Oil and overproduction 3

Mark Jones markjones011 at tiscali.co.uk
Sun Jan 12 15:09:45 MST 2003

David Schanoes wrote:

> Secondly, I do not agree that the terms of the discussions requires that I
> have to dispute questions of reserves and extraction.

It's impossible to have a meaningful discussion about for example the war
(or not-war) in Iraq without understanding something about oil reserves and
depletion-rates. If it was indeed true that there was plenty of oil in the
Caspian or the Gulf of Mexico for instance, the US would not be trying to
re-engineer the Mid-East the way it is. Depletion does matter a great deal.
It is not true for instance that the present crisis in Venezuela is not
about depletion. Venezuelan conventional oil production is in sharp decline.
Since Venezuela is a so-called 'high-absorber' Opec state, i.e. most of its
national revenues come from oil, the decline of its conventional oil output
directly affects the level of social tension in the country and is a direct
cause of both the rise of Chavez and the onset of counter-revolution.
Similarly, it is absurd to argue that depletion, and the virtual collapse of
oil production in the ex-USSR, was not responsible first for the savage
decline in East European living standards after 1987 which triggered the
collapse of the Warsaw Pact group of states, and second that this collapse
did not directly impact the progressive collapse of Soviet economy and
society and then the Soviet state as well.

It is equally wrong to argue that the present precipitous decline in North
Sea oil output has no bearing on the British conception of its strategic
interests in Iraq, for instance.

Russian natural gas output is much less secure than is normally supposed and
the European Union will face natural gas supply uncertainties in the future.
This directly impacts European attitudes towards Algeria and other
alternative suppliers of natural gas. These strategic energy uncertainties
also underpin rising political tensions between Germany and the US. The
reason for the split between Schroeder and Bush about Iraq is not because
Schroeder is a nice guy and a pacificist but because these are two
imperialisms competing for a scarce and diminishing resource--oil--and both
have contradictory goals in the current Middle East crisis.

The political economy of oil cannot be studied separately from the question
of where the oil is located, how much there is, and how long it will last.

A few years ago people like Doug Henwood took violent exception to the
notion that oil mattered any more. At the time, they conceivably had a
point. Oil prices were low, there was a supposed 'overhang' or glut on the
market, the Dow was heading north and the talking heads were gibbering
frantically about 'the weightless economy', the 'New Economy' etc. But there
is much less justification for that kind of approach now, and those of us
who argued then that we were entering an era of Oil Wars and international
instability, have been proven right by events.

Mark Jones

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