of government, non of them work, they only serve a part of the population and the percentage of the population they serve is shrinking rapidly. Until there is a form of government which takes its responsibilities seriously, the only way that can happen is if there is a global government in order to see that all people’s interests are looked after, then efforts such as the Longitude Prize will ultimately be in vain.

We live in interesting times and soon to be even more so. When you study the global political and business system it appears to becoming more sociopathic with time. Normally, sociopathy is something we relate to people but it appears that organizations can express the same behaviour. Here is a list of typical sociopathic behaviour, which when taken together create a monster. See what you think.

1. Very charming. Think of all the efforts governments and big business put into their charm offensives. To always portray themselves in the best light. Their leaders are often chosen in part for their charisma.

2. Spontaneous and Intense. They are unbound by normal social contracts, they do what they can get away with and the only sin is that of being caught. They make decisions which don’t make logical sense or have any sense of morality. Decisions are made to look good but without any real substance that is constructive for society

3. Incapable of feeling guilt, shame or remorse but put on a show if forced to.

4. Very good at lying

5. Intelligence which is used to decieve

6. Incapable of love and very self serving. However are good at acting as if they care.

7. Great wordsmiths. Goes with the charm which is used to decieve

8. Instead of apologizing will go on the attack to push the blame elsewhere

9. Delusional, believing that what is said is true because they have said it.

10. The need to win at all costs and dominate others.

When you take the above characteristics and refer them to the global political and economic system, the paralells become all too clear. What this goes to show is that we are living in a very sick world. There is no cure for sociopathy and there is no cure for the behaviour of the political and economic system. The system is clever, and very good at perpetuating itself, but as always with sociopathic behavior, leads to its own downfall. It is simply a question of time. Maybe that time is closer than many realize.

The financial crisis of 2007/2008 was symptomatic of a system trying to rebalance itself, to get back to a time when there was not the mass speculation and financial instruments that created money that never existed. The quantatitive easing was the response of governments to stop that happening. Since that time the economic system has almost arrived back at the level it was before the crash. Nothing systemic was really changed so all the ingredients are in place for exactly the same thing to happen again. Only this time it will be bigger. Economically we are in a period similar to that between the First and Second World War. The calm before the storm. The next time the economic system tries to reset itself the effect will be far greater and it will cause the global middle classes to shrink dramatically.

Politically, at a global level, conditions are dangerous, the period before the First World War was marked by rampant nationalism, countries looking to dominate one another, just as the situation is today. The situation between Russia and Ukraine is extremely dangerous, things are just getting started there and the potential for it to spill over into Europe in future is real. The Middle East is more explosive than many realize as political/religious forces seek to expand their influence. Talking of religion, the Orthodox Church in Russia is very influential in the actions which are taking place in Ukraine. The Church and Putin are extremely close.

We live in interesting times. Going back to the Longitude Prize, it is good that people still care, but until there is fundamental change in the Political, Economic and Religious systems that run this world then all the best will in the world is not going to improve the lives of people. That is why the prize is ultimately futile.

I know the tone of this article seems depressing but it isn’t. When the time is right I will expain why.