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Eric Margolis: High Oil Prices

Eric S. Margolis

NEW YORK - The release by the Clinton/Gore team of oil from America's
emergency petroleum reserve may cause a blip in prices and win Democrats
some votes, but it does nothing to solve the long-term oil crisis.  Using
the wartime reserve for crass political ends is simply the latest example
of the current Administration's indifference to US national security.

Steadily rising fuel prices - approaching US$ 40 per barrel - have driven
motorists and truckers across Europe to open  insurrection.  If petroleum
prices keep rising and shortages develop, Americans, and even usually
passive  Canadians, may also stage a modern version of medieval peasants
revolts. No wonder politicians on both sides of the Atlantic are running
scared.  The Curse of Saddam has struck.

Western oil consumers take for granted that cheap oil is theirs by divine
right.  For them, `normal oil prices'  means a return to the good old days
before 1970 when tame Mideast puppet rulers gave away oil at $2 per barrel
in return for protection and blondes.

`How dare those Arabs sheiks raise the price of our oil,' is what many
people  angrily mutter  - unaware, of course, that most of North America's
imported oil comes from West Africa, Venezuela, and domestic sources, not
the Mideast.

Angry western demands that oil producers lower prices are pure, unabashed
economic imperialism.  The Mideast, for example, imports over 50% of its
food  and 95% of its medicines from western nations - commodities even 
more precious and imperative than oil. Do we see our farmers lowering 
prices of grains or meats sold to the Mideast? Or Detroit, Silicon Valley
or drug firms slashing export prices of goods they sell to oil producers?
Of course not.

We are simply demanding by right of might that exporting nations,  many of
whom rely on oil as their sole source of income,  cut their prices so it
costs us less to tank up our road hogs. The United States produces over 6
million barrels daily: why are there no calls for American or Canadian
producers to slash their wellhead prices?

Amidst all the finger-pointing over who is to blame for  high oil prices,
and inevitable pre-electoral threats by the Clinton Administration,  to
bomb the usual Iraqis, it is simply amazing that no one has asked the most
obvious question:  does the 10-year embargo of Iraqi oil play a role in
this mess?

The answer is, of course.  Before Saddam's invasion of Kuwait, Iraq, which
has the Mideast's second largest proven oil reserves after Saudi Arabia-
120 billion barrels - exported over 3 million barrels per day and was
expanding its petro-infrastructure to export 4.5-5 million barrels by 

Today, under the decade-old UN sanctions regime, Iraq is allowed to export
up to 2.3 million barrels daily. Iraq is supposed to get half the proceeds
for food and medicine; the rest goes to the UN's bureaucracy and to 

But Iraq's actual exports are considerably lower because the US has
steadily blocked or delayed Iraq's purchase of equipment and spare parts
for its crumbling oil industry.

Now, ironically, western governments fear  Saddam may throw world oil
markets into a new crisis by halting Iraq's modest oil exports. World
petroleum consumption has hit 76 million barrels  daily. Oil is so scare
right now that even a minor reduction could trigger an international panic
that could spill over into financial markets.  In short, our punishment of
Iraq has come to haunt us.

Another nice irony.  During the made-for-TV Gulf War,  Americans thrilled
as they watched armadas of macho armored vehicles sweep across the desert.
This ignited consumer lust for tough-looking, road-warrior vehicles.  A
friend, psychiatrist Dr. Clotaire Rapaille, conducted in-depth studies of
post-war American auto consumer psyches for Chrysler and discovered that
both men and women wanted `aggressive' looking extreme cars.

The result: the enormous upsurge in huge, menacing RV's  and now,
paramilitary Humvees - both major gas guzzlers.  With nearly half the
vehicles on the road getting 12-13 mpg, and with booming economic times, 
is it any wonder gas prices are sky high?   Dr. Rapaille also helped 
conceive Chrysler's new `PT Land Cruiser,' which are selling like crazy 
precisely because consumers say it looks `menacing,' and like a `gangster 
car of the 30's.'

If Iraq's oil industry was quickly refurbished and allowed to export at
full capacity, there would be no shortage, and prices would fall sharply.
This column predicting way back in 1991 that oil shortages would ensure if
Iraq was kept out of the market.  And so they have.

But Iraq's Arab oil `brothers,' as well as competitors Iran and Russia,
don't want Iraq to resume exporting because prices would drop. Kuwait
knows Saddam thirsts for revenge.  Israel exerts intense pressure on  the
Clinton Administration through its American lobby and influence over the
State Department to keep Iraq bottled up. Britain wants Iraq shackled to
protect its lucrative Gulf markets. No American politician wants to risk
being called `soft on Saddam' or letting him out of his cage.

None of the above care much that 5,000 Iraqi children die each month from
disease and malnutrition mainly caused by the cruel western embargo. When
asked about this,  US Secretary of State Madeleine Albright replied, in
words that will one day come to haunt her and the United States, it's `a
price worth paying.'

This column heartily disagrees.  It would be far cheaper and more humane 
to lift the embargo, let Iraq export oil, and bribe ogre Saddam to be 
good, as Washington has done and continues to do with nuclear-armed North 

Instead,  consumers in Europe and North America are paying the cost, via
high gas bills, of sustaining Iraq's long imprisonment and prolonging the
suffering of its people.

Copyright   Eric S. Margolis  2000

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