In a hotel room in Brussels, the chief executives of the world’s top
oil companies unrolled a huge map of the Middle East, drew a fat, red
line around Iraq and signed their names to it.
The map, the red line, the secret signatures. It explains this war.
It explains this week’s rocketing of the price of oil to $134 a barrel.
It happened on July 31, 1928, but the bill came due now.
Barack Obama knows this. Or, just as important, those crafting his
policies seem to know this. Same for Hillary Clinton’s team. There
could be no more vital difference between the Republican and Democratic
candidacies. And you won’t learn a thing about it on the news from the
Let me explain.
In 1928, oil company chieftains (from Anglo-Persian Oil, now British
Petroleum, from Standard Oil, now Exxon, and their Continental
counterparts) were faced with a crisis: falling prices due to rising
supplies of oil; the same crisis faced by their successors during the
Clinton years, when oil traded at $22 a barrel.
The solution then, as now: stop the flow of oil, squeeze the market,
raise the price. The method: put a red line around Iraq and declare
that virtually all the oil under its sands
would remain there, untapped. Their plan: choke supply, raise prices
rise, boost profits. That was the program for 1928. For 2003. For 2008.
Again and again, year after year, the world price of oil has been
boosted artificially by keeping a tight limit on Iraq’s oil output.
Methods varied. The 1928 “Redline” agreement held, in various forms,
for over three decades. It was replaced in 1959 by quotas imposed by
President Eisenhower. Then Saudi Arabia and OPEC kept Iraq, capable of
producing over 6 million barrels a day, capped at half that, given an
export quota equal to Iran’s lower output.
In 1991, output was again limited, this time by a new red line: B-52
bombings by Bush Senior’s air force. Then came the Oil Embargo followed
by the “Food for Oil” program. Not much food for them, not much oil for
In 2002, after Bush Junior took power, the top ten oil companies
took in a nice $31 billion in profits. But then, a miracle fell from
the sky. Or, more precisely, the 101st Airborne landed. Bush declared,
“Bring’m on!” and, as the dogs of war chewed up the world’s second
largest source of oil, crude doubled in two years to an astonishing $40
a barrel and those same oil companies saw their profits triple to $87
In response, Senators Obama and Clinton propose something wrongly
called a “windfall” profits tax on oil. But oil industry profits didn’t
blow in on a breeze. It is war, not wind, that fills their coffers. The
beastly leap in prices is nothing but war profiteering, hiking prices
to take cruel advantage of oil fields shut by bullets and blood.
I wish to hell the Democrats would call their plan what it is: A war
profiteering tax. War is profitable business – if you’re an oil man.
But somehow, the public pays the price, at the pump and at the
funerals, and the oil companies reap the benefits.
Indeed, the recent engorgement in oil prices and profits goes right
back to Bush-McCain “surge.” The Iraq government attack on a Basra
militia was really nothing more than Baghdad’s leaping into a gang war
over control of Iraq’s Southern oil fields and oil-loading docks.
Moqtada al-Sadr’s gangsters and the government-sponsored greedsters of
SCIRI (the Supreme Council For Islamic Revolution In Iraq) are battling
over an estimated $5 billion a year in oil shipment kickbacks, theft
and protection fees.
The Wall Street Journal reported that the surge-backed civil warring
has cut Iraq’s exports by up to a million barrels a day. And that
translates to slashing OPEC excess crude capacity by nearly half.
Result: ka-BOOM in oil prices and ka-ZOOM in oil profits. For 2007,
Exxon recorded the highest annual profit, $40.6 billion, of any
enterprise since the building of the pyramids. And that was BEFORE the
war surge and price surge to over $100 a barrel.
It’s been a good war for Exxon and friends. Since George Bush began
to beat the war-drum for an invasion of Iraq, the value of Exxon’s
reserves has risen – are you ready for this? – by $2 trillion.
Obama’s war profiteering tax, or “oil windfall profits” tax, would
equal just 20% of the industry’s charges in excess of $80 a barrel.
It’s embarrassingly small actually, smaller than every windfall tax
charged by every other nation. (Ecuador, for example, captures up to
99% of the higher earnings).
Nevertheless, oilman George W. Bush opposes it as does Bush’s man
McCain. Senator McCain admonishes us that the po’ widdle oil companies
need more than 80% of their windfall so they can explore for more oil.
When pigs fly, Senator. Last year, Exxon spent $36 billion of its $40
billion income on dividends and special payouts to stockholders in
tax-free buy-backs. Even the Journal called Exxon’s capital investment
At today’s prices Obama’s windfall tax, teeny as it is, would bring
in nearly a billion dollars a day for the US Treasury. Clinton’s plan
is similar. Yet the press’ entire discussion of gas prices is shifted
to whether the government should knock some sales tax pennies off the
oil companies’ pillaging at the pump.
More important than even the Democrats’ declaring that oil company
profits are undeserved, is their implicit understanding that the
profits are the spoils of war.
And that’s another reason to tax the oil industry’s ill-gotten gain.
Vietnam showed us that foreign wars don’t end when the invader can no
longer fight, but when the invasion is no longer profitable.
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