There are things that I believe that I shall never say, but I shall never say things that I do not believe.
Howdy, Howdy, Howdy: Hello my friends (ooh, that sounded like John McCain there for a moment), hope that you are doing good. Alright as promised in the last issue-as tiny and pathetic as it was-we are going to be covering a slew of new news that has been thrown together, but is completely related (cue Twilight Zone music). I don’t believe that anyone on the news is talking about this stuff, I know the radio talk show hosts are, and so for those who aren’t able to listen-or choose not to-I want you to be able to be informed. Just as a quick note this issue WILL have a works cited column because I didn’t get much information from the links on my blog. I hope that everyone is able to read this and understand what I’m trying to say…because this stuff is kind of intense and it is confusing, but I’m going to do my best to explain it to you. It is my hope that you enjoy. So…here we go!
S’all About the Oil: It’s the truth. All of the problems we are facing affect the oil, and next to no one is telling you this. This is a complicated tangled web that is being weaved so I am going to do my best to unravel it a little bit. To begin with we have to look at the why question. Why is the price of oil falling? Is it because we are drilling, beginning to produce our own oil? Could we possibly have gone into ANWAR and into the Gulf now that the restrictions have been lifted by Congress? Yeah-no. The reason oil prices are coming down at such a consistent rate is because consumption has gone down around the world because there is a global economic crisis occurring and people can’t buy what they can’t afford. Which brings us to another question that should be asked. Who-who is in charge of all of this oil?
The truth might just scare you if you do not know already. The list of who has the oil is fairly large so I’m going to narrow it down considerably. Russia, Venezuela, and countries in the Middle East. Now…wait…I don’t know maybe it’s just me but…don’t these people…uh…HATE US?! That’s right everyone, we are dealing oil with people who want to see us go down in flame. *Sigh* Sometimes I wonder about the intelligence levels in our officials. What makes this worse is the way the economy of these countries work. To explain this I’m going to focus in on one country in particular. Russia.
Russia is a country full of natural resources which include the worlds largest natural gas reserves, second largest coal reserves, and eighth largest oil reserves and because of this they are the worlds second largest exporter of oil, second largest natural gas exporter, and third largest consumer of energy in the world. Basically their economy revolves around these specific resources. In fact “ Russia’s economic growth over the past seven years has been driven primarily by energy exports, given the increase in Russian oil production and relatively high world oil prices during the period. Internally, Russia gets over half of its domestic energy needs from natural gas”
If we are in anyway confused by what is said here let me clear it up for you. It’s telling you that Russia’s economy does very good when oil prices are high. That is completely opposite of how our economy works. We do best when prices are low, which means our economy flourishes. Which is a big red flag if anyone has been paying any attention at all. What’s going on with our economy right now? How high are the oil prices? Putting the answers of both questions together creates a bit of a conundrum. Our economy is tanking yet oil prices are low…doesn’t make sense does it? Like I said earlier, however, it is because there is no reason beyond less consumption for the oil prices to be down-which means Americans aren’t driving their “gas-guzzlers” any more-or as much-because they can’t afford it, and we aren’t helping ourselves out by drilling on our own soil.
But returning to Russia…. “Russia’s economy is heavily dependent on oil and natural gas exports….According to calculations by Alfa Bank, the fuel sector accounts for about 20.5 percent of GDP, down from around 22 percent in 2000”. Just as high oil prices present a problem for us, so do low prices for Russia whose economy has been falling apart at the seams since oil began to fall. “The Russian stock market went lower than 1,400 points due to the reduction of the oil prices and the ongoing of outflow of capital, which investors currently conduct.” This from Russian reporters on a Russian website I just “happened” upon. All reported this summer. You can’t help but wonder what’s going on when stuff like this is coming straight from the Horses Mouth.
This isn’t half of the story, however, where things really begin to get interesting are in a whole other NPR article written by Jackie Northam entitled Geopolitical Alliances Shift with Rising Oil Prices. “The soaring price of oil has a profound impact on relationships between nations that have the valuable commodity and those that don't.” This statement says it all, and gives us a little insight because it was written this summer as well. What I’m trying to get you to glean from this is that clearly, as previously stated, certain nations flourish under the high prices, but when things begin to get stingy for them they hit hard times. No nation is going to simply sit there and allow themselves to go through economic turmoil without trying to fix it (unless you’re the United States then you just try to make it worse). Northam interviewed Roger Diwan a partner at the consultancy company PFC Energy who told her that the shifting of wealth (like how all the sudden Russia was bringing in TONS of revenue) is creating a new geopolitical climate because those countries with the oil are beginning to flex their muscles and spread their influence over the countries that rely on their product. In Russia who was bankrupt one decade ago it is extremely clear that Oil helped create that change for them. “It helped them restore the country and it allowed them to play regional politics, and even as an interlocutor to Europe, to sit down at the table and say, 'This is what we want and this is what we're trying to achieve and let's see how we make a deal,' " he says. "So, it gives them, obviously, a lot of leverage.” Diwan says describing Russia’s sudden involvement in world politics. Leverage, I believe is the key word here, Russia has been looking to become a player in global politics once again-a position they haven’t held since the collapse of the Soviet Union, and it is because of that leverage that they were able to do what they did when they attacked Georgia this summer.
We all know the basics of what happened in the Georgian Russian conflict. Russia walked over and started attacking South Ossetia that was annexed by Georgia a while ago and sort of said “deal with it, we’re bigger than you.” They made a bit of a display over there in Georgia and no one did anything-least of all any of Georgia’s allies in Europe. As it happens there’s a bit more to the story. Right in the middle of Georgia through South Ossetia are a couple of large oil pipelines. One is called the Baku-Supsa, and the other is the BTC. These are HUGE pumpers of oil throughout Europe and also for the US which is why Russia targeted the area. They wanted to control more oil because that would further ensure that they would be able to keep prices up-in fact it would make it so Russia could take the already $140 a barrel price and jack it up even higher. Had this actually occurred we would have been in a world of hurt that we couldn’t have been able to compare too. Luckily for us that was a Warning that Russia sent out to everyone reminding us that they were no longer weak and were going to get what they want.
They aren’t alone in holding all the right cards. Saudi Arabia is also an oil rich province who is an ally-but I suspect only to a point. They too are effected negatively by the rising oil prices because they are suppliers. Venezuela is the same, and with these three groups who are already on friendly terms with one another all having problems because of the same thing you can bet your socks that if things continue the way they are we could have a conflict on our hands that we don’t want to deal with.
I guess you can enjoy the low oil prices, I mean really I can’t help but be happy when I see them fall, but don’t forget to listen to that nagging voice in the back of your head that is warning you to watch your back.
O.P.E.C: Who wants to mess with the price of oil? OPEC does! That’s right as mentioned in the previous article there are countries who are pissed that the oil prices are falling and they are demanding that it comes to a close. What’s worse is that OPEC is listening and President Bush isn’t doing a thing about it! Here’s what happened.
In an article released October 16th of this year written by Jad Mouawad he discusses what is going on with OPEC. Now OPEC had announced that it was to hold an emergency meeting regarding the plummeting oil prices the following week after this article was written (I’d give you the date but I’m too lazy to figure it out right now so I’ll let you do the hard work of counting seven days from the 16th). Apparently the problem was that petrol execs and oil producers were a nervous wreck because of the declining oil prices because they believed that this sudden decrease in price-it was sitting at $70 a barrel at this point-would “undermine the stability of the energy markets.” The problem was with the price up to $147.27 a barrel in July then suddenly back down to $70 only a few months later the market in oil wasn’t exactly what one would call “safe” and no one was willing to try and invest long term. That’s where OPEC decided to step in. With it’s meeting originally planned for Nov. 18 it had to quickly reschedule when it became obvious that some higher-ups were starting to get antsy all over the world. As the Iranian oil minister, Gholamhossein Nozari, said “ "I think the low price is a real damage to the future of production."
I think the low oil prices are a damage to YOUR future Mr. Minister, because Iran is one of those country’s that I described as benefited by high oil prices. We happen to like low prices…or would like them more if we could get them because we were actually drilling! Sorry…had to again get that off my chest.
What really bothers these people is the fact that with oil prices jumping and falling as they are there has been less of a desire to use the product from people who simply could not afford it, therefore the consumption slowed…wow I feel like this is déjà vu…. Basically it’s all the OPEC people who want to make a profit in the coming years and want everyone happy getting together. Now I’m not saying that they should not receive profits, but they should not get together and stick it to us just because they are upset at what oil is doing. What may be even worse is that a HUGE crunch is predicted on the not-too-far future. With prices falling it is predicted that people will begin mass consuming and a price surge will occur. When this happens the big wigs foresee too much need for not enough production.
That isn’t even the real kicker to this story though. Watch how different stories begin to intertwine….
The drop in prices has already created problems for oil producers, who have become accustomed to high prices. Iran and Venezuela both need oil prices at $95 a barrel to balance their budgets, Russia needs $70 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. The Algerian oil minister, Chakib Khelil, estimated Thursday that the "ideal" price for crude oil was between $70 and $90 a barrel.
In Russia, which is not part of OPEC, the drop in prices is threatening the country's ability to increase production. The Russian government has reportedly agreed to allocate $9 billion to its four major producers - Lukoil, Gazprom, Rosneft and TNK-BP - to help them cope with investment needs amid the credit crisis.
Weird…sounds so familiar. Sounds to me like OPEC is out to make everyone happy except the American people who most greatly benefit when prices are low. No one is really listening to us though, and I don’t think they will any time soon.
Here’s what happened at that meeting (oh, it was on the 24th of October…just so everyone knows). The meeting convened in Vienna, Austria at the OPEC Headquarters. Once everyone was done playing nice with the new appointees in the following posts: Minister of Petroleum in Angola, and Minister of Mines and Petroleum in Ecuador; they decided to repeat the same old thing I’ve been saying throughout the article…you know…people aren’t consuming as much and that’s the problem, then they decided that it was only going to get worse. They also noted that there were probably going to be shortages (jeez, I’m halfway through this article and I could have told everyone that…oh wait…I DID…can we just move on?). Here’s where things finally come to a head. It was decided that OPEC would cut back the amounts of barrels of oil that are put out daily down from 28.808 million by 1.5 million barrels a day…that’s a BIG cut! This began on the first of November. Here’s whose getting cut and by how many barrels a day.
Algeria: 71,000
Angola: 99,000
Ecuador: 27,000
I. R. Iran: 199,000
Kuwait: 132,000
Libya: 89,000
Nigeria: 113,000
Qatar: 43,000
Saudi Arabia: 466,000
U.A.E.: 134,000
Venezuela: 129,000
This is basically the end of the article basically…well other than this will all be managed by a big committee that no one actually cares about. Personally I don’t like this, cutting the amount of oil that is available to nations is doing nothing but putting a greater squeeze on us. In the end I think this is going to do more harm than good…but we’ll see I guess. Hold on for the ride my friends!
Since this oil thing is beginning to give me a headache…so we are going to move on to something equally happy….
The Weimar Republic: I’m about to give you a history lesson that I found on the official pbs.org website with the assistance of Google (that’s right I use Google search for my research!). This information was taken from an exert written by George J. W. Goodman. This piece is meant to show you why the phrase “history repeats itself” is extremely true. See if you can find the tangents.
Before World War I began Germany was a prosperous country whose currency was backed up by gold, and was beginning to spread in the fields of science and technology. However by 1923 not hyperinflation (very high, rapid monetary inflation that is great enough to threaten a nation's economic stability) was so bad that even a wheelbarrow full of marks could not buy so much as a loaf of bread. When looking for the cause of this we have to move back to 1914 when the war was expected to be over quickly and therefore the government borrowed money to fund it. In Germany the prices jumped between the years 1914 and 1919.
Unfortunately it was to get no easier. When Germany lost the war and was pushed into the Treaty of Versailles they had to pay reparations in gold-backed marks. With the loss of Ruhr and the loss of the province of Upper Silisea the Weimar Republic was becoming politically fragile.
The capitalist tendencies were still strong, however, with people working hard and knowing that in the end things would get better. Yet prices continued to double even into 1922 with things like milk going from 7 marks to 16. People were upset and slowly an underground economy began to emerge as the citizens tried to stick it to their tax collectors. Soon it became apparent to the citizens that the mark wasn’t what was valuable anymore and they began purchasing real goods such as pianos, diamonds and safe real estate. As value of things increased with the cost of each item banks hurried to fix the problem-for some reason no one saw anything wrong with it (if this is sounding familiar…you are one of the few sane people in this country).
The reason this wasn’t put to a stop was because of how fragile the government after the assassination of Walter Rathenau the foreign minister. By now the French had also come into Ruhr to enforce the demands for their reparations further pressuring the Germans.
Finally a group of German industrial combines by the name of Krupp, Thyssen, Farben, and Stinnes decided that the best way to fix the economy was to bring down the value of the mark. To do this marks had to be printed quick and in a large amount that would cause inflation. Now that the printing press was in full swing it was suddenly very hard to stop. Soon prices were skyrocketing so fast that the menus in restaurants could not be reprinted in time. Even the presses began to fall behind with the demand of marks until individual states and cities had to issue their own money to their citizens.
Eventually those who had been trying to back their wealth up with goods searching out anything such as soap and hairpins until the country was reduced to outright thievery.
To save themselves having to carry around huge wheelbarrows full of money a new mark was invented the “Rentenmark” which was equal to one billion old marks. "I remember," said one Frau Barten of East Prussia, "the feeling of having just one Rentenmark to spend. I bought a small tin bread bin. Just to buy something that had a price tag for one Mark was so exciting."
With everyone having given up on the economy it became a simple thing for Hitler to exploit with “diabolical talent.” No one was surprised anymore by the outrageous prices, or the growing problems that were blossoming all around them. People who had worked hard their entire lives were left on the street, and widows who depended on their husband were destitute. Pearl Buck, an American author described what it was like to be in Germany in 1923.
"The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self-assurance, their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency."
Farewell Until Next Time: Sorry I didn’t include the final article…it will be there next time-I promise. This Issue was beginning to get long…that’s my excuse. Alright so I won’t tell you what else we’ll discuss next time, but it will be great I promise! Can’t wait, and I hope you learned something in this issue. Thanks for reading!
Chene’
