FacebookTwitterGoogle+RedditEmail

Fear at the Pump

Americans are in a panic over rising gas and heating oil prices, and with reason. For months, the price of a barrel of crude oil has been rising steadily, hitting a record $127 yesterday.

Analysts keep getting trotted out on TV and in print, attributing the dramatic price rise to everything from “peak oil”—the idea that producing countries have reached their peak of productive capacity, and that the only direction for oil supplies looking forward is down, while demand continues to rise—to increasing demand in China and India, to supply bottlenecks, to specific news events, like a pipeline break in Nigeria, or a closed refinery in California.

Politicians, like Republican presidential candidate John McCain and Democratic presidential candidate Hillary Clinton, have called for a two-month moratorium on federal gas taxes, but with taxes running at something on the order of 18 cents a gallon, this is not going to do much to bring prices down—in fact it might do nothing, since retailers would be free to just raise prices to match the tax break, and pocket the profits.

One analyst, economist Ismael Hussein-Zadeh, a professor of economics at Drake University in Des Moines, Iowa, has a different explanation for the price rise, and American motorists and homeowners should pay close attention.

“Oil prices have gone from the mid $20 range in the fall of 2002 to $127 yesterday—a rise of $100/barrel in just over five years,” he says. “And the bulk of that increase can be attributed to the US wars in Iraq and Afghanistan, and to the threats of war against Iran.”

Hussein-Zadeh’s analysis looks at a number of ways that the Bush/Cheney wars have contributed to rising oil prices. Chief among these are two factors: the threat to supplies, particularly from the Persian Gulf region from which 20 percent of the world’s oil supplies come, and a falling dollar, because oil is priced in dollars, and as it loses value, oil producing countries raise their prices to compensate.

In an article titled “Worried About the Price of Gas? End US Wars,” Hussein-Zadeh writes, “Soon after the invasions of Afghanistan and Iraq the price of oil began to escalate in tandem with the escalation of war and political turbulence in the Middle East.” Furthermore, he says, “Anytime there is a renewed US military threat against Iran, fuel prices move up several notches.” If the US were to actually make good on Bush’s and Cheney’s threats to attack Iran, in Hussein-Zadeh’s view “the sky would be the limit” to oil prices, with $200/barrel being a starting point.

The dollar’s fall, too, is significantly a result of the wars—particularly the Iraq War, he says.  That war has been costing the US $200 billion a year, all in borrowed funds. That in itself is a huge hole that has to be funded by borrowing from China, Japan, Saudi Arabia and other nations. But as Nobel economist Joseph Stiglitz has pointed out, the true cost of the Iraq War, when interest on debt, health costs of injured veterans and other long-term costs are factored in, is more like $3 trillion and rising. And when currency speculators and traders—the ones who really set the value of the dollar—make their bets, they’re looking at that bigger number, not the little one.

Moreover, it’s not just oil that has been driven up in price because of the war.  As energy costs have gone up, so has the cost of food, in no small part because most fertilizer is oil-based, and because transportation costs are also largely a reflection of oil prices. As well, to the extent that American’s food is imported, they are paying in shrinking dollars, whose value is being driven down because of the war.

Hussein-Zadeh says the Bush/Cheney administration and its neoconservative war promoters have worked hard to offer other more benign explanations for the crippling rise in energy prices, and food prices. As he puts it:

Neoconservative forces in and around the Bush administration and beneficiaries of war dividends—wishing to deflect attention away from war as the main culprit for the skyrocketing energy prices—tend to blame secondary or marginally relevant factors: OPEC, China and India for their increased demand for energy, or supply-demand imbalances in global markets. Whatever the contributory role of these factors, the fact remains that the current oil price hikes started with the beginning of the Bush administration’s wars against Iraq and Afghanistan. Furthermore, a closer examination of these factors reveals that their roles in the current price inflation of oil have been negligible.

Common sense bears him out here.  China’s and India’s economies have indeed been growing rapidly, and with them, demand for oil, but over the past five years, oil prices have risen 400%, and the same cannot be said for demand. Even if Chinese and Indian growth figures of 7-9 percent per year were accurate (and there is reason to believe they are grossly inflated), that at best would amount to perhaps a 50% increase in economic activity over five years. In fact, during this time more efficient energy use in the developed countries has largely offset much of the increasing demand for oil in China and India, and even in China and India, much of the energy growth has involved replacing inefficient vehicles and power plants with more efficient ones, so oil consumption isn’t rising in lock step with economic growth.

The answer then, to rising oil prices, is obvious then. It is not some silly two-month moratorium on federal taxes—what Sen. McCain referred to, in a candid moment, as a “little gift” to American vacationers. Nor is it opening up the Artic refuge to drilling—a move that would take years to lead to any significant new supply, and which in any case would have minimal impact on overall supply, or on prices. Nor is it opening up the Strategic Oil Reserve—another drop in the barrel. Nor is it hammering OPEC to boost production—something they have already done.  No, it is much simpler. As Hussein-Zadeh puts it:

The political implications of this discussion are clear: to bring down the prices of fuel and food requires bringing home the troops. By lowering the energy costs of production and transportation this will help save our own and many other economies from the plagues of inflation and stagnation. It will bring relief to hundreds of millions worldwide who are burdened by crippling energy bills and the crushing costs of feeding their families.

Got that people? If you want to see gasoline drop back below $3.89/gal, get Congress to end the war!

It’s that simple.

DAVE LINDORFF is a Philadelphia-based journalist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now available in paperback edition). His work is available at www.thiscantbehappening.net

 

More articles by:

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

August 21, 2018
Anthony DiMaggio
Fascist Nation: The “Alt-Right” Menace Persists, Despite Setbacks
Chris Floyd
Dial “N” for Mayhem: Wording Our Way to a New Level of Hell
Creston Davis
The Education Impasse in the USA
Jonathan Cook
In Detaining Peter Beinart, Israel Has Declared it No Longer Represents Millions of Jews Overseas
Kshama Sawant
UPS Teamsters, We Have Your Back in this Fight
Kenneth Culton
Trump Supporters: the Joyous Cult Bound by Shared Story and Ritual
Andy Thayer
Why the Chicago ‘68 Convention Matters Today
Simone Chun
Sea of Tears: The Tragedy of Families Split by the Korean War
William Blum
The Russians Did It (cont.)
Manuel E. Yepe
How Capitalism Erodes Mental Health
Doug Noble
“Abolish ICE”? Then Why Not Abolish All US Militarism?
Thomas Mountain
Djibouti Faces Dark Days to Come; Eritrean Ports, Pipeline Threaten Ethiopian Trade Lifeline
Binoy Kampmark
Finding Fault and Faulty Infrastructure: Genoa’s Morandi Bridge Disaster
Kary Love
“Suffer Not the Little Children….”
Thomas Knapp
Omarosa Manigault Newman, Public Servant
August 20, 2018
Carl Boggs
The Road to Disaster?
James Munson
“Not With a Bomb, But a Whimper” … Then More Bombs.
Jonathan Cook
Corbyn’s Labour Party is Being Made to Fail –By Design
Robert Fisk
A US Trade War With Turkey Over a Pastor? Don’t Believe It
Howard Lisnoff
The Mass Media’s Outrage at Trump: Why the Surprise?
Faisal Khan
A British Muslim’s Perspective on the Burkha Debate
Andrew Kahn
Inhumanity Above the Clouds
Dan Glazebrook
Trump’s New Financial War on the Global South
George Wuerthner
Why the Gallatin Range Deserves Protection
Ted Rall
Is Trump a Brand-New Weird Existential Threat? No.
Sheldon Richman
For the Love of Reason
Susie Day
Why Pundits Scare Me
Dean Baker
Does France’s Economy Need to Be Renewed?
Jeffrey St. Clair
A Mighty Voice for Peace Has Gone Silent: Uri Avnery, 1923-2018
Weekend Edition
August 17, 2018
Friday - Sunday
Daniel Wolff
The Aretha Dialogue
Nick Pemberton
Donald Trump and the Rise of Patriotism 
Joseph Natoli
First Amendment Rights and the Court of Popular Opinion
Andrew Levine
Midterms 2018: What’s There to Hope For?
Robert Hunziker
Hothouse Earth
Jeffrey St. Clair
Roaming Charges: Running Out of Fools
Ajamu Baraka
Opposing Bipartisan Warmongering is Defending Human Rights of the Poor and Working Class
Paul Street
Corporate Media: the Enemy of the People
David Macaray
Trump and the Sex Tape
CJ Hopkins
Where Have All the Nazis Gone?
Daniel Falcone
The Future of NATO: an Interview With Richard Falk
Cesar Chelala
The Historic Responsibility of the Catholic Church
Ron Jacobs
The Barbarism of US Immigration Policy
Kenneth Surin
In Shanghai
William Camacaro - Frederick B. Mills
The Military Option Against Venezuela in the “Year of the Americas”
Nancy Kurshan
The Whole World Was Watching: Chicago ’68, Revisited
FacebookTwitterGoogle+RedditEmail