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Wednesday, January 25, 2006

Petro-dollar, petro-euro, Iraq, China, and You

On a list I write to, someone made a statement that the Iraq War was actuallly alll about the almight petro-dollar. Someone then retorted

PPLLEEAASSSEEE... ... don't try to make the totally absurd assertion
that the war in Iraq is not about oil. If Iraq had no oil we would not
be there. This IS a war about control of energy resources... plain and

Being of sound mind and body, I had to insert my two sense and I responded:

Actually, you are BOTH correct. It's not a zero-sum Boolean thing - it's a confluence of complex and inter-related actions, needs, desires, demands, and systems.

First, you are *not* completely correct in saying it is a war "about control of energy resources... plain and simple." There is nothing pure or simple about this conflict.

That is certainly a major part of the equation, but Ron's point about petro-dollars is equally important. Iraq was under our thumb and a virtual non-entity during the Clinton Administration, because he basically bombed the crap out of them. Iraq was in a nearly identical, if not somewhat worse, condition at the invasion than it was on the last day of the Clinton White House. What changed was S.Hussein's decision to move Iraqi oil off the dollar toward the euro. One of the first things to be implemented upon the invasion of Iraq was to put it back on the petro-dollar.

So, yes, Oil *is* fundamental to the war in Iraq, but not the only - the economic machine around it is of equal importance, as is the geo-political strategies of how to deal with a powerful China.

Example: Let's say ALL oil producers sell oil in a variety of currencies - pretend there is no "petro-dollar", making the market similar to pre-1945. Then the invasion of Iraq would be seen as an absolute grab for the resources, as the only way a given resource would be salable would be in the prevailing currency of the invading party, in this case, the USA.

We had vast control over the inputs and outputs of Iraq throughout the 1990s, Iraqi oil was in petrodollars, and there was no invasion. Once Hussein started grumbling about dumping the dollar, things got interesting, and when he made moves to pull out of the dollar and go to the euro - bingo: the hammer comes down and he's found hiding in a spider hole.

Another aspect of this is the geo-politics of China, especially their strategic vision of the USA and geopolitics in general. This report is getting a little dated (pre 9/11 and Bush) but the fundamentals it discusses are very much a part of the continuing picture.

CHINA DEBATES the FUTURE SECURITY ENVIRONMENT by Michael Pillsbury, January 2000, National Defense University Press

Both Clinton and China shared a similar long range outlook: a multi-polar vision of global security, where the USA gradually builds down into being a local power primarily dominating the Americas, China dominating east asia, and the EU in Europe. With this kind of an arrangement, the threat to China would be mostly economic, from India. China's military was not united in their analysis, and some felt that the USA would not go to a multi-polar system for at least another generation. The installation of the Bush Junta proved their skepticism.

So: combine these factors, and the contemporary situation makes a lot more sense - it's not just *merely* the oil resource itself, it is the economic and monetary structure that surrounds it that is of grave importance as well. With that in mind, we can see why Iran is such a threat to the Bush Junta's neocon plans of unipolar global dominance. A devalued petrodollar that is weak against the petro-euro makes it harder to finance the military adventures necesary to prop up the petrodollar and access to the resource that the petrodollar denominates: Oil.

Since the USA is bogged down in afghanistan and iraq, it is extremely unlikely that the USA can actually succeed in invading Iran. Therefore, proxies will be found to remove the Iranian nuclear capabilities, military or otherwise. This would, obviously, fall to Israel.

However, this wil not necessarily remove the Iranian petro-euro policy - and that becomes a significant stumbling block to the unipolar desires of the Bush Junta War Machine. It will serve to devalue the dollar, and gradually eat away the debt assets owned by the Chinese. However, the inflation created by this devaluation might not lead to a hyper-inflation, as the monetarist policies of the Fed will step in and raise interest rates to reduce the inflating money supply.

Depending on how high the interest rates go and the inflation rate rises, debt management becomes interesting - those with old debt will see their debts reduce in value with the lower dollar. Those with new debt or interest variable debt will get stuck if:

a: the interest rates wildly exceed the inflation rate
b: the interest rates don't drop as fast as decreases in inflation
c: an oddly contradictory position of finding money very hard to get, and not worth very much when you do get it... Stagflation on steroids.

To counter these problems, the will have to directly reduce the deficit to zero, ASAP, in order to reduce pressure on the interest rates and free up money. How it does that will be "very interesting..."

This makes for a complex and volatile situation - enemies of the unipolar American Empire working to undermine the currency, economic rivals competing for the declining resources, a deeply conflicted populace in the American Empire, and burgeoning populations - it's not a good situation, and it certainly demonstrates that the war in Iraq is not as straight-forward a "pure and simple" resource war as one might think.

best regards,

Stuart Studebaker

Monday, January 23, 2006

A debate

I'm on the ROE2 email list, and Matt Savinar made some statements that I disagreed with.

My rant follows:

I think this needs some perspective and intelligence applied here.

Someone wrote:

>I'm just tired of this "if you understand PO and
> protest the war you're a hypocrite" schtick."

and Matt Savinar replied

>I guess it should be "if you understand Peak Oil, protest the war
>and fail to lower your energy consumption to the absolute bare-
>minimum, then yes you are a hypocrite."

And I have to pull out my "bullshit" card.

The simple fact is, the SIMPLEST interactions with our economy is directly dependent and involved with:

1. a wildly destructive industrial system of resource consumption and tool/commodity production.
2. a massively exploitative method of labour organisation that has far reaching effects in terms of energy and resource consumption.
3. an intricate web of social and material relations of interdependency between these massively destructive systems and citizens of the societies that engage in such practices.

If we use Mr Savinar's judgement "to lower your energy consumption to the absolute bare-minimum" we have no sense of what constitutes the "bare minimum", in fact we have no sense of what constitutes the bare maximum, but that's another issue.

This reductivist nonsensical position reminds me of National Lampoon's record "Lemmings" where a "Weatherman" takes the stage. I have it almost memorised (I've owned the record since I was 14) and the rant (performed by a young and long haired Chevy Chase) goes like this (Caps are on purpose, because he shouts the whole thing):


Basically, to be quite simple, the ENTIRE system is completely rotten to the core, and it will have to disappear. However, I can assure you it will not be replaced by some benign and gentle wonderment of enlighted self-rule. Such notions are bourgeois/industrialist mythology and false consciousness. IT ain't gonna happen. It will be replaced by a system of repression and brutality, just as nasty and vicious as anything that has preceded it. It might be "nicer" than the previous system, and "cleaner" than the previous system, but it will still exist by standing on the necks of the working poor, just like this one, and
the manorial feudalism that preceded us, and the imperial slave states that preceded that, and the theocractic slave states that preceded them, and so on and so forth.

There was no golden past, and there is no golden future. There is only this struggle - forever.

There is no possible reduction to purity or innocence, and Mr Savinar's claims require such like as prerequisites of understanding. Without that there is no liminal value of "bare minimum" as a possible judgement.

Rather than engage in such histrionic nonsense, I think it is much more useful to say "this is where we are - it's complex, and messy. We need to get to some close approximation of (here), and how we do that is of utmost importance to the continuance of the human project."

What (here) is, often devolves into metaphysical thumb twiddling by the self satified or finger-pointing by the self-righteous. What needs to happen is organisation and co-operation around a common goal: the de-carbonisation of society.

This may *or may not* result in the complete collapse of industrialism itself - I don't think any of us will live long enough to find out. However: it *is* up to us to *consciously* set into motion the social, political, and material practise of the rudiments of the society that will follow ours. I have stated before and I will say it again: everyone born between 1945 and 2010 has a special mission: we *must* do our dead level best to again "set into motion the social, political, and material practise of the rudiments of the society that will follow ours." If we don't, then it's game over for humanity.

Matt Continued:

"If I may be so bold, I'm tired of this "I can have my cake and eat it too" schtick which maintains that a person can make individual and regular use of the most "death-dealing device every devised" while still saying (with a straight face) that they opposse the death-dealing necessary to get the energy to run the device."

I'm not, because every breath you take, every move you make, every step you take, every bond you break, has far reaching and devastating effects on the entire system of life on this planet. Except for the energy from the sun, and the crap that falls from the sky, the earth is a closed system. "Everytime you shit or piss, you dump ureic acid on the mother earth and you wipe your ass with the guts of a tree". So kindly dispense with the rhetoric, and get on with the real problem: how we use energy to accomplish how we live.

Matt then writes:

"Thing is, without giving up individual use of the car at a minimum, your individual energy use is still going to be "collosal." Giving up individual use of a car does not, in of itself, lower your consumption to sustainable levels but it is at least a big jump in that direction. "

That depends. Let's say I DON'T own a car. But I live in a single family suburban home, and I'm afraid of the dark so I leave all the lights on, and I hate the cold so I pump the heat, and I spend an hour every day in my hot tub. And how do I get to sell my labour? By riding a diesel bus to work every day.

Now, one might own a USED car, and live in a cave eating roots and berries.

Cars are only one part of the puzzle: it's the puzzle itself that is the problem. So rather than whinge about who is more destructive than the other, I think a far better use of time (which is geting shorter by the day) and energy (which is running lower by the day) would be to organise and develop social and political systems to transition to a new resource practice.

It WILL be slow, and it WILL be complicated. Tough. That's life. There won't be an apocalypse. Sorry. We don't deserve one - it would be too simple.

THAT all said, I MUST say that Mr Savinar's website is a truly wonderful thing, and I support and applaud his efforts in raising
consciousness regarding energy consumption. That is the critical first step. The next step (and it is several orders of magnitude more complex and difficult) is to organise - we need to spend time with our neighbours and develop the society we want to live in.

Nihilism will not get us out of this fix, anymore than terminal starvation is a successful method of losing weight. We "ate/reproduced" our way into this mess, we will have to "eat/reproduce" our way out of it.


Stuart Studebaker

Sunday, January 22, 2006

Back from the Shadows, again.

Well, dear friends, I'm back, and I'm just as pissed off as usual.

A friend of mine who is a consumer of the corporate propaganda machine was skeptical of the news regarding the collapsing dollar and Wall Street's recent dive, etc.

So I sent her the following links and excerpts from articles all stating the obvious:

That the Iraq War has as much to do with defending the economy of Empire, as it does with the oil under its ground.

Here are the links and snippets of Real News.

Article #1: Kuwait lied about its reserves - news as of Friday, 20 JAN 06.

LONDON, Jan 20 (Reuters) - OPEC producer Kuwait's oil reserves are only half those officially stated, according to internal Kuwaiti records seen by industry newsletter Petroleum Intelligence Weekly (PIW).

"PIW learns from sources that Kuwait's actual oil reserves, which are officially stated at around 99 billion barrels, or close to 10 percent of the global total, are a good deal lower, according to internal Kuwaiti records," the weekly PIW reported on Friday.

It said that according to data circulated in Kuwait Oil Co

(KOC), the upstream arm of state Kuwait Petroleum Corp, Kuwait's remaining proven and non-proven oil reserves are about 48 billion barrels.

Officials from KOC were not immediately available for comment to Reuters.

PIW said the official public Kuwaiti figures do not distinguish between proven, probable and possible reserves.

But it said the data it had seen show that of the current remaining 48 billion barrels of proven and non-proven reserves, only about 24 billion barrels are so far fully proven -- 15 billion in its biggest oilfield Burgan.

Kuwait has been adding up to 500 million barrels a year at Burgan which means the remaining non-proven reserves of some 5.3 billion barrels will likely be upgraded to proven, according to PIW.

Three consortia led by BP (BP.L: Quote, Profile, Research), Chevron (CVX.N: Quote, Profile, Research) and ExxonMobil (XOM.N: Quote, Profile, Research) are in the race for Project Kuwait, a 20-year operating service contract to raise crude capacity at four oilfields in the north of Kuwait.

Article #2: Kuwait's largest field has peaked and is in decline, 12 NOV 05

Kuwait's biggest field starts to run out of oil
Kuwait: Saturday, November 12 - 2005 at 08:46

It was an incredible revelation last week that the second largest oil field in the world is exhausted and past its peak output. Yet that is what the Kuwait Oil Company revealed about its Burgan field. The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years of life, Chairman Farouk Al Zanki told Bloomberg.

He said that engineers had tried to maintain 1.9 million barrels per day but that 1.7 million is the optimum rate. Kuwait will now spend some $3 billion a year for the next year to boost output and exports from other fields.

However, it is surely a landmark moment when the world's second largest oil field begins to run dry. For Burgan has been pumping oil for almost 60 years and accounts for more than half of Kuwait's proven oil reserves. This is also not what forecasters are currently assuming.

Forecasts wrong
Last week the International Energy Agency's report said output from the Greater Burgan area will be 1.64 million barrels a day in 2020 and 1.53 million barrels per day in 2030. Is this now a realistic scenario?

The news about the Burgan oil field also lends credence to the controversial opinions of investment banker and geologist Matthew Simmons. His book 'Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy' claims that the ageing Saudi oil filed also face serious production falls.

The implications for the global economy are indeed serious. If the world oil supply begins to run dry then the upward pressure on oil prices will be inexorable. For the oil producers this will come as a compensation for declining output, and cushion them against an economic collapse.

However, the oil consumers then face a major energy crisis. Industrialized economies are still far too dependent on oil. And the pricing mechanism of declining oil reserves will press them into further diversification of energy supplies, particularly nuclear, wind and solar power.

Article #3: The implications of Iran switching away from dollars and only sell oil in euros.

"Until now oil is solely priced, traded and paid for in the greenback on both markets in London and New York. The Treasury Inflow Capital data from mid-2005 show that OPEC members have parked only a skimpy $120 billion in direct dollar holdings which are almost equally split between equities and debt paper. This is a clear indication that oil producers are investing their windfalls elsewhere. The yield spread between US and EU debt papers in favor of the EU is clearly another hint where the petrodollars might flow after conversion.

The Iranian Oil Bourse (IOB) will become a factor that could further unsettle the dollar's dominant position.

Especially in the case of Iran it does not make sense to accept dollars only for its much desired commodity. Being seen as a hostile country by the USA for the intention to build its own nuclear reactors one wonders whether the new IOB will not try to attract other buyers than Americans who are particularly unwelcome in that corner of the globe. Iran has recently announced that the new oil exchange will start up its computers in early 2006.

Steering away from the almighty commodity, currency and commodity currency - the US dollar - can have a deeper impact on the US economy than a direct nuclear attack by Iran. The permanent demand for dollar denominated paper stems to a good part from the fact that until now almost all resources of the world are quoted in it."

Article #4. The Iranians are coverting their oil currency to euros, which will weaken the dollar

"In 2005-2006, The Tehran government has a developed a plan to begin competing with New York's NYMEX and London's IPE with respect to international oil trades - using a euro-denominated international oil-trading mechanism. This means that without some form of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project for U.S. global domination, Tehran's objective constitutes an obvious encroachment on U.S. dollar supremacy in the international oil market."

Article # 5. The Iraq war as seen as an oil currency war.

"Although completely unreported by the U.S. media and government, the answer to the Iraq enigma is simple yet shocking -- it is in large part an oil currency war. One of the core reasons for this upcoming war is this administration's goal of preventing further Organization of the Petroleum Exporting Countries (OPEC) momentum towards the euro as an oil transaction currency standard. However, in order to pre-empt OPEC, they need to gain geo-strategic control of Iraq along with its 2nd largest proven oil reserves. The second coalescing factor that is driving the Iraq war is the quiet acknowledgement by respected oil geologists and possibly this administration is the impending phenomenon known as Global "Peak Oil."

This is projected to occur around 2010, with Iraq and Saudi Arabia being the final two nations to reach peak oil production. The issue of Peak Oil has been added to the scope of this essay, along with the macroeconomics of `petrodollar recycling' and the unpublicized but genuine challenge to U.S. dollar hegemony from the euro as an alternative oil transaction currency. The author advocates graduated reform of the global monetary system including a dollar/euro currency `trading band' with reserve status parity, a dual OPEC oil transaction standard, and multilateral treaties via the UN regarding energy reform. Such reforms could potentially reduce future oil currency and oil warfare. "

Articles #6 : China has announced that it is going to diversify its portfolio (i.e., reduce its investment in our debt) 6 JAN 06

" The latest comments from China should warrant more focus than today’s non-farm payrolls. Coming back to haunt dollar bulls was talk of Chinese reserve diversification. China announced yesterday that they plan on diversifying their reserves away from the US dollar and US treasuries. China is the world’s second largest holder of US Treasuries, which means that any diversification away from dollar denominated assets, could have grand ramifications.

Although they are not expected to make any quick or massive shifts, even gradual moves in an environment that is already becoming less and less favorable to the dollar, could certainly give dollar bulls another reason to jump ship. "

So, that's the news while I've been away: basically, the oil situation is a bit more dire than previously understood, and the Empire not only must defend itself from terrorist attack (as there is no credible national military threat, with the exception of Russian Nukes) but must also defend itself economically against a run on its currency which is tied to the production of oil.

The Empire has spent itself into oblivion, and needs to either wildly increase taxes on the rich (something the rich and their idiot minions are loathe to do) or simply monetise the debt through inflation.

A move in that direction is witnessed here:

The Fed is discontinuing the publishing of the M3

Once the public is in the dark about eurodollar transfers, the money supply can be expanded at will. The devaluation of the dollar can be seen as an "attack from the outside" when it is actually a strategic decision from the inside to monetise the debt. IF (and it seems fairly logical to me) that is what the pigfuckers running this show are up to, then the questions become: will they also raise interest rates to try and "stifle" the inflation? If so, then get locked in interest rates NOW, and pay off your debts with ever cheapening dollars, or sell off your house, move someplace cheap, and pay cash from your equity. If they DON'T boot interest rates, or boot them fast enough, we could get into a hyperinflation, in which case being in debt is a Really Good Thing, because you can borrow money that is soon worthless.

My guess is the Fed won't let that happen

(although it should be noted that while bread and other goods were insanely expensive, unemployment dropped to nearly zero during the Weimar hyperinflation, people paid off their houses in an afternoon, and the investment in industrial capital and infrastructure was astronomical. That the following crash led directly to the rise of Adolf Hitler is not lost on many...)

and will try to "manage" the inflation, so we have an inflation to defray the destruction of the debt, but not so much inflation that it runs away with the economy.

My next post will outline the Stuart Studebaker policy.


Monday, January 02, 2006

Home Again Home Again Jiggety Jig

I arrived home to find a huge stack of mail. I did a quick analysis of what I need to do to improve the Home Energy Picture, and it looks like I will spend most of this summer labouring to increase the efficiency of this house.

What needs to be done in the first round:

1. We need a set of stairs from the kitchen to the back yard.
2. We need to insulate the garage (it is under the main living spance and is not insulated at all.)
3. We need to change the cooking range top from gas to electric.
4. We need to get better laundry machines - frontloading hyperefficient electric systems.
5. We have a pretty good refrigerator, so we don't need a new one yet.
6. I would like to solarise the hot water system. Right now we have a classic NG water heater. That will be an interesting problem - we don't have really good sun - our house is on the north side of a hill. That will take some arranging and planning. I was thinking that we really only need hot water for bathing, so we might get one of those miniature hot water heaters that are common in Europe.

Those are a few of the immediate concerns. I am *extremely* busy for the next two weeks- preparing for the next semester for my day job as Professor Studebaker. I'm teaching 3 classes, 2 of which have no syllabi, bibliographies, or assignments developed. Uff da!

more later.


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