It’s blood and oil, not Saudis against fracking ( Comment Whitehorse Star August 28, 2015 )
Gwynne Dyer’s thesis of a contest between Saudi oil and North American frack interests is popular in Wall Street gazettes and the mainstream media, but without weight in the real world for two reasons.
His Aug. 20 column syndicated by the Star, “Face up to it, folks: fracking is winning”, overlooks that subsidized shale oil fracking was losing money when a barrel of oil traded for more than $100. Plain math.
Secondly, he mischaracterized the Saudi-U.S. relation of political economy as one in which market regulations dominate, when in reality it is almost pure protectionism and resource colonialism. Neoliberal pseudo economics hide dangerous problems.
With a crude price around $100 per barrel until mid-2014, the super majors, such as Exxon, Shell and BP, published for 2013 a drop in profits of around 25 - 50 per cent.
This was also the year that unconventional reserves, by about 60 per cent, took over reserve replacement in their financial statements. Unconventional stands for burning the oil candle at both ends.
Access by tar steam extraction and new style brute force fracking is expensive beyond transparency and inflates false production figures because useful net energy output is questionable to non-existent.
Unprecedented and discounted quantities of conventional energy and other resources are blown up in smoke for a new and extremely ideological fossil extractivism.
The data fallout of this 2013 financial tipping point of overall oil profits is overwhelming but has not yet quite sunk into general awareness.
Among the big fossil resource consultancies, EY (Ernst & Young) Oil and Gas Services is one more that observed a steep increase of cost in accessing crude and nat gas reserves.
Since fracking became relevant around 2009 and into the mid-term future, their 2014 U.S. Oil and Gas Reserves Study marks a fluctuating but steep cost increase per new BOE (Barrel of Oil equivalents describing combined quantities of O and G) capacities to come on line.
The International Energy Agency’s 2013 World Energy Outlook downgraded frack reserves and optimism and put it more succinctly:
“The Middle East, the only large source of low-cost oil, remains at the centre of the longer-term oil outlook.”
So how does short-lived fracking create continued exposure to energy insecurity, economic decline, ecological and financial debts?
Nobody earns profit with it, but the oil majors have bought all the smalltime frack ops they could find to work them into their reserve portfolios.
Audited by the U.S. Geological Survey as shale reserves that run out after a handful of years, yes. But it is useful for an energy security illusion the public is made to pay the wealth of nations in subsidies.
On the basis of energy security promises, governments defer taxes and provide many handouts to the big oil outfits such as with carbon pricing schemes.
But behind the reserve smokescreen, many frack subsidies are hidden. From there, money is laundered into corporation internal tar and frack subsidies.
More so than Dyer, I see socialized fracking and tar steam extraction continuing even when oil drops once again to $20 a barrel. (Of course, the North American natural gas price hasn’t been near crude level for a while.)
In 1973, then-U.S. president Richard Nixon and then-secretary of state Henry Kissinger struck the iron clad petrodollar deal guaranteeing the House of Saud to stay in power, no matter what, in exchange for locking in OPEC crude trade in U.S. dollars only.
We owe some gratitude for this illustration of how free trade works.
During the onset of the Arab spring, many in the region believed the Saudi people, perhaps even ahead of Tunisians and Moroccans, would be first to establish democratic rights, if not for the petrodollar deal.
The agreement is a geo political corner stone and intact today.
It is responsible for propping up the Saudi dictatorship with its spreading of Wahhabism and violence throughout Saudi Arabia, Syria, Iraq, Yemen, Afghanistan, Pakistan and other places.
Also, the petrodollar platform reinforces the U.S. ability to borrow money for American elite interests and their penchant for military adventurism.
Pegging crude oil to the dollar is clearly protectionist of oil majors’ interests and influence in the wider region, such as Saudi Aramco and Exxon Mobil. It is also protectionist of arms industry interests and electoral as well as political war on terror profiteers.
Iran and Iraq have been on the forefront of attempts to open oil to market trading and international currencies.
Notably, the Iraqi dictator Saddam Hussein but more so the democratic Iranian government of the aristocrat Mohammad Mossadegh and later the Mullah regime played a role.
In Operation Ajax, Mossadegh was overthrown by Britain and the U.S. in 1953 after nationalizing oil production, events that cast a long shadow defining many Middle East troubles today.
Twelve years after an illegal coalition of the willing, with Saudi participation, conquered Iraq in 2003, consecutive parliaments (Iraq Council of Representatives) continue to refuse to pass the American-sponsored Iraq oil law (Iraq Hydrocarbon Law).
It attempts to rubber-stamp the illegal post-invasion takeover of oil resources by American companies.
On June 29, 2014, the Politics page of Al Jazeera English News posted a video, The ‘Sykes-Picot’ borders ISIL wants gone.
It explains a festering Arab wound far beyond the minds of Daesh fanatics and attempts to build bridges to overcome the limitations of Western naval-gazing.
Daesh is a term commonly used in Arabic with layers of meaning that are less accommodating or friendly to the jihadi fiefdom than Isis or ISIL.
There was a secret drawing-up of boundaries for a colonial Middle East by French and British diplomats Francois Georges-Picot and British and Sir Mark Sykes already in 1915/16.
The world learned about the backstabbing of Arab independence by their French and British brothers in arms when the Soviets later exposed the deal.
Imperial Russia, as a junior partner, had been privy to these negotiations that were without Arab participation or knowledge.
Marty Callaghan’s 2006 documentary film Blood and Oil: The Middle East in World War 1, employing a star cast of international historians concludes:
“But it is really Great Britain and France, two Western countries, trying to impose their rule on a predominantly muslim world,” and,
“In redrawing the map of the Middle East for the benefit of Western political and economic aims and in selecting pro-Western leaders to rule Muslims of various cultures and religious beliefs, Europe guarantees that the future of the Middle East will be plagued by civil strife, regional wars and foreign occupation.
“The key ingredient for political stability, legitimacy, has been largely destroyed by a Western fabrication that has virtually destroyed the history and traditions of the Middle East,” and “Among the Muslim people from Istanbul to Tehran, anti-Western sentiment has never been greater. And terrorist attacks on the West have become more deadly. The defeat of the Ottoman Empire in 1918 turned out to be a hollow victory for the West.
“The seeds of discontent sown at the end of World War 1 have grown into a fearful harvest. As the author David Fromkin has written: The treaty (Sykes-Picot and by extension Versailles/Paris 1919) forced upon the Muslim world was indeed a peace to end all peace.”
Hindsight is 20-20 but cannot correct wrongs that should not continue.
I have no doubt, were Gertrude Bell and T. E. Lawrence, aka Lawrence of Arabia, around today, they would draw a straight line in the sand from Sykes-Picot to Kissinger’s petrodollar deal.
Unfortunately, Canada adds false legitimacy and war on terror obfuscation to a terrifying interplay and expansion of destruction.
It will be crucial to rethink before a current situation of a dozen or so of regional shooting wars, driven by anti-colonial underpinnings, will engulf into the firestorm of a déjà-vu Mahdist War (1881-1898).
The centennial of the 1915/16 Sykes-Picot betrayal of Arab freedom is good timing to end the petrodollar deal and pull back even now escalating Western occupations and interventions, by public education and pressure. The petrodollar protection racket against the region will come down eventually, but proactively will be less disruptive.
I found a helpful quote in a bad book, Samuel Huntington’s 1996 Clash of Civilizations and the Remaking of World Order.
“The West won the world not by the superiority of its ideas or values or religion but rather by its superiority in applying organized violence. Westerners often forget this fact; non- Westerners never do.”
As discussed, major oil and gas cartels are not elements of functional markets as many understand potatoes, books and hammers to be bought and sold.
However, it is a highly efficient and sensitive supply system with super-tiny storage buffers, such as gas stations, oil tankers and so-called strategic reserves.
Sensitive does not have to mean lack of adjustment to big overproduction.
A point or half a point of error in anticipation causes problems. One such energy demand factor that escapes the status quo oil mentality are an often underestimated but now explosive growth of industrial-scale renewable energies in India and China.
Much of Gwynne Dyer’s detail contemplation on “swing producer” characteristics, etc., evaporates in too narrow a scope that, surprisingly for him, misses basics such military history, geo-politics, energy economics and petroleum geology.
Bloodbaths dislocating and antagonizing millions of people are worsening, the Saudi princes heading OPEC are still in the oil business and the frackers are on the dole for good.
Journalist Robert Fisk introduced the last chapter of his The Great War For Civilization: The Conquest of the Middle East, with Rudyard Kipling’s appropriately melancholic lines:
“Far-called our navies melt away;
On dune and headland sinks the fire:
Lo, all our pomp of yesterday
Is one with Nineveh and Tyre!”
