Iran, Oil, Israel, the NDAA, and the 2012 Election : A Primer

Let’s start this off with a curious conjunction of news articles as presented by the Google News algorithm.

That's why they do it

That's why they do it

And I also ran across this article over on Juan Cole’s site.

Will his New Sanctions on Iran Cost Obama the Presidency?

Posted on 01/03/2012 by Juan

A sharp drop in the value of the Iranian currency as a result of new American sanctions may sound like good news to hawks in the US. But actually this development may signal ways in which Americans will also be harmed, and Obama may have put a second term in jeopardy, cutting off his nose to spite his face.

An amendment to the National Defense Authorization Act signed by President Obama this past weekend will seek to slap third party sanctions on countries and enterprises that deal with Iran’s central bank. It will go into effect this summer. In effect, the law says that if you buy Iranian petroleum, you cannot do business with American financial institutions. Since the United States is still over a fifth of the world economy, and most institutions with capital need to deal with it, the hope of Congress is that Iran will be left without customers.

The measure, pushed by the American Israel Public Affairs Committee on behalf of the government of Israeli Prime Minister Binyamin Netanyahu, might well be a trap for Obama. In an election year, he could not refuse to endorse new sanctions against Iran (the Republican candidates in Iowa are practically running on promising that if elected they will launch a war on Iran; and they are lambasting the president as weak on this issue).

[full story]

There’s a couple of interesting things about this line of thinking and Cole explores the direct results on this in his post.

Those two factors, the likelihood of rising Asian demand for petroleum in 2012, and investor nervousness about how tensions with Iran will play out, will probably keep petroleum prices at historically high levels in 2012, and some analysts believe that there could be a return to the overheated pricing of 2008 before the crash.

It would be much better for the American economy if prices sank back down to the levels of only a few years ago, of $50 a barrel or less.

If the Congressional sanctions actually worked, and took Iran’s roughly 2.5 million barrels a day in exports off the world market, that would take out 80% of Iran’s export income and deeply hurt the regime. But it would also send world petroleum prices through the stratosphere, deeply harming Western economies already teetering on the edge.

The NDAA (National Defense Authorization Act for Fiscal Year 2012) which has people all a-twitter about the AUMF made real, also includes the language that essentially declares economic warfare with Iran.  You know how all those little dollars say “Federal Reserve Note”…well…when it comes to being the one that redeems property, one tends to have some control over who gets to officially use it for business.   The NDAA (of FY 2012) essentially says that anyone who uses our money, can’t use it to buy their oil (or anything else they sell).

This was added to the NDAA by a flake.  Literally, Jeff Flake (R-AZ).

Washington, D.C., Dec 9, 2011 – Republican Congressman Jeff Flake, who represents Arizona’s Sixth District, today along with 22 House Members sent a letter to House Armed Services Committee Chairman Buck McKeon (R, CA) and Ranking Member Adam Smith (D, WA) urging them to retain during conference negotiations with the Senate provisions in the National Defense Authorization Act (NDAA) that would levy sanctions on the Iranian financial sector, including the Central Bank of Iran, in an effort to severely limit the funding sources available to the Iranian regime for use in developing nuclear weapons.

You will be unsurprised to find out that Flake was one of the 81 Congressmen (only 21%) who did, in fact, take an all expense paid weeklong [edit 9 day] vacation to calm and relaxing Israel during the summer break.

Don’t worry though, no taxpayer money was (directly) used to pay for this.  Lobbyists covered the whole thing.

Sponsor(s) – American Israel Education Foundation
Dates – August 18, 2001 – August 26, 2001 (9 days)
Location(s) – Israel 

Purpose – Educational mission
Notes – Spouse Cheryl Flake accompanied. Other costs not specified.

Travel Cost – $7,183.20
Lodging Cost – $2,023.70
Meal Cost – $1,391.30
Other Cost – $986.00
Total Cost – $11,584.20

Additional family members – Yes

[full data on the Flake]

And just so you get an idea of how much of a flake this Flake guy is…

Flake was first elected to what was then Arizona’s 1st congressional district in 2000, after Republican incumbent Matt Salmon stepped down in honor of a self-imposed term limit. The district was then renumbered to the 6th district as Arizona gained two Congressional seats due to the results of the 2000 census.

In his campaign in 2000, Flake had pledged to serve no more than three terms in Congress, leaving no later than January 2007, but in early 2005, shortly after being elected for a third time, Flake announced that he had changed his mind and would in fact run for re-election in 2006. “It was a mistake to limit my own terms,” Flake said.

[from the wiki]

So…long story short…get ready for much higher gas prices this summer and the Republicans constantly blaming Obama for it.   There’s a decent chance that the actual reason for the rise in prices will not be a constraint in supply, but instead an increase in middleman costs caused by the sanctions leading to a run-up in the price of oil…if not a full-on closing of the Straight of Hormuz by Iran (if the sanctions work too well  and they realize they are fucked either way.)

Whatever the reason, higher oil prices (even if only caused by the threat of increased hostilities…raising risks raises prices) will slow the already crawling economic recovery in the U.S., leaving it, most likely, continuing to sputter along like an old car running low on…well…gas.

What I find really funny here (funny in an ironic way), is that while Obama will be in actuality taking a political hit from the slowing economy from increased oil prices, he’s also going to continue to be hit for “throwing Israel under the bus” even while taking the economic hit that comes with directly targeting the money supply of Iran.

Pretty funny, if you think about it.

I still don’t think it’s going to be enough to convince more Americans to vote for Romney than Obama, however.

The election is going to be literally a Wall Street Tycoon vs a Community Organizer.

Ask your average Tea Party member which one of those they support (using those labels), and do it while they are community organizing for even greater lulz.

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Move Review: There Will Be Blood!

Just a quick review on this one.  It was nominated for a bunch of awards and I had wanted to see it for some time, but didn’t get the chance until this weekend.

It is a very deliberately paced and honestly told story of a oil-man in Southern California.  It goes through the trials and tribulations of drilling a well and brining it to market, with all the blood and gore that such an undertaking can often entail.  The grittiness of the story and the brutal honest of the film-making are a testament to the inspiration of the story, Oil! by Upton Sinclair.

It was only when I became aware of the originator of this story that I finally “got it”.  To be honest, I burst out laughing when I saw at the end of the movie where the story had began.

I won’t go into any spoilers, but I will say that There Will Be Blood! is not a normal dramatic movie.  Those waiting for a particular act that exists in most movies will be left waiting a long time in this one.  That is because this is not a normal dramatic movie.  It is a two-and-a-half-hour parable.

And when you watch it like one, it makes a whole lot more sense and serves its purpose nicely.

NOTE: the book and the movie are only loosely related, as this review reveals.

It should also be noted that I was reminded to write this review by the Southpark last night [Episode Whatever Where Cartman Gets His Ass Kicked By A Girl (Wendy)] which ended an epic struggle with an homage to the movie.  Nicely done, gents.

End the War or Drill Offshore: Which Will Yeild More Oil?

So I was thinking about drilling today (kinda been lonely lately) and drilling offshore specifically.

I recently had a post that illustrated how much oil, in barrels per day (BPD), that we could expect to gain by drilling offshore.

Here’s the pic.

Dril, Baby, Drill....You'll have to do it harder than that.

Dril, Baby, Drill....You'll Have to Do It Harder Than That

 I didn’t look it up then, but I wanted to make absolutely sure that these numbers were correct before making this comparison.  I am very confident the above number is correct.   It comes from here.

For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher—2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant. 

 My point here isn’t that offshore drilling won’t affect prices (we already know it won’t impact them at all for at least 10 years, and then by a couple cents), but the point that in 22 years, what we can expect to see is maybe 200,000 BPD in extra oil production.  I haven’t seen estimates for the cost of extraction, which with oil prices tumbling with the rest of the world’s economy could severely hamper extraction attempts, but that’s the general figure outside of ther forces.   As the report states…

Although a significant volume of undiscovered, technically recoverable oil and natural gas resources is added in the OCS access case, conversion of those resources to production would require both time and money. In addition, the average field size in the Pacific and Atlantic regions tends to be smaller than the average in the Gulf of Mexico, implying that a significant portion of the additional resource would not be economically attractive to develop at the reference case prices.

Now the other part of the equation: How Much Oil Do the Wars In Iraq and Afghanistan consume?

The US Department of Defense (DoD) is the largest oil consuming government body in the US and in the world

“Military fuel consumption makes the Department of Defense the single largest consumer of petroleum in the U.S” [1]

“Military fuel consumption for aircraft, ships, ground vehicles and facilities makes the DoD the single largest consumer of petroleum in the U.S” [2]

According to the US Defense Energy Support Center Fact Book 2004, in Fiscal Year 2004, the US military fuel consumption increased to 144 million barrels. This is about 40 million barrels more than the average peacetime military usage.

By the way, 144 million barrels makes 395 000 barrels per day, almost as much as daily energy consumption of Greece. 

These are 2004 numbers, before the war in Iraq really got going, and the cost got calculated….

If you make the calculation for peacetime vs wartime, and remove the 40,000,000 extra barrals a year, we end up at “normal” military use of ….285,000 BPD.

A difference of 110,000 BPD with basic wartime consumption.

And that was in 2004.

In the May 2005 issue of the Atlantic Monthly article Robert Bryce says that “The U.S. military now uses about 1.7 million gallons of fuel a day in Iraq. … each of the 150,000 soldiers on the ground consumes roughly nine gallons of fuel a day. And that figure has been rising.” This mean in Iraq each day 40 000 b/d of oil is consumed by the US military.

Yes, something is wrong with that figure. Compare it with the one given by the Defense Logistics Agency spokeswoman Lana Hampton. Accroding to an American Forces Information Service News Article she said the U.S. military is using between 10 million and 11 million barrels of fuel each month to sustain operations in Afghanistan, Iraq and elsewhere. This makes 330 000 – 360 000 barrel per day.

So now we are looking at a calculated difference of somewhere between 110,000 BPD on way low-end and 360,000 BPD on the high end.

We look quickly at history again…

According to a Rand Corporation report “1.88 billion gallons of fuel were consumed within the U.S. Central Command’s area of responsibility during Operations Desert Shild and Desert Storm (ODS/S), between August 10, 1990 and May 31, 1991.” [5]. This makes 44.8 million barrels, or 150 000 barrels a day. Note that ODS/S lasted 295 days.

[sourced here with additional sources]

…and we see that the easy, quick, and successful war in Iraq used at least 150,000 BPD.

Given all these numbers, and both wars, and a surge, I think it is very easy and accurate to say that our wars are currently consuming more than 200,000 BPD IN ADDITION to the regular, defensive operation of military forces.

So which is the quicker way and more effective way to get more oil? 

Peace.

Unsurprisingly. 

I know of no wise people in history who ever recommended consumption as a cure to addiction.  I know of many who speak of restraint and humility as a reliable course of therapy.

GET THE FUCK OUT OF OUR COUNTRY!!!!!

Last week, U.S. and Iraqi officials said the two sides agreed tentatively to a schedule that includes a broad pullout of combat troops by the end of 2011 with the possibility that a residual U.S. force might stay behind to continue training and advising Iraqi security services.

But al-Maliki’s remarks indicated his government was not satisfied with that arrangement and wants all foreign troops gone by the end of 2011.

Iraqi leader insists foreign soldiers must go – Yahoo! News.

——

Sorry for the harsh paraphrase there, but I wanted to make it clear to my fellow Americans what the Iraqis think our foreign policy should be regarding their domestic policy.

Iraq PM Wants Obama to Be President (i.e. wants a Timetable and Soverignity)

Iraq says may agree to timetable for U.S. withdrawal – Yahoo! News

BAGHDAD (Reuters) – Iraqi Prime Minister Nuri al-Maliki raised the prospect on Monday of setting a timetable for the withdrawal of U.S. troops as part of negotiations over a new security agreement with Washington.

It was the first time the U.S.-backed Shi’ite-led government has floated the idea of a timetable for the removal of American forces from Iraq. The Bush administration has always opposed such a move, saying it would give militant groups an advantage.

The security deal under negotiation will replace a U.N. mandate for the presence of U.S. troops that expires on December 31.

“Today, we are looking at the necessity of terminating the foreign presence on Iraqi lands and restoring full sovereignty,” Maliki told Arab ambassadors in blunt remarks during an official visit to Abu Dhabi, capital of the United Arab Emirates.

I think that pretty much ends discussion on the topic.

The simple fact of the matter is that the Iraqi people are ready for us to go.  The majority of the American people are ready for us to go.  The VAST MAJORITY OF THE WORLD wants us to go.

Obama wants us to go.  McCain doesn’t.

Why are we even still having this discussion?

Ahh, yes…

“One of the two basic topics is either to have a memorandum of understanding for the departure of forces or a memorandum of understanding to set a timetable for the presence of the forces, so that we know (their presence) will end in a specific time.”

Maliki was responding to questions from the ambassadors about the security negotiations with the United States. The exchange was shown on Iraqiya state television.

U.S. officials in Baghdad had no immediate comment. Last month Maliki caught Washington off guard when he said talks on the security deal were at a “dead end” after he complained Iraq’s sovereignty was being infringed by U.S. demands.

Oil and Terror.  That’s why some want to stay.  We don’t yet have the agreements in place that were the major impetus for starting this whole debacle.  And we don’t have carte blanche to go in and abduct or kill anyone we want.  Those are the three main sticking points, extra-legal right to the Iraqi people (that we think are bad), ownership of Iraqi oil (which we think is good), and immunity from Iraqi courts (which we would rather avoid, since our mercenaries have done lots of bad things).

All of these can be resolved by an Obama presidency or exacerbated by a McCain one.  Vote accordingly.

——————

UPDATE: One of the sticking points has been resolved, generally…

BAGHDAD — Iraq’s foreign minister said Tuesday that the United States had agreed to lift immunity for foreign security contractors operating in Iraq, making them subject to prosecution under Iraqi law, according to Iraqi politicians.

In a briefing for lawmakers on the status of a complex security agreement being negotiated with the United States, the foreign minister, Hoshyar Zebari, said Iraq had insisted on ending the immunity for private security companies, according to three Iraqi politicians who were present. American troops are operating under a United Nations mandate that expires in December.

The private security companies, like Blackwater Worldwide, have reputations of using excessive force in protecting diplomatic and other foreign clients, and currently enjoy immunity from Iraqi law. That immunity became a political issue last fall, after a Blackwater shooting in Baghdad in September left 17 Iraqis dead, according to Iraqi investigators.

The Dastardly Are Even Sometimes Right

Venezuela’s Chavez predicts oil could reach $200 a barrel — South Florida Sun-Sentinel.com

CARACAS, Venezuela – Venezuelan President Hugo Chavez says he expects oil prices to keep climbing and predicts they could reach $200 a barrel.

It isn’t the first time the Venezuelan leader has mentioned that benchmark– though he hasn’t said when it might be reached.

Chavez reiterated the prediction after the price of light, sweet crude continued to rise on the New York Mercantile Exchange and settled at $136.38 a barrel Wednesday.

Chavez said in a televised speech Wednesday that oil should be $100 a barrel, but could keep rising to $200.

He blamed the falling U.S. dollar [1], U.S. “threats” against Iran [2], and what he called “bad management” of the U.S. economy for driving rising prices [3].

I’m not a big fan of the guy, and was happy when his “dictator-for-life-vote[!?]” failed [full story].

However, he is very correct about [1].  As the dollar falls, imports cost more.  We import oil. Lather, rinse, repeat, get raped at pump.

He is also right about [2].  If we invade Iran, or even start bombing them, and they [a] gum up the Straight of Hormuz and [b] stop pumping gas, the world will run like an engine without oil.  This would be bad. and the very threat of it helps to push up the prices of oil in the future (which is the price everyone talks about).

On [3] it’s more of a toss-up.  I do think the Bush Administration has mis-managed the economy and done a number of things to exacerbate the economic disparity here.  I’m not sure how much that has to do with the price of oil, except that it tears the heart out of the working class, which hurts productivity, which hurts the economy, which causes the dollar to fall, which makes oil more expensive.

It’s All About the Electrons (Flowing, Yo)

The Coming Energy Wars | Newsweek International Edition | Newsweek.com

The lack of any spare capacity in the global pipeline makes it difficult to solve such situations with sanctions; taking any oil off the market would, at this point, merely ignite an already explosive situation. The megatrends fueling the global supply shortage tend to feed on one another. Higher prices fuel the growing tendency of oil states like Russia and Venezuela to re-nationalize fields. That often leads to lower output, due to the inefficiency of most state oil companies, notes Sanford Bernstein analyst Ben Dell. The publicly traded companies have to go where they can. As fields in peaceful places (Alaska, the North Sea) are tapped out, the hunt for new oil has moved into conflict zones (Nigeria and Angola) or geologically extreme territory (Siberia, the deep sea). And while higher prices are already driving down energy consumption in rich nations, that drop does not offset the booming demand in emerging markets.

Some dry but good reading from Newsweek on the ramifications of everyone fighting over the same thing, i.e., everyone is going to fight over the same thing.

This is also why Iran is having such a fun time being in the position they are.  That is, the world is both trying to cut them off to punish for the uranium enrichment and trying to open them up to exploit their oil, natty gas, and pipeline potential.

The Problem of Speculation

Saudi Arabia seeks oil price curb – Jun. 9, 2008

The Saudi announcement comes just three days after the biggest single-day price leap ever, when oil surged more than $11 to surpass $139 per barrel.

Retail gas prices rose further above $4 Monday in the United States, the world’s largest oil consumer, following the unprecedented price rally.

The kingdom will work to ensure there will be no “unwarranted and unnatural oil price hikes that could affect international economies, especially those of developing countries,” said Madani.

“There is no justification for the current rise in prices,” he said.

There isn’t any market justification for the prices right now, at least in the fundamental sense.  However, with all the strangeness going on and the way the market works, the prices now have spiked tremendously which is exacerbating some very real problems in developing countries.  When people are already rioting in the streets, run away oil prices have the ability to be a very nasty catalyst.

The Cost of Stupidity Just Went Up

FARK.com: (3656470) As the national average for a gallon of unleaded regular gasoline reaches $4, keep in mind that mere months ago President Bush accused a reporter who asked about $4 gas of liberal bias

Dr.Zom : 2008-06-08 08:22:47 PM
Electing an oil man president and complaining when the price of gas goes up is like electing a pimp and complaining about the rising price of vagina.

And the truthiness flows…this particular piece of it coming from this story.

NEW YORK – The average price of regular gas crept up to $4 a gallon for the first time over the weekend, passing the once-unthinkable milestone just in time for the peak summer travel season.

Prices at the pump are expected to keep climbing, especially after last week’s furious surge in oil prices, which neared $140 a barrel in a record-shattering rally Friday.

While Americans who have to drive will feel the biggest squeeze, the increased prices also translate into higher costs for consumers and businesses, who will be forced to shoulder increased transportation costs of food and anything else that needs to be transported.

[full story]

Really folks, is there any question left as to where the blame lies for this debacle?

Der Vassermeister Quote 2008-06-08 08:52:25 PM
Do you know the price per barrel of oil in February 200[3]? (For historical context, that would be the month before the Iraq invasion). The answer is that in February 200[3], the month before the Iraq invasion, the per barrel price of oil was [$35.87]. Thank you preznit numb nutz.
[note: had to edit for accuracy, but I liked the point. source]

The Market Recursion Continues

Oil surges $11 to record $138 – Jun. 6, 2008

NEW YORK (CNNMoney.com) — Oil prices shot up nearly $11 a barrel and settled Friday at a record $138.54 on geopolitical jitters, a dollar decline and a forecast that oil would hit $150 by July 4.

Friday’s spike in the July contract for light crude on the New York Mercantile Exchange marks the largest single-day increase in oil prices on record. The contract hit an intraday record of $139.12, breaking the previous trading record of $135.09.

This looks like pretty much rampant speculation.  Everyone is trying to lock-in a good price (see Dodge’s 3 year price guarantee) and that’s pushing demand even further, plus problems in Africa and Iraq and a new round of sanctions on Iran…all pushing future demand through the roof.

Ultimately we have a flat-finite supply curve and an exponential-infinite demand curve, leading to a halfway-infinite price curve, which is to say, it will increase like demand, just half as quickly.

The price will continue to increase until the fundamentals change.  It will only level for a time, it will not decrease for an extended period of time for the foreseeable future.

Add that analysis to the others.

Obvious News of the Day (Saudis, Oil, Israel)

Saudis see no reason to raise oil production now – Yahoo! News

RIYADH, Saudi Arabia – Saudi Arabia’s leaders made clear Friday they see no reason to increase oil production until customers demand it, apparently rebuffing President Bush amid soaring U.S. gasoline prices.

It was Bush’s second personal appeal this year to King Abdullah, head of the monarchy that rules this desert kingdom that is a longtime prime U.S. ally and home to the world’s largest oil reserves. But Saudi officials stuck to their position that they will only pump more oil into the system when asked to by buyers, something they say is not happening now, the president’s national security adviser told reporters.

This was a big part of Bush’s mideast trip. The funny part that the other part was to go and praise Israel and everything they do.

JERUSALEM – President Bush said Wednesday that 60 years of Israel‘s existence is cause for optimism for democratic change throughout the Middle East. “What happened here is possible everywhere,” Bush said, opening a trip divided between ceremonial duties and a new push for Israeli-Palestinian peace.

“I suspect if you looked back 60 years ago and tried to guess where Israel would be at that time, it would be hard to be able to project such a prosperous, hopeful land,” Bush said during a meeting with Israeli President Shimon Peres. “No question, people would have said, ‘We’d be surrounded by hostile forces.'”

Yet Bush’s message of optimism was immediately offset by troubling realities in the region.

Israel confirmed plans to expand settlement activity in the West Bank, a development likely to undermine peace talks with Palestinians. A weakened Israeli Prime Minister Ehud Olmert fended off corruption allegations. And another burst of violence erupted in the Gaza Strip just ahead of Bush’s arrival in Israel.

[full story]

I’m not sure if a country dominated by a particular religion, having a 40-year occupation of another religion, having secret nuclear weapons, a history of pre-emptively attacking her neighbors, and occasionally assassinating whoever they want is exactly the example we are looking for here. Yes, sure, people get to go out and party (which is a big deal), but to act like Israel is the end-all be-all of Middle Eastern civilization is a bit of stretch.

And that’s a decent part of why the Saudi’s and like “meh” when it comes to sending more oil (and they are bathing in cash right now, which tends to silence the pleas of others).