Monday :: Aug 9, 2004

As Al-Sadr Vows Fight To The Death, Oil Heads Towards $50/Barrel

by Steve

Ah yes, remember the days when Rummy, Pottymouth Dick, Condi Twin Mirrors, and Wolfie told us that we would be greeted as liberators and the captured Iraqi oil booty could be used to pay for their own reconstruction?

Well, we are close to a tipping point in Iraq, as Muqtada al-Sadr had pledged today to fight to the death against US and Iraqi security forces, thereby thumbing his nose at efforts by our installed interim Prime Minister Allawi to strong-arm the renewed conflict in several cities to a close. The conflict, and the loss of control of the southern Iraqi oil pipelines to Sadr’s Mehdi militia has shut down Iraqi oil production, driving world oil prices today to their highest levels ever. Keep in mind that Ayatollah Sistani is in London, unable to moderate Al-Sadr's behavior.

The southern city of Basra, where 90 percent of Iraq’s export oil passes through, is now effectively under the Mehdi militia’s control, with no sign of British or Iraqi security forces. The other 10 percent of Iraqi export oil to the north has been shut down since June. In effect, the militia has figured out the Achilles heel of both the interim government and the Americans, which are the oil exports, and have focused on seizing control of the means of distribution in Basra, forcing the Americans to fight to retake it.

Our Polish “Coalition of the Willing” partners, after being handed responsibility for security in Najaf province and neighboring Qadisiyah provinces only ten days ago, have already cashed in and handed security back to us.

Meanwhile, as a result, the cost of a barrel of US light crude rose to just under $45 a barrel today, its highest level ever. The price rise was based on the threats by the Mehdi militia to sabotage production at the state’s Southern Oil Company in Basra, thereby shutting off the flow of 1.9 million barrels a day of Iraqi oil to the world market.

If you thought gas prices were bad now....

See, these insurgents are not as dumb as the neo-cons think they are. Al-Sadr and his ilk have figured out that the quickest way to make things bad for Bush is to damage the world oil market and drive up gas prices even higher, while simultaneously giving voters here fresh evidence that Bush’s war of choice in Iraq has made the world and its economy even less stable than it was before. As Business Week notes, there are a variety of reasons why oil will march straight to the $50 per barrel level and right past it. These reasons range from increasing demand across the globe, a lack of an energy or conservation plan by the Bush Administration, a lack of new production capacity by the industry over the last decade through intentional capacity restrictions, and geopolitical instability in oil producing regions.

One could argue that an incoming administration of allegedly smart oil industry and foreign policy experts would have seen such challenges years ago, and known not to make things worse by destabilizing the key regions of the world through their own actions. But that would have assumed that the Bushies knew what they were doing in the first place.

We know now that this was an erroneous assumption to begin with.

Steve :: 1:35 PM :: Comments (15) :: Digg It!