Friday :: Sep 24, 2004

Oil's Shell That Friend's Hell

by pessimist

We've been hearing about how the US Strategic Oil Reserves were being increased at a time when oil prices had never been higher in the US.

Oil Reserves and Politics
April 8, 2004
Alan Reynolds, a nationally syndicated columnist, is a senior fellow at the Cato Institute.

Since November 2001, the U.S. government has been adding about 160,000 barrels a day to the 651 billion barrels already stockpiled in the SPR. During that time, oil prices rose from less than $20 a barrel to as much as $37. The Energy Department can't resist a bad bargain and plans to buy another 202,000 barrels a day in April. Some 55 members of the House of Representatives wrote to the president earlier this month urging the administration to stop adding to reserves. Mr. McClellan responded by telling reporters selling reserves "would have a negligible impact."

One month later, we were hearing:

All this panic about prices is ridiculous

Memo to American public: Please stop getting silly about gas prices. They're high. Prices sometimes do that.

But not a single word about the increased supply to the Strategic Petroleum Reserve helping to cause higher demand and higher prices.

That was only the beginning.

One company, BP, increased its profits that quarter 36% over the previous year. It couldn't have been such a good quarter without the US government adding to the demand.

Now, several months later, with the election pending, oil is again a major focus of the (mis)Administration:

The Great Disconnect

George W. Bush tells us that the economy is strengthening and Iraq is on the road to peace and ballot boxes. He appears to be wrong on both points. Yesterday, the Dow seemed to notice. It slipped toward 10,000 - again.

And all over the country, people are having trouble keeping up with their obligations. The city of San Diego has $1.2 billion in pension benefits it can't seem to cover. Watch those long bonds! Instead of going down with higher interest and higher inflation rates, they're going up. They're telling us to beware... Go bankrupt. Cut costs. Cut payrolls. Cut spending. Not something to look forward to. But something to expect.

Crude oil also took a few whacks at the market's behind, by jumping $1.59, to $48.35 a barrel. Once all the wailing and sobbing had subsided, the Dow Jones Industrial Average was nursing a painful 135-point loss to 10,109, while the Nasdaq was 35 points lower at 1,886. Since Hurricane Ivan brought oil importation to a halt in the Gulf of Mexico last week, refineries and other crude oil consumers had no choice but to dip into existing stockpiles. The news of falling inventories sent oil prices soaring to near-record levels, which also triggered sympathetic rallies in unleaded gasoline, heating oil and natural gas. October natural gas rose 5.7 cents yesterday, to $5.665 per million British thermal units, capping a three-day, 20% rally for the "clean fuel."

Back on 8/20/04, Bu$hCo announced that The United States has no plans to tap into its strategic oil reserve.

"To stop filling it would have a negligible impact," McClellan told reporters here, where President George W. Bush is vacationing on his ranch for the week. The strategic reserve "is not there to manipulate prices for political purposes," the spokesman said.

New York`s benchmark contract, light sweet crude for delivery in September, surged 70 cents over Thursday`s [8/19/04] price to 49.40 dollars a barrel within five minutes of the start of official trade. Crude prices have risen nearly 50 percent since January 1.

In fact, as of early September, there were calls for the US government to maintain that posture.

But as our wrong-wing friends like to remind us, the law of supply and demand aplies. If supplies are low, the price will go up if demand doesn't go down.

Out here in SoCal where I reside, supplies and prices have been somewhat stable, and as far as I can tell demand is unchanged despite the prices. If the wholesale prices of gas and oil are headed up, it would take a while for that effect to reach the retail public - just about in time for the (s)election in November. There is thus no other conclusion to draw that Scott McClellan lied to us, as I quoted above, that 'the strategic reserve is not there to manipulate prices for political purposes' when US plans to release 'limited' amount from strategic oil reserves

The news came as oil futures neared all-time record levels, pinching US consumers less than six weeks before the November 2 US presidential election. Crude oil traders shrugged off the news, and pushed prices higher after an initial drop in early trade after the White House confirmed that talks were underway.

The New York Mercantile Exchange contract for November delivery gained 11 cents to 48.46 dollars a barrel at the close. In London, Brent oil futures closed at 45.13 dollars, up 20 cents. With the latest rise, the New York futures price edged closer to the all-time record close on August 19 of 48.70 dollars and the intraday record of 49.40 dollars on August 20.

This isn't going to be ending the tight supply situation however. The government intends to continue to stock the Reserve vigorously:

The US Department of Energy said crude reserves fell by 9.1 million barrels in the week to September 17 to 269.5 million barrels, the lowest levels since February 6. The American Petroleum Institute said its survey showed an even steeper drop of 12.9 million barrels to 266.7 million. The SPR is expected to reach its full capacity of 700 million barrels in 2005.

By my calendar, that's only just over three months away. But with the (s)election pending, nothing can be allowed to awaken the American People from the Neuro-Linguistics trancs they've been placed in, so all of the increased demand will begin right after Jebbie the Butt and the other GOP electoral embezzlers perform their duty to the New Multinational Corporate World Order and complete the legitimization of King George XLIII, CEO-pRezdint of Bu$hCo World Inc.

Then look out.

But there is a complicating factor to their plans. Something seems to be happening in Nigeria, one of Shell Oil's majoirproduction areas. It looks like some kind of uprising against the government, the one that sees to it that Shell drills undisturbed by minor things like impoverished citizens denied jobs on the rigs - or on the Nigerian ships that Shell won't use to haul the oil despite the law.

I do not know of any Nigerian that is benefitting, apart from the "Alarm blow boys" that the foreigners now use as fronts. I was at one of those banks customers meetings and I saw quite a number of these people who they (foreigners) use as fronts. You see, such things make me sick and honestly speaking, I don't love to talk much about it. If Nigerians are not patronised by Government agencies that are saddled with the responsibility of moving cargo or petroleum products in the country, Nigerian National Petroleum Corporation (NNPC) as an umbrella body there is no way foreigners will not continue to have their way and the excuse will continue to be that Nigerian vessels are substandard, Nigeria don't have the capacity.

Of course, it might have helped if Shell had paid their Nigerian bills on time!

Shell owned up to overstating its reserves of oil, and the chairman was told to clear his desk. This being Shell, everything was systematic, and was approved at the highest level, and had been going on for years.

The punishments have followed. The Financial Services Authority thinks that a fine of - ooh, let's call it 17m - would be right. The lawyers expect to make far more than that from a wave of class actions. The Nigerians, those pillars of commercial morality, think that Shell ought to pay them an extra 1.5 billion.

I think that Shell executives felt that 'Ah! It's only them damn N-word Nigerians! We can cut them out and carry on like nothing happened.'

Go bankrupt. Cut costs. Cut payrolls. Cut spending. Not something to look forward to. But something to expect - along with the angry response of a people long-suffering and hopeful that a multinational corporation would someday live up to the promises made to them and pay what was promised.

It's time to get a clue, folks. The people of the Third World, from whom the West (including Europe, and Japan of Asia in particular) have been taking and taking and taking for centuries, have their backs to the wall. There is nowhere else they can be pushed. It's fight or die time.

Greed has a way of blinding those affected to the wisdom of heeding that maxim that goes something like "Never take in a fight everything a man has." This means that once it's obvious he's beaten, you end the fight. Not to do so creates a motive for revenge, and the Marquis of Queensbury rules aren't likely to be followed.

This maxim can also be applied to commerce. When a colonial power comes along and takes everything a formerly sovereign nation has, revolts ensue. Greater power must be used to subdue the natives, and resentments build, until the occupier has weakened and become slothful enough, and blinded to the realities of the relationship, that a successful revolution has at last begun.

It is said that terrorism isn't a nation that can be fought in the traditional manner. So it is with neoliberal commerce. Multinational corporations aren't nation-states (yet), and can't be fought like one.

Yet, that is the line up in today's "War on Terra" - two non-nation-state entities squared off against one another and fighting through the agency of a national army (or military contractor) on at least one side. There is no court of law, no international deliberative body, no government, that can take on that situation. IOt has become a jungle - and the law of the jungle applies.

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pessimist :: 2:16 PM :: Comments (7) :: Digg It!