Asymmetrical Information

Well said!

Well put, indeed.

Although the fact that you have to "put it" is silly.

Lind has been called a rightwinger over at The Cafe. I imagine his reputation will be greatly rehabilitated with this theory.

Who knew Leo Strauss was a Sinologist? Now, Harvey Mansfield, of course, everyone knows that. But Leo?

SMG

Yup, that strategy of throwing our weight around in the middle east is sure helping keep oil prices down ... er, stable ... er ... something.

Phil, if the U.S. military didn't exist, China, India, and Europe, among others, would have to invent it. The basic geo-political fact of our times (and it is head-thumpingly aggravating that Jane, after all that has transpired in this new century, still has to point out something so obvious as the centrality of Persian Gulf oil production to the entire world's economic conditions ), is that what is far in away the world's most important natural resource has a huge percentage of it's reserves located in an area where the polulation is militarily, economically, and politically weak. Because the population of this region has been unable to achieve self-government, it is unable to trade peacefully and profitably with the rest of the world, thus the rest of the world is under constant threat that political developments will threaten the supply of the natural resource critical to economic growth. That is the major source of this conflict. If the oil reserves of the Persian Gulf were instead located in Greenland, the Israel/Palestinian conflict would trouble the rest of the world about as much as the conflict between Pakistan and India.

Any pundit who opines on what should be done in Iraq, and elsewhere in this conflict, without explicitly stating what political model should be employed in facilitating oil extraction for the Persian Gulf, is merely yammering without real purpose, other that to stroke his or her sense of self-satisfaction, because facilitating the peaceful, predictable, and orderly extraction of oil from the Persian Gulf is, at it's core, is what this entire issue is about. All the people screaming "No blood for oil!" would actually be screaming bloody murder if they had to endure the economic conditions that would prevail if Persian Gulf oil were to go off-line for, say, 60 days.

Yes, Jane and Will, we are in Iraq for one reason, and one reason only: oil.

Then there was the one about how the US invaded Iraq in order to prevent OPEC from changing from pricing its oil in dollars to pricing it in Euros...

Simplistic is as simplistic does, Ivan. We continue in the middle east for a complex web of reasons, even if oil is the dominant contributor among those reasons.

We continue in the middle east for a complex web of reasons, even if oil is the dominant contributor among those reasons

Right. Besides, saying "oil" doesn't really convey WHY we're interested in oil. We don't care about the fuel itself; what we care about is the global economic catastrophe that would follow major price disruptions.

People like to sneer that money isn't worth fighting over, but those sorts of people never bother to consider that poverty has caused more death than all the wars in history.

Ivan makes that remark as if it's an accusation of immoral reasoning. One wonders if he has any notion who would suffer most if oil were to quickly spike to, say, $130 or $150 per barrel. Guess what? It sure as hell wouldn't be the shareholders of Mobil, Chevron, or Shell, even if those companies were shut out of the Persian Gulf.

Some good points...now if only the right-wingers who insist that we don't care about Saudi Arabia's oil because it only accounts for 12% of our consumption would read this piece too.

Great post Jane! The comments are insightful too, but it seems to me that too many people are looking at this from a purely American-centric viewpoint.

The US, and the western democracies generally are better equipped to handle a major oil disruption than most other countries in the world... we have the technology.

The same is not true for other countries, specifically China and to a lesser extent India. China's growing demand for oil will become an even more significant factor in the price of oil. A steady flow of affordable oil is critical to the economic transformation of China and (hopefully) the political transformation that will accompany it.

As Will already said, if the US military wasn't already there, China would be in rather short order. Do I need to remind anyone what happened the last time an East Asian power felt the need to secure its oil supplies?

As others said, the Middle East is unstable and weak. Someone is going to control the region. During the Cold War, the US and the USSR fought an ongoing war over the region, neither one willing to leave the other in control. Now that the Cold War is over, the US is stepping in to stabilize the region.

If we did not, China would. Or India. Or someone else. If someone is going to be stabilizing the region, I can't think of anyone I'd rather do it than the US. I say that as an American and a human being. As an American, I trust the US government to look after US interests more than any other government. As a human being, I know that the US government is more likely to improve the lives of the locals and allow them to retain their independence for the most part. Other nations capable of stabilizing the Middle East would take direct control of the region and effectively subjugate the the populace.

The fact that the war is about oil among other things has not stopped us from trying to liberate the Iraqi people and help them set up their own government. If we were only concerned about oil, we wouldn't bother with all that. We'd have set up a puppet government propped up by a military presence or we would have established a "provisional" government that would have never found the locals ready to govern themselves.

Earnest

Which reminds me, what happened to the folks who thought that gasoline should be a lot more expensive in the US. Shouldn't they be out there now saying that the recent run-up in prices is a good thing?

Do I need to remind anyone what happened the last time an East Asian power felt the need to secure its oil supplies?

I guess so... nothing's coming to mind.

Historical Dimwit, I believe Travis is referring to Japan in World War II. But I could be wrong.

Then there was the one about how the US invaded Iraq in order to prevent OPEC from changing from pricing its oil in dollars to pricing it in Euros...

This is one of my favorites.

There is a way we could cut off much of China's oil supply - put a couple of carriers off their coast and announce we'll sink any tanker that looks like it's going to dock in China or North Korea. That would cut them down to domestic production, and maybe a little shipped overland - but does anyone have pipelines running to China? But of course, blockading the Chinese coast would be an act of war - and besides, most of us would be barefoot within a year without those Chinese-made shoes in Walmart...

Note that "the last time an East Asian power tried to secure its oil supply" (it started on Dec. 7, 1941, a date even Historical Dimwits should remember), the single most effective military action we took against Japan was to send out submarines to sink their tankers. In a couple of years, the first part of any naval operations plan they tried to put into effect had to be sending small groups of ships to remote islands here and there to pick up whatever oil was left, because otherwise they didn't have enough fuel to fight.

dimwit - Just to spell out the reference. Japan invaded China in the 1930s. This was naked aggression. To try to force Japan to halt its war against China, Roosevelt imposed an oil embargo on Japan. Japan had two choices: (1) defy America, continue the war in China, and run out of oil in about 12 months, or (2) try to defeat the US with a knockout punch and at the same time seize oil supplies in Southeast Asia (the Japanese senior staff knew that Japan could not win a prolonged war against the US). Guess which they chose.

I have always found the "no blood for oil" mantra particularly stupid. Of course the US will shed blood for oil. The only question is when and under what circumstances. If Saudi Arabia fell to a radical clique that turned off the pumps, would the US invade or watch the global economy plummet into depression? IMHO, that's what the Marines are for.

Was the decision to invade Iraq made to secure worldwide oil supplies? No, I don't think so. Hussein would have been happy to pump and ship as much oil as we or anyone else wanted to buy. Conspiracy theorists will have to look elsewhere.

Jane -- nice explication of how commodity markets work. Wish more people -- left and right -- would bear those truths in mind when they wave the flag of trade embargoes to try to punish regimes they don't like.

Not sure I agree that the Arab oil embargo of 1973 was a complete failure from the Arab perspective. To the degree they wanted to punish the US for its support for Israel, it certainly caused a major economic distruption: It set off a wave of inflation that lasted for years. At the smae time it was drving economic growth here to zero. "Stagflation" it was called, and it was exceedingly unpleasant. Moreover, the effects of cartelizing the industry under an Arab-led OPEC drove the world price from about $8-$10 bbl to something close to $30. That's when the Arabs started making the really big bucks.

OPEC didn't so much give it up in the 1980s as experience the effects of of unsustainably high prices: Added production from elsewhere. The collapse in oil prices in the 1980s -- back down to the $10 bbl level -- was painful for Texans but a boon to everyone else. That did more than anything else to put out the inflation fire and break the inflationary psychology of the time while allowing for natural growth forces to reassert themselves.

I'm surprised how many posters believe that our policies in the Middle East are driven by a desire to keep oil flowing to Western markets in abundant quantities. While such a policy would be rational, I've noticed that rationality is more often a casualty of policy making than its outcome.

For instance, if keeping Arab oil flowing were our overarching objective, we would never have supported Israel so unswervingly and unstintinly, making them a regional superpower. Israel pumps no oil. Israel's mere presence abraids the people who own the oil. The Arab oil embargo of 1973 -- and its painful economic sequelia -- was a driect result of our support for Israel. So why support Israel? Obviously, it has nothing to do with our need for oil -- it is counter to our need for oil. There are obviously many and varied reasons to support Israel, but access to Arab oil is not among them.

Consider Iraq. We supported them in their war against Iran, eventhough Iran pumps way more oil. We then hammered them over the Kuwait invasion -- which may or may not have been more oil-driven, at least in cynical rationalization -- but then organized a boycott of Iraq in the 1990s. The purpose of the boycott was to compel Iraq to play ball with the UN arms inspectors, but the effect was to limit their ability to maintain their oil fields and a consequent decline in production. Clearly, the policy thwarted access to oil rather than increasing it.

Consider Afganistan: Big military commitment, long engagement, zero oil.

So what are our real aims and values?
We support Israel because we support Isreal.
We support democracy, but support dictatorships if they promise stability.
We fear political radicalism, and radicals thowing bombs bring our fears to the boiling point.
We want plenty of Middle East oil, but political considerations are more important but rarely articulated clearly.

I submit that US policy in the Middle East has more to do with the politics of power than the economics of oil, although oil plays a role. However, its role, as often as not, is as a provider of a rational-sounding pronunciamentos when what is really going on is power games for the sake of power games.

Even with the vast disparity of power between the US and any combination of countries in the Middle East, getting the facts on the ground all wrong is not an auspicious beginning.

Yes, Publius, but any U.S. policy in the Middle East must involve, as a bedrock goal, the orderly and uninterrupted extraction of Persian Gulf oil, and no other goal will be allowed to override that outcome. This conflict is about what political model will be employed to facilitate that outcome, since the U.S. and the rest of the world does not (yet) wish to simply extract through force of arms.

When goods don't cross borders, armies will. This is not to say all wars were due to one country refusing to trade with another. Many were greedy invasions to seize wealth. However, no matter how nationalistic or anti-free trade a nation is, it won't (given a sufficiency of military might) allow its economy to be ruined by
another nation cutting off vital resources. That's, unfortunately, reality in a world run by nation-states which don't operate on libertarian
principles.

Will: Are you saying that we have some sort of God-given right to Middle East oil? A right so basic and so well-founded that we are entitled--moraly speaking--to kill any number of people to get it?

Seems to me that a need on our part does not create an obligation on the part of anyone else.

Does Mexico's serious need for fresh water create an obligation for water-rich Canada to supply it? Or a right for Mexico to go take it?

Publius to speak of rights in the international arena is like speaking of speed limits at an Olympic track meet. Human beings will acquire what resources they need to prosper. They will either do it via trade with other humans, or they will do it by force. There never has been a polity in human history which has willingly allowed itself to suffer economic catastrophe, out of respect for another group's unwillingness to trade, and there never will be, which is one reason that FDR and the U.S. military were so foolish to not anticipate the attact at Pearl Harbor. The oil in the Persian Gulf will be extracted, and unless one desires wanton slaughter, one best figure out a way for it to be done peacefully.

Are you saying that we have some sort of God-given right to Middle East oil?

Whether we have a right to do it is moot. We have the means and the need to do it.

What's more, we have good arguments for Iraq that exist on many levels, access to oil being an over-arching one. But one never-spoken but fully understood reason trumps them all, and that's to show we've taken as much crap from loony Arabs as we intend to.

Anybody who thought we'd respond to 9-11 by busting up some sub-human, rag-tag Toyota army in a Third World dusthole doesn't get America. I can prove it too, since despite what anybody tells you, Iraq was a pipedream before 9-11.

You have to wonder exactly what UBL had in mind. Now there's a virtually permanent US presence right on top of huge reserves. If he ever gets a shot at running Saudi Arabia, what exactly will he have won? How are we vulnerable?

The guy's a simpleton, I'm telling you.

Hi Jane - I was hoping you could explain something I've been wondering for a while. I keep reading that China's trying to shore up its access to African and Asian oil supplies, but if oil is sold on a global market with fungible sourcing, what advantage does that gain them? For instance, can Sudan sell them oil at below-market prices? Why would Sudan want to?

For instance, can Sudan sell them oil at below-market prices? Why would Sudan want to?

There are circumstances under which China may not be able to get the oil it needs through legitimate trade. For example, if it triggers an embargo against itself by invading Taiwan.

"Shoring up access to its oil supplies" is code for "being in a position to seize necessary oil supplies in the event of war". That's my understanding of the situation, anyway.

Markim has a point here: while I don't necessarily disagree with Jane Galt's broader point about conspiracies etc. (although there is no reason to reject a theory just because it sounds conspiratorial, especially from an administration whose policies are being shilled in op-eds by Henry Kissinger), it would be politically and logistically possible to cut off China's oil supplies. If the U.S. secures the oil from unfriendly nations, viz., Iraq, Iran, etc., then the friendly nations won't necessary take up the slack simply because of U.S. political pressure. It's hard to believe that, in a situation of serious conflict between the U.S. and China, Norway wouldn't fall into the U.S. camp. Any any tankers that approached the Chinese coast could easily be sunk.

In other words: oil goes by one of two routes: land or sea. Land routes of oil to China would be either through the mideast in pipes, now controlled by the U.S., or from Russia. (Are there pipelines in s.e. asia? I'm not sure, but don't think so.) Russia is friendly-ish. The sea is controlled by the U.S. Navy.

Spongeworthy writes:

>>>"You have to wonder exactly what UBL had in mind. Now there's a virtually permanent US presence right on top of huge reserves. If he ever gets a shot at running Saudi Arabia, what exactly will he have won? How are we vulnerable?"

Osama Bin Laden didn't inspire this. This was the Project for the New American Century. It's textbook. Osama gave them an EXCUSE to pull the bait and switch on the American public and get this neo-con war going. Neo-cons have been planning this way before 9/11.

The China bashing is also fascinating. The American Retail System is now almost totally reliant upon Chinese labor, yet Chinese access to oil must be countered at every turn? I guarantee most of the people posting right now are wearing some article of clothing made in Red Communist China. Not being too wildly conspiratorial, but it's very interesting how aghast many mostly conservative government officials were at the prospect of China trying to buy Unocal, (remember the folks at the heart of the Afghan pipeline deal?)

--Cobra

What is wrong with a US military presence in the Middle East positioned to impair Chinese access to oil in an uncertain future? I agree that establishing the capacity to interdict oil to China is not the secret reason we went to war in Iraq, but isn’t it on the plus side of our efforts there? China is the only country that is seriously expanding and upgrading its military capability across the board. China has fought border skirmishes with the Soviet Union, India and Viet Nam. They continuously threaten Taiwan. The only counterweight to a country with China’s population, growing resources and industrial capacity is the US. Even as a counterweight, we can never go toe-to-toe with China on the Asian mainland. Any military pressure on China will be prophylactic in nature, mostly if not entirely.

Changing subjects: while it seems self evident that oil is such an integral commodity in the global economy that military action is justified to keep that economy working, there are two additional points that come to mind. First, keeping the world economy going, with the US economy as the essential component thereof, should be an absolute moral imperative from a ‘do-gooder’ perspective. If much of the third world lives hand-to-mouth today, it is feasting compared to what circumstances would be if access to Middle Eastern oil was materially impaired. Try harvesting a ton of wheat in Kansas and moving it to Zimbabwe using solar and wind power. Good luck.

Second, oil, in and of itself, creates neither the environment nor the justification for going to war to secure it. Rather, it is the unfortunate geological/historical accident that puts so much oil underneath such unattractive leaders and governments and which allows those leaders and governments to arm themselves or, through cartels and market manipulation, to otherwise threaten the stability that the rest of the world is only too happy have as a permanent state of affairs. If all of the Middle Eastern oil were in Australia, it would almost certainly be sold peacefully on the world market and not used as an economic club or as a means of funding a military in order to invade neighbors and seize their oil fields. Countries that use their oil as a means of coercing or invading others invite and justify retaliation.

Cobra: Hey, giving "Most Favored Nation" trade status to a country with grossly protectionist/mercantile trade policies and something close to slave labor wasn't my idea. It seemed to be some sort of weird alliance between the evil Nixonian wing of the big-government conservatives, big business, and liberals.

About "something close to slave labor": For example, Chinese factories have five times the fatal accident rate of American factories - although the most relevant comparison for the average Chinese factory worker isn't American factories but Chinese farms, and I've no idea of how dangerous those are. But American factories became safer due to union actions long before there was government regulation. (Yes, there was a time when unions helped the workers with more than how to spend part of their wages and how to drive their employers out of business.) I've never heard of Chinese workers going on strike, and I rather expect that if they did, they'd be crushed under tanks.

The present Chinese government is as nasty as Hitler or Stalin ever were, so keeping in mind what we just might have to do to win a military confrontation is just plain good sense. Of course, there's one other problem with a war with China; they do have the capability of launching a few nuclear warheads, probably with intercontinental range. We could retaliate a hundred to one, but there are no winners in a nuclear exchange... A blockade is something intermediate between war and peace that probably wouldn't cause even an insane government to commit suicide by nukes, and it's something the Chinese cannot very well counter. In air/sea battles technology is far more important than numbers. That makes oil delivery by tankers a crucial vulnerability. Of course, we've got a vulnerability too - if we cut off trade with China, Walmarts would be empty everywhere. But if my grandparents could survive four years with no rubber, little gasoline or sugar, and no new cars, appliances, or anything else that used much steel at all during WWII, I think we could stand to wear our old shoes and keep the old TV sets an extra six months while Walmart established new supplies in other countries. (One of the most comfortable pairs of shoes I've ever owned was made in Poland.)

Markm writes:

>>>"But if my grandparents could survive four years with no rubber, little gasoline or sugar, and no new cars, appliances, or anything else that used much steel at all during WWII, I think we could stand to wear our old shoes and keep the old TV sets an extra six months while Walmart established new supplies in other countries."

I wish it was just that. Chinese labor manufactures darn near everything. The trade deficit is stupendous. We've become as dependent on foreign, mostly Chinese labor as we are on foreign oil.
I agree with you in the respect that absolutely NOTHING good can come from a nuclear war. America is in absolutely no position to sustain that type of death toll and damage on the homefront, no matter what is done in retaliation.

It would never reach that point in my opinion, but the recent blusters and "war exercises" from both sides, ("Operation Dragon's Thunder" by the US, and the joint Chinese/Russian exercises).
China is using its monetary power not only to gain more access to oil, but naval power as well, purchasing Russian cruisers and Akuna class nuclear submarines.
http://www.analisidifesa.it/articolo.shtm/id/2450/ver/EN
Of course, its also hard to tell a country that buys a sizable amount of your debt what they can and cannot do, especially if the US government has a recent and nasty habit of invading sovereign nations, removing their leadership and establishing permanent millitary bases in them. What would our argument be against China invading Taiwan if the Chinese government declared a regime change was neccessary?

If Americans would stop bowing to corporations and their profits, enforce higher fuel efficiency standards to reduce demand, and SERIOUSLY pursued alternative energy sources, we certainly wouldn't be in the disastrous position we are today, where 57% of our oil comes from foreign countries.

--Cobra

"We've become as dependent on foreign, mostly Chinese labor as we are on foreign oil."

Markm had it right. It would take time to find new suppliers, but there are plenty of countries out there with a cheap labor force. There would be a substantial transition cost, but China has no monopoly on the ability to produce cheap shoes, so the comparison with oil isn't valid. And the Chinese people would lose a lot more than the rest of the world from an end to trade, although that's not a big concern for the Chinese Communist Party.

"What would our argument be against China invading Taiwan if the Chinese government declared a regime change was neccessary?"

Are you honestly saying that you see no difference between a peaceful, productive democracy like Taiwan and Iraq under a thug like Saddam Hussein?

Regarding "something close to slave labor", there was an article in the (now defunct) Far Eastern Economic Review a few years ago about the rise in slave labor in China. Companies that were paying their workers and allowing them to leave every evening began to realize that it would be cheaper to just lock them in at night, rather than pay them. They only did it to workers from poor interior provinces, of course. Often there would be locals working right next to them, being paid and allowed to leave at the end of the day. When asked whether they were bothered by the fact that they were working alongside captives, the response of the locals was that the others were from another region and spoke a different dialect, so they didn't feel any responsibility towards them.

When I lived in Hong Kong in the 1990s, it was amazingly common to hear about large numbers of workers dying in factory fires. They padlocked the exits so that the workers couldn't steal inventory, so when there was a fire, few escaped. The government (which controlled the news) only admitted to a fire or explosion if the company was owned by Taiwanese or Hong Kongers (or other foreigners), so they could point out how evil these outside businessmen were. Once a plant that made (I think) fireworks exploded. It was locally owned, so the news media wouldn't report it at first, but the explosion was so loud that it was heard across the border in Hong Kong. Finally, after a few days, the news media admitted that something had happened. In other words, I'm sure the situation is far worse than is reported.

Ann writes:

>>>"Markm had it right. It would take time to find new suppliers, but there are plenty of countries out there with a cheap labor force. There would be a substantial transition cost, but China has no monopoly on the ability to produce cheap shoes, so the comparison with oil isn't valid. And the Chinese people would lose a lot more than the rest of the world from an end to trade, although that's not a big concern for the Chinese Communist Party."

Yeah, like the Sudanese still practice slavery. You're right, I'm sure American corporations can find other third world people to exploit.

Ann writes:

>>>Are you honestly saying that you see no difference between a peaceful, productive democracy like Taiwan and Iraq under a thug like Saddam Hussein?"

Don't forget, Saddam was OUR thug, and we didn't have a problem with him when he was our buffer against Iran and Islamic theocracy, which ironically, is just what's being installed in Iraq right now. Taiwan wasn't always "peaceful" and again I ask you, what would your argument be if Chinese leaders declared that it was an "imminent threat" and began a "pre-emptive" strike to protect Chinese national interests in unification?

--Cobra

"I'm sure American corporations can find other third world people to exploit."

How is offering them a valuable option a form of exploitation? No one is forced to take a higher-paying job, with better working conditions. There are plenty of people around the world that would love to be "exploited" by a higher standard of living.

The fact that the US once supported Saddam, and ignored what he did to his own people, was just one more reason why we owed it to the Iraqi people to help them. Are you saying that, having made a mistake in the past, we were thus morally obligated to perpetuate that same error?

Moreover, the effects of cartelizing the industry under an Arab-led OPEC drove the world price from about $8-$10 bbl to something close to $30. That's when the Arabs started making the really big bucks.

Well of course a tripling of the barrel price of oil didn't hurt them then -- but it also helped bring the numerous alterante supplies online which, in turn, undermined the ability of Arab OPEC states to exercise nearly as much control over the price and availability of oil later. Which arguably hurt OPEC's position, relative to its goals (although in the oil market of the last couple years it doesn't make a particle of difference -- pump all you want and make >$50/barrel regardless, such a deal while it lasts...).

What would our argument be against China invading Taiwan if the Chinese government declared a regime change was neccessary?

The same argument we've used for the last few decades: "we don't want you to do that".

The only reason China hasn't invaded Taiwan yet is that they're not sure what we'd do if they tried. They haven't refrained from doing so out of respect for international law, or because we offered a convincing moral argument, or any of that crap. They've refrained from invading because they're afraid of us. No other reason.

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