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Let me throw out an idea: the US will "succeed" in Iraq. The war, of course, is lost, but this is, perhaps, the wrong measure.

From a liquid fuel context, all we have seen is that full Iraqi oil production has been kept off the market for many years. If I were holding an asset that was appreciating as fast as oil, and I could afford to wait to sell, then I would hold back.

At some point in the next few years, the hot war in Iraq will stop. This doesn't mean that all will be well, but it does mean that oil companies will be able to move in. They are used to operating in relatively unstable situations, Nigeria is a good example.

When the Iraqi oil production reaches the levels expected, the current situation will moderate, and the world will get some more time to postpone the hard choices. It would be interesting to see how the two trillion dollars the war is projected to cost will compare with the savings in future oil costs as the Iraqi oil starts to flow.

(I'm, of course, ignoring all the human and ecological costs of the war and militarism, but this is what economists do, so I'm following their lead.)

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun Oct 28th, 2007 at 12:07:53 PM EST
it seems clear to me that rdf is essentially correct concerning the U.S. ruling class' strategy in Iraq. They intend to stay there, despite everyone and anyone. The gauntlet is down, pick it up whomever, and however many.

Several trillion U.S. dollars, thousands of U.S. soldiers, and a few million camel-jockeys mean less to the powers-that-be than even their own working class - which ain't much. In current dollars and prices, the prize may be on the order of $30 trillion in gross sales (U.S. DOE estimates on oil deposits in western Iraq included), if they can keep Iran out of the southeastern section of Iraq. If their sweetheart production agreements are ever accepted by the Iraqis, then they will pocket over 30% of that amount for essentially no cost - so $10 trillion given the idea that they just collect their "dividends" on the war.

However, as Robert points out, and as Jerome has been pointing out for months, conditions are changing. The actual price for Iraqi oil will be much higher than implied by the current market. So - a helluva return on investment right there.

But wait, there's more - with every barrel of oil you will get additional fees for shipping. And if you call in your bid tonight, we'll throw in some cracking and catalysis followed by some distillation. Now, unfortunately, we cannot make this offer on-line, so you will have to come down to our retail outlets, where we will add another layer of costs. Point being that there's a whole lot of additional profit after the oil is high-jacked - I mean extracted.

I think that they have pushed all of the chips into the center of the table. And, what the hell, why not?
They're using my chips and your chips, not their own. It's no lose all the way for them, as far as they see it.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Oct 28th, 2007 at 11:08:27 PM EST
[ Parent ]
and the longer it takes to reach that stability, the more delayed the pumping of that oil is, well, the higher the profit from pumping it ultimately gets.

hellova bet. wish i could fold and take the rest of my chips off the table.

by wu ming on Mon Oct 29th, 2007 at 02:40:46 AM EST
[ Parent ]
It is a helluva bet.

But it presupposes that there isn't anyone else at the table with a stronger hand.

What is the US going to buy this oil with? The US $ is rapidly becoming a "toilet currency" - to re-use the traders' phrase re the early Euro.

Its productive economy is being misdirected to wasted expenditure, largely military, and much of its "wealth" creation is a financial mirage, founded on a land price bubble of cosmic proportions.

We are seeing the end of dollar hegemony, IMHO. Some say the Euro will replace it as a global reserve currency but my take is we need to revisit Bretton Woods and start with a new, and "asset-based", approach.

The US simply does not have the financial resources to maintain its hegemony by conventional force - particularly the astronomic energy costs - nor does it have a nuclear monopoly.

I never thought I would be pleased that Russia maintained its nuclear arsenal, but MAD is the only thing that keeps the current crew - and those who follow - from what would essentially be a gargantuan global corporate Imperial kleptocracy.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Oct 29th, 2007 at 05:56:44 AM EST
[ Parent ]
that bet can only be won in a situation of worldwide war, in which military control of the assets matters, and investment can be imposed from the top - a command economy.

There is no conceivable peacetime scenario under which Americans or Western companies get to keep any meaningful chunk of the Iraqi oil rent.

So it's a really a bet on the long - hot - war - WWiv. It's a bleak 'win'.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Oct 29th, 2007 at 06:15:53 AM EST
[ Parent ]
I agree completely.

But, as they say: Possession is nine tenths' of the Law.

I do not see the US ever leaving Iraq entirely while there is significant oil.

This need not be a problem - eg they're still in Cuba - but they are going to have to realise that the only Iraq settlement will be a multilateral one and not on terms they dictate.

But the $64 trillion question is what sort of settlement it will be...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Oct 29th, 2007 at 06:28:32 AM EST
[ Parent ]
I trust that my characterization of the U.S. ruling class' strategy is understood to be clinical and contemporaneous. In my old-style Marxist rhetoric - I think that the 'contradictions' will just about bury them. Despite the paranoia that simmers here in the left community concerning takeover by a mercenary army (Blackwater, of course), I doubt that their gamble will be sustained domestically, let alone in the wider world.

Of course, WW IV is possible, but, so far, it looks like Russia and China are just playing the U.S. like a crawdad on a piece of bacon. The stupid crawdad just won't let go of the bacon, as long as you haul him in sorta slow-like.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Mon Oct 29th, 2007 at 10:58:17 AM EST
[ Parent ]
Bush appears to be another monkey caught in a "Gumption Trap" by "value rigidity".

All kinds of examples from cycle maintenance could be given, but the most striking example of value rigidity I can think of is the old South Indian Monkey Trap, which depends on value rigidity for its effectiveness.

The trap consists of a hollowed-out coconut chained to a stake. The coconut has some rice inside which can be grabbed through a small hole. The hole is big enough so that the monkey's hand can go in, but too small for his fist with rice in it to come out. The monkey reaches in and is suddenly trapped...by nothing more than his own value rigidity.

He can't revalue the rice. He cannot see that freedom without rice is more valuable than capture with it. The villagers are coming to get him and take him away. They're coming closer -- closer! -- now!

What general advice...not specific advice...but what general advice would you give the poor monkey in circumstances like this?

From "Zen and the Art of Motorcycle Maintenance", of course, if you hadn't guessed...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Oct 29th, 2007 at 11:07:51 AM EST
[ Parent ]

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