Making the World Safe for Oilgarchy

by Philip Greenspan

March 3, 2003


- Wha'd'ya say, Benny? Do you believe all the crapola they've been feeding you about why they're gonna go to war?

- You may be pleased to know, Molly, that even I cannot swallow their phony reasons; but that doesn't mean I will not support a war. Taking on Iraq is in the national interest.

The administration can't disclose its real motivation. Starting wars to advance the economic interests of a country does not sit well with the public. They must feel that a war will accomplish some vital ideological mission. As a result this administration is forced to concoct an attractive reason.

Some pundits have correctly pointed out that by defeating Iraq we will be put in possession of the world's second largest oil reserves; and we will no longer be at the mercy of highjacking foreign governments.

- Pundits, shmundits. They know the administration has a lousy case so they get support from guys like you who think they understand the importance of war. Baloney! There is no imminent threat to the world's oil supplies. But the trauma of a war can upset the entire picture and really cause problems.

- Now, Molly, you can't deny that there have been problems in the past with our supply of oil. Oil is imperative in today's world. Our society would be shut down if an adequate supply was not always available.

By placing the oil in friendly hands we safeguard that vital commodity.

- The countries that possess the oil have always been anxious to sell their oil. They can't drink it, bathe in it, nor swim in it. Their domestic needs require only a miniscule portion of their production. The sale of that oil is extremely important to them. It is an asset that they must sell. Usually it's their main and sometimes their only saleable asset.

The few independent countries that have not sold out to the oil giants have never withheld their oil for any length of time. Their pressing domestic needs have compelled them to concede whenever the oil companies were unwilling to negotiate a fair price.

The corporations' insatiable appetite for profits is never satisfied. They are continually screwing the public, their suppliers and the governments.

- Hold on there, Molly. You are making a lot of unsubstantiated claims. How can you claim that with oil controlled by OPEC countries the corporations are the culprits? I don't follow your absurd logic.

- It requires a little understanding of US-Middle East oil history. Perhaps a few well-documented facts may alter your thinking.

Back in the '40s, FDR invited the Saudi king, ibn Saud, to a powwow on a US warship. The king was so unimpressed that he brought along a whole flock of sheep to the party. After probably kissing the king's ass to show his admiration, FDR assured the monarch that the U.S. would be Saudi Arabia's loyal friend as long as the American oil companies were kept happy. The U.S. has been keeping the royal family happy ever since.

- Well what is so wrong with that, Molly? Keep those guys happy and American consumers have a reliable supply of oil and at a fair price, besides.

- But don't you realize that the arrangement was strictly benefiting the international oil giants and not the American consumers?

- That's an assumption on your part. FDR had to make the arrangement for the companies because the companies are the ones who deal directly with the producers. The producers have no control over what the price to the ultimate consumer will be.

- Exactly. The producers do not control the ultimate price. The companies are the bastards who buy cheap and jack up the price. But let's get back to some very interesting historical incidents.

It didn't take long for the government to show how solicitous it was to the oil companies.

Several years later the Saudi monarchy insisted the royalties were insufficient. The companies ran to Uncle Sam for help. What would the Truman administration do to fulfill FDR's promise?

Simple. Don't call a royalty what it really is -- 'a royalty.' Tell the Saudis to enact it as a tax instead and under the law the oil companies can deduct the entire amount from their tax bill. With that nice little gimmick there was no expense for the companies; but you and all other taxpayers became responsible for the extra royalties. A hidden price increase for the little guys!

"Give 'em hell Harry" didn't give the big guys hell; but the little suckers, you included Benny, unknowingly got their usual screwing.

- Oh, I realize the big guys get some breaks from time to time. While I don't know how much the added royalties were, overall I don't imagine they were exorbitant. Were they?

- I don't know. You may be right, Benny.

- They probably added up to a lot for the big companies but to the average Joe it was not too much. And I don't believe the public has been badly served over the years.

- Well let's take a look at a different historical situation where Uncle Sam during Eisenhower's administration was again not quite as considerate of his own citizens as he was of the oil companies.

Back in the '50s the price of Middle East oil was ten cents a barrel.

- Ten cents a barrel? You mean ten cents a gallon? Right?

- Wrong. I said it and I mean it! TEN CENTS A BARREL. Seems like American consumers should have had an enormous supply of very cheap oil. But, oh no, that was not for Americans.

- What? Americans could not purchase that cheap oil? That's crazy. How could they prevent that oil from coming into the country?

- The Eisenhower administration claimed NATIONAL DEFENSE.

Supposedly, if America were to permit unlimited oil to enter the U.S. it would undercut the price that American drillers needed to stay in business, and a domestic oil drilling industry was imperative in case of war. Result: cheap oil was not permitted in.

The real reason, of course, was to...

- Oh no, it was not to protect those fat cat drillers?

- Yes, yes, to protect the fat cat drillers... Of course, they never couched it in such an objectionable phrase. They claimed national defense. America had to have a viable oil industry with operating wells. But by continually pumping out the oil, the wells would run dry and there would be no oil drilling industry. That obvious fact was never considered.

So American consumers paid higher prices to the oil companies.

But then again, Benny, with the cheap oil so readily available it was a shame to exclude all of it. So exceptions were made. For the big boys there always are exceptions. So cheap oil did come in. A few oil giants were granted government licenses to import limited quantities. They promptly made gobs of dough by charging the prevailing retail price.

Translation: screw the retail consumer but take care of the oil giants, and this again by the US government and not any hostile foreign power.

It's O.K. to keep that oil price low for the US corporations. Then they can have larger profits when they price it at what the market will bear.

- I'll concede that the government may give some domestic companies a break from time to time. Probably for some important reason that you're not aware of. But come now, Molly, you know the OPEC countries are a cartel that fixes prices to gouge the consumers. It's only because of friendly countries like Saudi Arabia who have moderated that damned cartel's activities that the prices are not higher. And right now it seems the Saudis are falling in line with the other Arab highjackers.

- Well I would imagine that your idol Adam Smith would have given you a little lesson on the law of supply and demand.

Oil is pumped from areas all over the world that are outside the OPEC bloc. Although OPEC tries to control the price, the competition from the non-OPEC oil sources forces crude to find its correct market level. There were times when OPEC could not hold its price and times when those other sources were able to get the OPEC price because the free market supported it!

Free market prices can be overridden by government regulations within their country and that is what the U.S. does on behalf of its corporations.

- You have provided a few examples of where the government has given a benefit to some corporations. But I recall a tremendous jump in oil prices that was initiated by OPEC back in the seventies and that supposed free market did not get the price down.

- Touché. You picked a real good one, but there were other factors at play.

Tricky Dick had just announced that his 'Nixon Doctrine' would get lavishly armed friendly countries to protect America's regional interests.

The Shah of Iran, who at the time was considered one of our bulwarks for controlling the Middle East, was extremely anxious to enlist in the new policy. He demanded a generous supply of the latest military hardware. The government had no intention of providing him with that equipment gratis. So Henry Kissinger told the Shah to raise prices on his oil to get the needed funds for his hardware.

When the Shah proposed an increase of almost 400 percent in the OPEC price the bloc realized that such a request coming from one of America's top allies meant there was a green light ahead. OPEC put through that increase but it was our friend, the Shah, who was the initiator and there was US government complicity involved.

- That scenario is very strange and incredible -- too incredible for me to believe.

- Yes, it is strange and incredible and knowing you, Benny, I didn't expect that you'd believe it. I just want you to be aware that a possibility exists of a US government involvement in that increase.

There were a lot of strange things that always seemed incredible about the oil companies in the Middle East.

When one country, Iran, nationalized their oil the U.S. stepped in to oust that government and install the Shah but when several governments nationalized their oil and created OPEC no similar action ensued. I suspected that the oil companies were willing to accept the OPEC bloc because friendly governments would be included in the cartel. Like the FBI that infiltrated suspected subversive organizations with their agents, the companies could now learn the inner workings of the cartel through their friendly local agents - the Iranians and the Saudis.

- Now, Molly, you don't expect me to believe your far-fetched suspicions, do you? You keep going farther and farther off the deep end.

- No, Benny, I absolutely don't expect you'd believe it. I'd be shocked if you did.

- Molly, you've made a few points but you have not convinced me that the government is not strongly regulating the oil companies.

I maintain that if government did not restrict them they could lower prices and better serve the public. Regulation increases costs and puts added burdens on the companies which translates into less efficient operations. Get government off the backs of the companies and you will see the difference.

- Benny, my suspicions may seem far-fetched to you but they result from a lot of independent thinking. Yes, independent thinking. Something everyone should do from time to time. It's a little more stimulating to the mental processes than simply accepting the conventional line pounded out regularly by the corporate-media-government complex.

As a final example of the little guy rip-off we need not turn back to history because the recent Enron scandals fit so nicely. During this usurper's administration...and to get off the topic for a second, if ever there was a highjacking it was of that recent election when the big boys pushed the idiot puppet into office. A typical banana republic coup. And this is supposed to be the country that teaches the world about democracy. Even you, Benny, as I recall were astonished at the audacity of the bastards.

But to get back to the Enron rip-off. Only a short time ago the state of California was clobbered by the exorbitant costs of electricity. And those costs were directly related to deregulation. Deregulation. Recall that wonderful word. Corporate America pushed through that gem. A great scheme that successfully got government off their backs.

When the state of California called on the administration for help they were told that the government would not interfere in the inevitable forces of the free market.

We now know of all the rigging that went on and how the government not only fails to protect the public but conspires with its buddies in the corporate sector to screw the public. Wha'd'ya say to that, Benny?

- No system is perfect and yes there was definitely wrongdoing. But those guys were just a few of the bad apples that exist everywhere.

- To make the world safe for the oil-igarchy thousands or perhaps tens of thousands of innocent men, women and children will receive undeserved capital punishment.

I know, Benny; those poor souls will be in the wrong place at the wrong time and they will just happen to be COLLATERAL DAMAGE. But many others in the world will not agree with the collateral damage designation and will retaliate with their own version of collateral damage on American soil.

Be aware that those retaliators are but a few bad apples that exist everywhere.

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Internal Resources

Iraq on Swans

The 1991 Gulf War Rationale - A Swans Dossier

United States' Gargantuan Energy Appetite - A Swans Dossier


Philip Greenspan on Swans (with bio).

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Published March 3, 2003
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