Tag Archives: peak oil

Noah is a Rousing call for Christian Environmentalism

It has been a grim week for the planet, but the movie Noah offers a glimmer of hope by delivering a spectacular wake-up call to Christians – reminding them that it is God’s creatures who are going extinct and God’s jewel of a planet that is being destroyed.

NoahWith the environmental movement desperately trying to protect the earth, energetic Christian environmentalists would be a welcome addition.

We all know the biblical story of Noah: humans have wandered far from the Garden of Eden, with immoral cities, plundering and killing. The movie Noah adds an interesting twist that makes the story jump into the 21st century – the most visible evil is how humans are befouling the earth. As the movie begins, we find Noah and his family living in an odd wilderness. Later, when they begin their journey to discover God’s vision for Noah, we suddenly realize that the wilderness is a forested area that has been completely, ruthlessly, denuded of trees and top soil by heedless human farmers.

The cruel and disheveled people they meet on their journey are literally starving to death as the earth becomes barren under the weight of human development. Only Noah seems able to recognize the beauty and worth of the animals, plants, and birds that struggle to share the planet with these ravenous humans.

The movie has a series of unexpected plot twists that put everyone in the family under intense moral strain but throughout, the sense of wonder and reverence for the creatures and the fullness of life on the plant remains a constant – right down to Noah’s final words after the flood, asking his family to replenish, not subdue, the earth.

Darth Vader Visits Georgia

Under cover of the Republican convention, Vice President Dick Cheney journeyed to Georgia, Ukraine, and Azerbaijan during the first week of September, hoping to stir the pot and whip up a new cold war for the next president.  Cheney made a joint appearance with Georgian President Mikheil Saakashvili and was as provocative as possible.  “Russia’s actions have cast grave doubt on its intentions and on its reliability as an international partner, not just in Georgia, but across this region and indeed throughout the international system,” intoned the man who masterminded the unilateral U.S. invasion of Iraq.  Saakashvili, a vocal U.S. ally, whose surprise attack on the break-away province of South Ossetia triggered a devastating Russian counter-attack, needs support from Washington because he is now under attack by Georgia’s opposition parties.  For example, David Gamkredlidze, leader of the New Right party, said last week, “Despite numerous warnings Saakashvili unilaterally took the criminal and irresponsible decision to shell (the South Ossetian capital) Tskhinvali, which led to catastrophic consequences for the country.”

Saakashvili seems to have been lured into initiating the war with Russia by the Bush administration’s push for Georgia to be admitted into NATO.  If so, the war and its aftermath are the result of a series of aggressive U.S. moves since the fall of the Berlin Wall in 1990.  While dragging his feet on a nuclear arms reduction treaty with Boris Yeltsin, President Bill Clinton initiated a policy of offering NATO membership to the former communist countries of Eastern Europe.  The Bush administration enhanced this policy by pushing for NATO membership for former Soviet Republics, like Ukraine and Georgia, on Russia’s borders.

It is here, as with the situation in Iraq before the invasion, that national security policy intersects with oil.  The Clinton administration and now the Bush administration have been pushing for the building of pipelines from oil-rich Azerbajain (Georgia’s neighbor to the east), Kazakhstan, and Turkmenistan through Georgia to the Black Sea.  This would by-pass the largest existing pipeline route to the large European market.  That pipeline runs through Russia.  Once again, Cheney is working toward an expansion of the American empire into an unstable oil region through armed diplomacy.  In fact, as Sarah Palin pointed out last week in her TV interview, if our European allies had given in to Bush administration pressure last spring and admitted Georgia into NATO, then the U.S. would have had a treaty obligation to send soldiers into Georgia to confront the Russian threat.  “Asked whether the U.S. would have to go to war with Russia if it invaded Georgia, and the tiny country was part of NATO, Palin said, ‘Perhaps so.”

Into this potent mix of military treaties and oil scheming steps John McCain.  The Republican presidential candidate was quick to support Saakashvili, telling an audience, “I told him that I know I speak for every American when I say to him, ‘Today, we are all Georgians.'”  McCain has already signaled his intention to take an aggressive stance against Russia, proposing last spring to evict Putin’s country from the Group of Eight industrial nations that meet yearly to discuss the world economy because Russian is not a functioning democracy.  Thus, election of the McCain-Palin ticket is likely to mean a return to a confrontational cold war relationship with Russia – just as Cheney has planned it.

Oil Price Declines Unrelated to Supply and Demand

All spring and into June we have been told by the media that the rise in oil prices was related to the “supply and demand for oil.”  Journalists and economists told us that the doubling of the price of oil, from $72 per barrel in September of 2007 to $147 at the beginning of July was the market responding to (and you can take your pick) China and India buying more oil, guerrilla bands attacking oil rigs in Nigeria, oil companies being unable to find new oil supplies, or tensions between the U.S. and Iran.  Then, once again, reality showed that most economists and journalists are merely putting a positive spin on anything that puts money into the pockets of big corporations.

In the two weeks between Friday, July 11 and Friday, July 25 the price of oil fell 16.3%, from $147 per barrel to $123.26 per barrel.  Did China or India stop buying oil, were tensions eased betweent the U.S. and Iran, did Exxon-Mobil find a new oil field, is there peace and justice in Nigeria?  No – yet the price fell 16.3% in 14 days.  What better evidence that most of the price rise was speculation; speculation based on the falling U.S. dollar, speculation based on low U.S. interest rates, speculation based on U.S. trade and budget deficits.  The price fell in July because the speculators went too far, the U.S. dollar is not collapsing, it is gradually sinking, so they overshot their mark.  This is cold comfort as we spend $50 to $100 dollars filling our tanks.

Let’s be clear, this is not the kind of illegal, market manipulation speculation that the Democrats in Congress say they can wipe out with legislation.  This is financial managers at multi-national corporations, traders at hedge funds, investment banks in Switzerland and London and New York, doing what they do every day, year after year, move money around the globe to find the best pay-off for their cash.  Countries that have suffered runs on their currency at one time or another since 1990 include Mexico, Russia, South Korea, Indonesia, Malaysia, and Argentina.  Now it is the U.S.’ turn – our budget deficits, trade deficits, and low interest rates are a classic set-up for a run on our currency – and the traders are doing the run in oil futures because oil is paid for in dollars.  Check out my post from June 27 for a more detailed explanation of why the oil price rise is a run on the dollar.

There is a solution to this problem, but it can’t be done overnight.  It will take rare leadership ability for the U.S. to change the way it operates in the world.  If the oil price speculative frenzy is at heart a run on the dollar, then the cure is:

1) Reduce the U.S. trade deficit by greatly reducing imports of oil (take out the cost of imported oil and our trade is roughly in balance) and do it by conserving energy and ultilizing alternative energy, not by making ridiculous claims about the amount of oil that can be drilled off-shore.

2) Raise U.S. interest rates above their artificially low levels so that people can get decent interest rates when they save money and then resolve the mortgage/financial crisis by targeting aid to people who are either in foreclosure or verging on foreclosure.  It sounds expensive, but direct subsidies to homeowners in trouble would be way cheaper than what doubling the price of gasoline has cost us.  Plus, every dollar spent would stay in the United States, while our oil dollars line the pockets of companies in other countries.

3) Reduce the U.S. federal deficit by ending the Bush tax cuts for the rich and reducing military spending by ending the War in Iraq.  Most of the federal deficit run up during the Bush years is a creation of the tax cuts for the wealthy in 2001 and 2002 and by the $150 billion per year we are spending to occupy our new colony in Iraq.

Speculation, the Price of Oil, and the Run on the Dollar

There is a lot of talk this week (June 23-27) about international speculators driving up the price of oil.  Some people claim that oil would cost what it did in September of 2007, $70 to $80 per barrel, if speculation was eliminated.  However, the focus on speculation is distracting us from the underlying causes of the current oil price crisis.

 

International speculation, be it in global oil markets or in the value of a nation’s currency, has a significant impact on prices and markets only when speculators are able to take advantage of a weakness or flaw in the world economy.  This is true because speculators are a divergent group consisting of hedge funds, investment banks, currency traders, wealthy individuals, and trans-national corporations.  Many of them are based in Europe, Asia, or the Middle East, but a significant portion of them are located here in the United States.  This group of rich, but uncooperative financial actors only focuses its speculative energies on a particular commodity, national currency, or industry when there is widespread agreement about a problem or vulnerability in the world economy.

 

The greatest weakness in the world economy is pretty obvious right now.  If any country other than the United States had a federal government deficit of more than $300 billion, a trade deficit of over $700 billion, a currency that lost 15% of its value vs. the joint European currency (the Euro) since last June, and a central bank that slashed its prime interest rate from 4.75% to 2.0% in six months, then the sound you heard this spring would have been the thunder of a massive run on that country’s currency.

 

Until this year, the United States has not had to raise interest rates or cut government spending in spite of its chronic budget and trade deficits.  Its role as the globe’s military superpower and largest economy has made international financial actors unwilling to sell dollars at low prices and trigger a run on the currency.  All of that began to change in September of 2007, when the bursting housing bubble began taking down elite Wall Street banks and brokerage houses.  The U.S. Federal Reserve decided to rescue the mortgage bankers and Wall Street dealers from the consequences of their bad loans and proceeded to lower interest rates in a series of rapid, panicky decisions.

 

With the dollar already sliding in value, these cuts sent out a clear signal to international financial actors.  As a result, I believe what we are seeing is a back-door run on the dollar.  Speculators concluded last fall that interest rates for treasury bonds and other financial instruments would decline for the indefinite future as the United States drifted into a recession.  In addition, the value of their U.S. dollars would also continue to fall.  A number of countries, especially China and Japan, have vast reserves of dollars that they are unwilling to dump because of the hostile political and possibly even military reaction of the U.S. government.  Blocked from starting a successful run on the dollar, international financial actors purchased oil futures contracts at higher and higher prices.  Why – because oil is always traded in U.S. dollars.  When the value of the dollar falls, oil prices go up.

 

Thus, a speculative frenzy: with oil prices guaranteed to go up, gambling on oil futures last fall became a no-risk venture.  As more and more speculators bought oil futures the price kept jumping, from $70 per barrel in September to $99 in November to $110 in March to $135 in May.  Every time the Federal Reserve cut interest rates to bail out the banks, the speculators bought more oil futures at higher prices.

 

A parade of economists and spokesmen for international financial firms now claims that rising oil prices reflect supply and demand.  They say that as demand for oil grows and supply worries associated with the coming of “peak” oil add up, it is only natural for prices to increase.  However, between April 14 and May 22 the price of oil jumped 18%; no theory of supply and demand can account for that increase.  The truth is that runs on a currency are driven not by day-to-day demand for a country’s money, but a decision by hundreds of international investors that it is time to get out.  The rising price of oil – and of gasoline at the pump – is a vote of no confidence in the people who manage U.S. economic policy, especially the Federal Reserve Bank and the Bush administration.

 

But they aren’t the ones who suffer.  Instead, the American consumer is paying through the nose for gasoline because the Federal Reserve is bailing out the mortgage bankers and investment firms that made boatloads of money speculating on housing prices.  The cost of the housing bubble’s collapse has to be paid for one way or another, and by forcing down interest rates the Federal Reserve is deflecting the cost onto ordinary Americans – one gallon at a time.

 

For a longer essay that describes in more detail the connections between rising oil prices, rising interest rates, and the American empire, just click on this link and then scroll down to Rising Oil, Sinking Empire.