Oil price as an instrument of globalization

If we agree with the saying that “history is the science of all sciences,” then we should watch the reports from Al-Jazeera.

Israel won (in October of 1973) the third Israeli-Arab war, which was started by Arabs. The coalition of the Arab countries (oil exporters) that lost in the war put an embargo on oil deliveries to the Western countries, which unconditionally supported Israel. This gave birth to a new notion, the petrodollar. Thirty years ago, people realized that one barrel of oil is not only meant to measure oil, it also became the measure of value of any other welfare. A barrel of oil became a unique measure of value for any product.

When the twenty-first century came, people realized there was not much oil left on the planet. Its reserves are only enough for two future generations. The dollar now calculates the cost of the entire mass of the world commerce in a monopolistic way. Since oil is the major goods in this commerce, then the volume of oil, sold on the world market with prices in US dollars, provides a guarantee for dollar as well as the stability of the whole world economy.

When the USA alone consumes one billion tons of oil a year and the rest of the countries have this figure on the level of some 3 billion tons more, it is the USA that will have the final word on the oil market, as this country is the major consolidated oil consumer in the world, so it will have to decide in the long run.

It should also be realized in order to get the sense of oil as an instrument of globalization that there is no free market for oil in the world. The world market of oil is a strictly regulated process: money – goods – money with the income. The mechanisms, which have been invented on three exchanges in Singapore, London, and New York, are used for the regulation of these supposedly free trading process. No need to mention that the day starts in the east and every trading day starts in Singapore, London joins in eight hours and New York is always the last in the line to do the final thing. In other words, if Europe reduces the price of oil, then America is always able to rise it and vice versa. Asia just has to start it over again beginning with the America's level. Since Trans-national Corporations are presumably traded on all those exchanges (the American corporations mostly), it is their wish to determine the oil prices. A seller always sets a price on a market, but a market can only exist, when there is a buyer on it. The USA is the major customer. This is what is actually called globalization or the new world order.

What about the countries that manufacture oil? The Arabian countries and the states of the Persian Gulf take the top positions on this list. These countries supply oil to the market, so the oil market is supposed to function in supplier’s favor.

In the 1970s, when they frightened the USA with the energy crisis and embargos, the States banned the delivery of drilling equipment, pipes, pumps, then exercised their military force, and let them feel the American power, pointed, where their place was, so to speak. It should be said in this connection that there used to be the Eastern Block standing behind the Muslims with the USSR in the head – the country that produced up to 640 billion tons of oil annually at that time. This was used for the opposition during the Cold War. When the Soviet “Empire of Evil” collapsed, the Arab countries became the material support for the Islamic fundamentalism. This was a requisite to resist to the “good of globalization” in an American way: in order to have an active competition in the world, to make the tender bring profit.

The events of September 11 indicated “the source of evil.” The evil was showed, so it had to be punished for what it had done, so the USA started setting up the “anti-terrorist coalition” for a crusade against the Islamic fundamentalism. Where is the origin of this fundamentalism? Right in the place where there is a lot of oil: in Iran, Iraq, Saudi Arabia. Mass media outlets do not say anything about the USA’s devoted ally, Tony Blair, who encountered several surprises in his tour with a goal to establish the anti-terrorist coalition. He got a firm agreement from Moscow, then he was about to leave for Saudi Arabia to discuss the question of deploying an army base there to strike the Taliban, but got the refusal. Blair headed to Pakistan. Here, we have a rebellion of oil manufacturers again. Al-Jazeera was throwing light on the anti-American, anti-globalist position of the Taliban movement on a global scale.

So, how did the ideological and political opposition affect the oil price? The reaction to that is rather remarkable: during the first week after September 11, when the American administration was totally at a loss, the oil market behaved as a market should behave on the threshold of a war. The price of Brent crude jumped from 25 to 32 dollars per barrel within a week. Afterwards, when a decision was made and the schedule organized, there was a command given to punish all enemies of America and encourage all friends of America. In other words, to reduce the oil prices and subsequently cut the income of oil producers, reduce the costs for purchasing oil. Therefore, the level of $32 per barrel dropped down to $20. Norway and Mexico took the pro-American position and refused to struggle. The producers of oil that are not OPEC members, took a stubborn position on November 14 in Vienna, which only resulted in further price recession from $20 to $16 per barrel. What conclusion can be made? An evident one: the USA will keep the oil prices low, punishing Saudi Arabia, showing who the master in the world is.

Having this war, the USA has a very good channel for its spending – the real usage of missiles, bombs, aircrafts and so on. These expenses are vital for the USA to prevent the economic crash and to restrain the American dollar.

When Al-Jazeera says Saudi Arabia cursed the Taliban movement, then the gamblers of the oil market will start speculating for a rise again.

The story that happened to President Boris Yeltsin in Beijing, on December 10, 1999, is a good example to prove the fact that the reduction of the oil prices is the punishment of the intractable countries. Back in those days, there was some information that Russia had hard times after the reduction of oil price in 1998 and the financial default of the Russian ruble, sanctions in connection with the war in Chechnya. But Yeltsin suddenly said this to journalists: “Clinton ventured to pressure on Russia. He must have forgotten what Russia is. Russia possesses a complete nuclear arsenal, but Clinton decided to play his muscles. It will not ever be for him to dictate how people should live and rest. It will happen the way we agreed with Jiang Zemin. We will dictate how to live, not him.” In 20 days, Yeltsin apologized in front of all the Russian people and retired, letting Vladimir Putin took his place. Two years have passed and in October and November of the current year, Russia is again facing the threat due to the reduction of oil prices. Putin did not shake his fist at George Bush this time, but surrendered standing on November 16, 2001 at the Texas ranch.

On November 19, Pakistan stopped acknowledging the Taliban movement as the ruling power in Afghanistan. Since November 20, 2001, the oil prices went up to the level of $18 per barrel, which is not good, but acceptable to Russia. It should be said in this respect that China wins from the drop of the oil prices: this country imports the extra part of the oil it needs to the public reserve in order to cover up the current needs. Self-sufficient China, which is now highly respected by the States.

Speaking about the energy resources for the coming five years, one should say that China did not make a stake on oil, but on its endless hydro-resources, on coal, on the nuclear power. This is the way China is going to be independent now.

Humanity has been using oil in industry only since the 20th century. And the world reserves of oil will soon be over, oil will have to be changed, like it earlier happened with woods and coal, then oil came along, then gas, then atom and so on. There will be the new energy found. A Russian scientists is very likely to give an answer to this question.

Prepared by Andrey Devyatov and Martin Martirosyan

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Author`s name Editorial Team