Americans are not in Iraq due to Oil
There has been many theories that Americans invaded Iraq due to Oil revenues, my problem is that the Iraqi oil revenues cannot cover the costs of war at all, so all those theories are based on the idea that they cannot do elementary math in Washington?
Americans are in Iraq because oil profits will pay everything
source of numbers is here
The USA would have to withdraw Iraq now and control all the Iraqi oil production for at least 140 years to cover all its direct costs and more than 500 years to cover total costs!
The Iraqi oil profits cannot pay the total war costs at all.
Americans attacked Iraq because Hussein did not want to use the dollar anymore
Buying power of the Iraqi oil is absolutely minimal compared to the whole American economy, there is also dozens of countries with bigger economy using dollar (China, Saudi Arabia, Singapore, Hong-Kong).
Or take a look at Kuwait, which is a larger economy than Iraq and stopped using the USD and Kuwaiti dinar has been re-pegged to a basket of currencies.
1 – Iraq war costs source – Reuters
2 – Iraqi oil revenues (the biggest annual revenue in the history – 2008) – Energy Information Administration
3 – Iraqi oil profits – my estimate based on profits of large OPEC companies - OPEC
Rumors about Replacing the Dollar in the Crude Oil Market
Today there appeared some speculations on the Independent that Arab states started a deal with Russia, France and China about replacing the USD in the crude oil market. However the rumors has been after a while completely denied by all supposed participants.
This is not a new thing, a year ago I pointed out that behind the peak oil price was actually the value of the dollar and as a proof I have shown the oil price nominated in gold which is much more stable.
This oil-dollar peg has been point of many conspiracy theories that the USA controls all those countries and forces them to use the dollar. Which is, of course, as the most of conspiracy theories a non sense.
Anyone can trade a crude oil in any currency he want to, using the FX market (spot conversion is a matter of seconds). And anyone can calculate the crude oil price in any currency, using basic math of the elementary school level.
So why all of them has used the dollar? Because it was really profitable for them. And because it does not seems that good anymore, there are some talks about changing the dollar leading position.
Consider this, The Saudi Monetary Agency gained more than 1 trillion Saudi ryials (cca 260 billions USD) just in 6 years due to the USD peg. All those money are saved somewhere all around the world, owned by someone in the government. (SAMA annual report, page 46). The same goes for China which gained much much more.
So talks about forcing someone are nonsense, non-US governments will use the USD as long as it is profitable. When it stop being profitable they will simply switch to something different, which is China doing now, so far it has not been much successful.
UPDATE: Just realized that behind this report is 9/11 “Truther” Robert Fisk, that explains all thought
End of the Middle East gold age?
OPEC this week announced historically the biggest cut in production following by Russia as the second largest oil producer. The target is simple to push the oil price higher, ideally somewhere around 75 USD which would be fair price King Abdullah said.
As I pointed before price is driven by the USD much more than crude oil supply and market reaction have confirmed it. It’s looked as if traders totally ignored the OPEC statement.
Actually situation has to be very desperate. In a language of numbers OPEC cut production by 9% which means to keep their income the price would have to climb above 50 USD/barrel but the reality is quite different and price has broken long term support and fall under 40 USD/barrel. Limit cheating will be then matter of fact again in an effort to keep at least some income.
The second hard punch for OPEC has been end of the USD value/crude oil price correlation. Take a look at this chart.
US Dollar Index reflects strength of the USD to the main world currencies
As you can see when dollar was high then crude oil was low and vice versa. But few days ago something has changed and both indicators started follow one direct. This is very critical especially for the USD pegged countries because low prices cant be compensate by higher value of dollar.
The USD pegged countries (yellow)
How this will end resolve the USA as the biggest oil consumer and the USD producer but even now Saxo Bank forecasts social unrest in Iran, Arabic stocks are going down and Obama’s team speaks about reducing carbon emissions or higher gas taxes.
This is the reasons why the Middle East shouldn’t leave it without notice and start act! Dubai real estate bubble peaked same as the USA one, hotels are desert and the accommodation prices are at the record lows. But because the gap between rich and very poor is widening I’m afraid off they will choose return to the old traditions which offer more “socialization” instead of free market capitalism steps even if this situation have been caused right by these social interventions.
Crude oil price is stable like never before
In last days when crude oil prices reached 150 USD and then have been falling down to the 40 USD would be probably very strange to talk about stability in crude oil market. But there is something you should know.
 |
|
Brent monthly average price |
To be specific many people are making a big mistake just because they’ve accepted money as a universal measure for value! This is certainly not true at all. Money does not have standardized value like meters, miles or minutes!
Imagine If I had enough power and influence to force the world to trade crude oil for one of my Adidas T-shirt model. In the beginning crude oil price would be very high because supply of these T-shirts would be very low. (thousands of barrels for one T-shirt) But If China noticed it and started to produce my T-shirt model, price would rapidly change direction. (one barrel for thousands T-shirts). All of this could happen with no change in supply and demand for crude oil.
 |
|
Oil price in gold |
The picture above shows price we could see today if Nixon hadn’t canceled convertibility of the USD to gold. No peaks, no bubbles and stability. It’s obvious why was price in last decade much more stable than in previous because markets has been developing much more quicker than never before (open electronic markets, creation of ICE – Inter Continental Exchange) that means competition on the markets rapidly rose and that has been helping to push the price in the ideal point.
It’s bit amusing to see how politics are speaking about necessity to regulate these markets and restrict speculation even if this speculation significantly do help. There is only one sick medium in crude oil market it’s the USD (which is completely government regulated) especially then its infinite production. Because making new dollars is much easier than making new gold bricks.
Motto
Recent Posts
- There Is No Special Islamic Finance Finally Confirmed
- The Berlin Wall Fell 20 Years Ago
- Michael Moore and Ron Paul about Capitalism
- Internet Access as a Legal Right?
Archives
- December 2009 (1)
- November 2009 (2)
- October 2009 (5)
- September 2009 (3)
- August 2009 (3)
- July 2009 (4)
- May 2009 (1)
- April 2009 (3)
- February 2009 (3)
- January 2009 (1)
- December 2008 (7)
Atheist Blogroll
