The reason for the drop in oil prices is the massive increase in oil production. Iraqi oil fields are refining more oil than at any time since the US invasion of 2003. The Kingdom of Saudi Arabia continues to expand its oil production apparatus, despite losing money in the process.
Domestic crude oil production in the United States is the highest it’s ever been, churning out 9.3 million barrels of oil every day. The innovative technology of hydraulic fracking is rapidly extracting a new surge of oil from vast, previously untapped deposits. Technological innovations in drilling and the process of refining also play a role in the current financially devastating overabundance on the oil market.
In the context of massive oil production and drastically low oil prices, after 40 years, the United States Congress is discussing a repeal of the 1973 oil export ban. With so much oil being refined within the United States, it makes sense that oil companies would want to start making money selling it outside of the country.
The oil export ban has always had a single exception, allowing US oil firms to export to Canada, the country’s northern neighbor, which has always been dependent on US energy corporations. Current US oil exports to Canada are fourteen times higher than in 2007, showing how desperate US oil is to reach markets beyond the border.
The White House officially opposes lifting the ban, but leading Democratic Party figure and presidential candidate Hillary Clinton, who speaks as a de-facto representative of the powerful Democratic Leadership Council, has announced she would support lifting the ban — if certain concessions are made.
If domestic US oil begins to flow onto the international markets, creating further overabundance in the process, the price of oil will drop even further than before. The US-aligned Kingdom of Saudi Arabia, and now the US Congress itself, have been and are now continuing to push measures to hurt the profits of Wall Street oil firms in the short term, in order to serve real long-term political objectives.
Recent turmoil on the stock market indicates that the prolonged strategy of maintaining low oil prices to serve geopolitical ends has real economic consequences, and may soon be abandoned. However, before the prices are allowed to rise, the “Oil Showdown” with oil-producing opponents of US hegemony will have to play out. The rise of tension in the Middle East and Latin America indicate that final countdown to a new oil war could be very rapidly approaching.
The Middle Eastern Tinderbox
The Kingdom of Saudi Arabia, in coordination with its Wall Street paymasters, is waging a violent war of aggression against its neighbors.
The autocratic Saudi regime is funding, training, arming, and transporting violent anti-government extremists to Syria. Over 200,000 people are already dead as the US-aligned regimes in the region, led by Saudi Arabia, keep this ugly war going.
Saudi Arabia is currently engaged in a horrific bombing campaign in Yemen. Saudi soldiers, along with soldiers from the equally autocratic United Arab Emirates, have been on the ground, attempting to re-install the puppet dictator Mansour Hadi. Thousands of Yemenis have already died as US-manufactured missiles pound the country, in an effort to beat back a mass uprising of the people.
Repeatedly the Saudi military has sent its troops into Bahrain, in order to put down popular uprisings for democracy and keep the unpopular autocratic monarchy on the throne.
In Iraq, Sunni extremists have been on a campaign of terrorism and murder. Long before “ISIS” or “Daesh” made international headlines with its atrocities, money from the Saudi Kingdom was flowing into the hands of violent Sunni takfiris in Iraq. Iraqi Shias, the majority of the population, have been forced to form militias to protect themselves.
The Kingdom of Saudi Arabia has the fourth-largest military budget of any country in the world. These weapons are exclusively purchased from the United States.
As the Syrian Arab Republic defends itself from Saudi terrorism; the people of Bahrain battle for democracy against a brutal, US-Saudi backed king; the people of Yemen battle against a Saudi-led attack and invasion; and the Shia community in Iraq seeks to defend itself, the major regional player that has spoken in support of all them is the Islamic Republic of Iran. Iran is also a consistent supporter of the Palestinian resistance, despite deep political and religious differences with its leaders.
The Islamic Republic of Iran, with its state-owned oil apparatus, is led by the Supreme Leader Grand Ayatollah Seyed Ali Khamenei. Iran has an armed network called the Islamic Revolutionary Guard Corps that is directly loyal to Khamenei. Khamenei frequently denounces the system of western capitalism, and condemns the United States and Israel for their crimes around the world. The Islamic Republic of Iran openly strives to “stand with the oppressed” around the world. Within its borders, the Islamic Republic provides free healthcare and education, and tightly regulates the markets, keeping society in line with religious principles.
The Iranian leadership also benefitted from the drastic rise in oil prices in 2003, after its major enemy Saddam Hussein was deposed in Iraq. Knowing that overdependence on oil was a potential weakness, Iranian leaders began to build nuclear power plants, hoping to diversify their energy sector. The response was illegal unilateral sanctions from the United States, based on the false allegation that Iran was seeking to acquire nuclear weapons with its peaceful nuclear energy program.
In the context of low oil prices and economic problems in Iran, the US and Iran have reached a nuclear conclusion after months of the “P5+1 Negotiations.” Iran is currently in the process of drastically reducing its peaceful nuclear energy program, in exchange for a lifting of US sanctions.
Tensions in the Middle East are rising all the time, as Israelis harass the Al-Aqsa mosque with daily raids that offend Muslims across the region. The conflict in Syria is escalating and Yemen continues to endure a horrific Saudi assault. What exactly is planned for the Middle East as the low-oil strategy reaches its climax is yet to be seen.
Cash-Starving “21st Century Socialism”
In 2003, when Iraq was blown to bits by the Pentagon’s “shock and awe,” its oil production apparatus was destroyed along with it. The price of oil went through the roof, as a major oil-producing country was blown off the market and supply dropped.
Hugo Chavez, the elected leader of Venezuela, had just defeated an attempted coup against him, supported by the United States in 2002. It was in 2003, in the context of that post-coup victory and a boom in the oil markets, that Chavez announced his intention to move Venezuela toward “21st Century Socialism.” Chavez had been originally elected on an economic program of the “third way between capitalism and socialism,” but after defeating the US-backed coup in alliance with trade unions, rank-and- file soldiers, and leftist street activists his program shifted significantly leftward.
Venezuela’s government-owned oil company was able to subsidize a huge expansion of social programs. Government-funded schools and literacy campaigns were established. In exchange for Venezuelan oil, Cuban doctors were brought to Venezuela in order to provide free healthcare in government-run clinics across the country.
Between 2003 and 2007, Venezuela’s economy expanded by 70%. In 2003, 55% of Venezuela’s population lived in poverty. By 2007, the number was down to 34%, and it continued to decrease.
Led by the United Socialist Party, the Venezuelan state sector has nationalized industries and also subsidized an apparatus of communes and cooperatives. Bolivarian political leaders have always raised concerns about the economic revolution’s dependence on the oil revenue, seeing it as a weakness that could be exploited by their enemies.
Since 2014, Venezuela’s oil money has been drying up as the US and its Saudi allies consciously drive the oil prices lower, and do everything possible to keep them down.
The oil-price drop has coincided with an escalation of meddling in Venezuela by US-aligned and -directed forces. In the spring of 2014, events called “La Salida” involved massive street violence, staged by US-funded NGOs like the Albert Einstein Institute. Scores of innocent people were killed by shootings, bombings, and razor wires strung across street intersections.
Since the oil price manipulation began in 2014, anti-government Venezuelans have begun a coordinated practice of hoarding certain foods and consumer products. Entire warehouses of food have been discovered by Venezuelan officials, where wealthy Venezuelans have been hoarding items in order to create false shortages and panics.
The Venezuelan opposition, funded and controlled by wealthy interests in the United States, has been attempting to re-craft its image, preaching a kind of social-democratic message about opposing “corruption” rather than the vulgar pro-market rhetoric that defined its previously unsuccessful efforts. In the 2014 upsurge of violence, wealthy young Venezuelans donned Occupy Wall Street-style Guy Fawkes masks as they attacked healthcare clinics and buses. For the upcoming election, the traditionally conservative Venezuelan opposition has even nominated a “socialist” transgender woman for office, presenting itself as more liberal.
Wall Street Pushes For Continental Crises
Destabilization efforts have also escalated on Venezuela’s borders. Fanatical anti-communist paramilitaries from the US-aligned country of Colombia recently began illegally crossing over Venezuela’s borders. Troops have been sent to the Colombian border to quell the situation as smuggling and destabilization from Colombia has escalated.
Guyana, another US-aligned regime, has also begun to harass the Bolivarian Republic. The Venezuelan ministry of foreign affairs says that Guyana’s attempts to claim certain oil-rich Venezuelan border territories are part of a pattern of “recurring provocations and aggression” from their US-backed neighbor.
The obvious intent of Washington is to create a big enough economic and political crisis in Venezuela that the December elections can be utilized to foment regime change. Even though the United Socialist Party has undisputedly won all of the recent elections according to international observers, the US-backed opposition routinely declares all election results to be fraudulent. Whatever the result of the December vote, the National Endowment for Democracy and the Central Intelligence Agency are prepping their Venezuelan proxies for serious provocations.
The United Socialist Party-led Bolivarian revolutionaries are also preparing for the upcoming conflagration. In order to stimulate the economy and keep the loyalty of the Venezuelan public, the government led by Chavez successor Nicolas Maduro is engaged in a push for affordable housing. All across Venezuela the government is building high-quality affordable apartment buildings for low-income Venezuelans. Millions of unemployed Venezuelans have been hired to build new affordable housing units, and millions of Venezuelans will soon be moving into new, well constructed homes.
Meanwhile, over 160,000 Venezuelans who are not part of the official military have formed “Bolivarian Militias.” If there is a direct foreign attack on Venezuela, or an episode of domestic right-wing insurrection, these thousands of young ideological and armed revolutionaries are prepared to defend their revolution.
As the elections approach, the US media is already attempting to turn Leopoldo Lopez, who directed anti-government violence, into a “human rights” martyr after he was given a prison sentence.
Ecuador, another oil-exporting country which has aligned with Venezuela, is also facing similar destabilization efforts. Washington’s coordinated efforts to keep oil prices low is playing a key political role in Latin America. Events in Venezuela and Ecuador are tied in all across the continent. Central America is also becoming less stable as anti-corruption protests have rocked Guatemala and Honduras.
A Global Walmart Scheme
Many in the United States have bemoaned the practices of the low-wage “big box” store called Walmart. The chain of Walmart stores, now the biggest employer in the United States, has a reputation for its practice of beating out any competition from local businesses by offering dramatically low prices until a near monopoly can be established. Once any competitors are defeated, Walmart raises its prices, as consumers no longer have other options.
The global crisis of low oil prices is essentially the business practices of Sam Walton being applied on a global scale by the banking and oil cartels of Wall Street and London. US and British oil corporations, in coordination with their Middle Eastern vassals, are dropping the prices lower and lower. They hope that by doing this they can defeat their competitors in Russia, Venezuela, Ecuador, and Iran, and secure control of the world market.
However, in the global marketplace, “defeat” does not mean forcing the competitor into bankruptcy. Saddam Hussein and Moammar Gaddafi presided over state-owned oil companies that were in competition with Wall Street and London. They were forced out of the global marketplace with cruise missiles and bombs.
In the 21st Century, public ownership of natural resources has become the basis for anti-capitalist and anti-imperialist projects. The oil price fix is not merely a strategy for cornering the market, but it has deep ideological and political implications. Countries which export oil in competition with the United States tend to have socialist, nationalist, and populist economic models, in which there is heavy government control of business in service of the public. The countries aligned with the United States tend to have heavily unregulated and neoliberal economic models, in which the activities of big business are unrestrained, and the setting of government policy is turned over to transnational institutions like the International Monetary Fund, the World Trade Organization, or the World Bank.
The recent dramatic events on the US stock market show that the geopolitical strategy of keeping oil prices low cannot be maintained forever. As oil prices remain low, other commodities are seeing a decrease. Natural gas prices are dropping. Steel and copper have declined in their market value as well. The stock market is writhing in the pains of overproduction. There is too much oil, steel, copper, and natural gas being produced. The market cries out for a fresh barrage of destruction in order to keep the profits rolling in.
The possible lifting of the oil export ban indicates that the boardrooms of US oil corporations are anticipating the ultimate conclusion of their price-fixing scheme. They are preparing themselves for a global market where key economic opponents have been removed, and in their absence, countries around the world begin to import oil from the United States.
As tensions rise in Latin America and the Middle East, it is clear that the anticipated oil showdown is approaching. The artificial deflating of oil prices cannot be continued much longer. The drive for economic independence and self-determination in oil-producing countries across the world is about to be severely tested. The price of oil will soon rise again, but before this happens, dramatic global events are likely to occur.
Caleb Maupin is a political analyst and activist based in New York. He studied political science at Baldwin-Wallace College and was inspired and involved in the Occupy Wall Street movement, especially for the online magazine “New Eastern Outlook”.