In October, 2008 as the world's economies were on the verge of collapse, OPEC spokesmen, exhibiting their innate instinct of timing and concern for the well being of their client base throughout the world called for an emergency meeting to be held in November. "The decision will very likely to be to cut production" was to be the theme (please see "While The World's Economies are Reeling, OPEC Wants Us To Pay More For Oil"). Then in December, 2008, that great bearer of good tidings, the Saudi Oil Minister enlightened us that King Abdullah's oil price target of $75 a barrel was a truly "noble cause" given that, according to al-Naimi ,"marginal producers cannot produce at $40 a barrel", the going price at the time. So much for the endless hyperbole emanating from the Arabian/Persian Gulf, except that the price of oil is now approaching $75/bbl as of this writing. Certainly Saudi Arabia and their brothers in arms in the OPEC cabal are cheering every extra nickel their willful manipulation is extracting from the market at grievous cost to American and world consumers. And so it was during the Bush years all the way to $147 when their gluttonous barrel was permitted to run over.
Are we there again, watching the same theater that emanated from the Bush/oil industry ballet? Since February the price of oil has increased by over 100% (for those wont to blame it on the dollar know that oil prices increased over 100% while the dollar index fell less that 15% since February) with no effective countermeasure by our government that would have immediate effect on oil prices such as desisting from additional purchases for the Strategic Petroleum Reserve or even releasing some of the near 800,000,000 barrels now in storage, thereby sending a forceful signal that prices are much higher than they should be, and will no longer be tolerated without countervailing policies. These measures could include NOPEC legislation (removing OPEC's sovereign immunity so that their collusion becomes actionable in our courts), truly effective CFTC oversight, subjecting imports of oil to import licenses according to country of origin, and on.
But now this grim drama has gone one step further. Secretary of State Hillary Clinton, in her recent tour to Southeast Asia suggested clearly that the United States might well extend a "defense umbrella" protecting its Arab allies should Iran develop a nuclear weapons capability. She offered a rare glimpse into what the United States might do if Iran did not respond to its diplomatic overture. "We want Iran to calculate what I think is a fair assessment, that if the U.S. extends a defense umbrella over the region, if we do even more to support the military capacity of those in the gulf, it's unlikely that Iran will be any stronger or safer, because they won't be able to intimidate and dominate, as they apparently believe they can, once they have a nuclear weapon."
Now one need ask what kind of allies are these who openly extort a higher price for a commodity key to our and the world's economy than a fair and free market would determine. (You can well imagine the opprobrium that would be leveled at the United States, Canada, Brazil, Argentina, Australia if they joined together to treble or quadruple the price of soybeans, corn, and wheat -and note grains are not a fully renewable resource being dependent on ever depleting fertilizer elements as potash, phosphates, nitrogen/nitrates to grow sufficient crops). And that being the case, given the billions that would be involved in extending such a defense umbrella, who then foots the bill?
To date, we are, and have been for years, paying out some $100 million a day representing the outlay share of the naval task force patrolling the Arabian Gulf protecting the shoreline of Saudi Arabia, Kuwait, the United Arab Emirates without any meaningful quid pro quo expect perhaps docking facilities in the U.A.E. Thanks! Not to speak of the lives and treasure expended to protect Saudi Arabia and Kuwait and on, in Gulf War I and II. This while we are being taken to the cleaners by the willful manipulations and collusive restraints on supply by these very nations who are full fledged members of OPEC with Saudi Arabia being recognized as its putative leader.
This was a policy tolerated by the Bush administration given its craven obeisance to oil interests. One had hoped for a more balanced and mutually shared relationship under the Obama administration, but it is still early in the game and the administration's efforts to get the oil monkey off our back once and for all appear genuine though long in the making.
Given the billions and billions that have flowed into national treasuries of the countries in question built on egregious oil prices it should be made crystal clear that an American "Defense Umbrella" will not come as an American giveaway. That neither the American public nor its government will no longer tolerate being the pensionary policeman to the oil producer's extortion. That the nations protected under the "defense umbrella" will have to foot the bill directly and desist from oil pricing policies that is collusionary.
On a side note but pertinent given the players and issues involved let us not lose sight of the enormous influence on government policy that was gained by Middle East money flowing into the coffers of think tanks, K Street Lobbyists and perhaps most emblematically the millions of Saudi money committed to the Bush Presidential Libraries. The millions sloshing around the Bush administration provided access (i.e. Saudi Arabian Ambassador's virtual open door entree to the Oval Office), and most certainly had its impact on the administration's decision making and in turn on national policy. The government and press needs be vigilant that similar access that might be gained through the millions donated to the William F. Clinton Presidential library is not a harbinger of a similar moneyed power play toward this administration. Given the sensitivity of the issues at hand it would be disastrous if this administration were exposed to similar blandishments!