Oil Pricing and the Democratic Party
Rizwan Ghani
April 23, 2008
A report in 2004 Wall Street Journal showed 19 US dollars as production cost for a barrel of oil that fetched around 30 dollars in international market. Reports show that today it costs around 31 US dollars to produce one barrel of oil. The international economic experts unanimously agree that it is speculation that is pushing the oil prices not the manufacturers. It is reasoned that recession on Wall Street is attracting ´speculative´ investment in oil, which is safer and as lucrative an option as gold at this point of time.
In other words, Wall Street is surviving at the cost of main street or common man. If this assertion is right, Isn´t it time Democrats come forward to bring an end to this broad daylight robbery- a 31 US dollar barrel of oil being sold for 117 plus US dollars- and freeze the oil price to 50 dollars a barrel. It is hoped that Obama will rise to the challenge to save an average American and some three billion poor from rest of the world living below two US dollar a day, which is almost half of world total population of 6 billion plus population.
President Chavez in 2007 offered a barrel of oil for $50 to those who wanted to buy Venezuelan oil on long term basis starting with ten-year understanding. Even today Wall Street observers are predicting a normalization of current spike to $80 a barrel in near future. Keeping in view the IMF Dec. 2007 report confirming 30 percent devaluation of dollar the actual price of a barrel of oil comes to 56 dollars.
Democrats therefore have to address the issue of dollar-oil peg vis-à-vis oil prices. The devil lies in the details. Washington model of US economy by virtue of world oil sale pegged to dollar get access to huge cash inflow (liquidity) which in turn allows Wall Street, banks and insurance sector to do business.
However, due to two wars, the credit crisis and mortgage meltdown the flawed fundamentals of conservatives Washington economic model has come to haunt the Wall Street´s ´unchecked´ business practices which solicits only ´leftovers money for commoners´ commonly known as ´trickle down´ effects in third world. These adverse effects of Washington model until now had been covered by banks liberal lending practices, which following credit crunch and mortgage meltdown are being criticized (for further explanation see Conservatism by Roy C. Macridis; Encarta 2005-8 editions).
Today an average American on the street is looking for state intervention to protect its: social security; increase in average hourly wages; rationalization of salary between employer and employee down to the ratio of 7:1 instead of 278:1; (free/subsidized) health care and quality education. Will the Democrats stand up and ´socialize´ America in these areas as part of good governance and govt. effectiveness to bring relief at grassroots.
Democrats need to uphold the laws passed by US Supreme Court in 1936, which recognized poverty as ´hindrances to good life´ and allowed legislation positive state action to promote ´self-fulfillment´, that is, to prevent economic monopoly, abolish poverty, and secure people against the disabilities of sickness, unemployment, and old age. Democrats instead of defending Republicans allegations of ´socialism´ should therefore standup to protect these legal rights of average American and in turn emancipation of rest of the world (for further explanation see Liberalism by Peter Gay; Encarta 2006-8 editions)
The reports of rising food costs, crisis is a diversion and the reports of bio-fuel usurping food land is a cover up. Statistics show that Brazil has only used 2 percent of its agri-land for corn. America is still struggling to reach projected 3 percent of ethanol use to reduce dependence on foreign oil.
The 2008 US oil consumption projections show a flat cum decrease in oil consumption. US govt. March 12 report shows 3.2 percent decrease in oil consumption (Oil market not in control of demand-supply dynamics Mar. 28, Arab News). Saudi Arabia has announced increase in its production to 12.5 million bpd from 11 million bpd. The report shows 20 percent increase each in Chinese and Indian oil consumption (CNN). It is less than 9% of total increase daily global oil put. The daily global output is32 million bpd (Politics extracts heavy price; Feb. 22, Arab News)
Interestingly, the production of oil in Iraq costs $1 to $2 against $31 global average. Reports show western oil companies including US are taking away some 300,000 to 500,000 bpd from Iraq. Iraq has proven oil reserves of 115 billion barrels, which experts believe could well turn out to be at least double ( Iraq oil draft…, 29 Feb, Arab News). It explains reasons for Iraq occupation, Iran´s witch- hunting (reports of attack on it on lines of Cambodia towards the end of Vietnam war) and oil giants backed media uproar over oil draft as occupied Iraq tries to protect its national asset while more and more innocent people die for no fault of their own.
The Iraqi mothers are fed up with servicing their clients in name of Democracy while their minor stand on watch to save the hapless mother from police, militia or virtue commission (documentary run by CNN in Month of Mar. 08 ). Will Obama, Hillary and other Democrats stand up with likeminded international community to uphold fellow beings ´right to life´ as mandated in UN Human Rights Charter and dignity or like Palestine and Kashmir it will be ignored.
The US oil companies´ statistics however show a different situation. Reportedly, five American oil giants posted 123 billion dollar profit for 2007 and US Congress has only asked for 18 billion in tax cuts as average American pays 3.50 dollar a gallon for a barrel of oil that costs 31 dollars in the first place.
On the international level unlike widely believed the reports show that G-7 states are earning more than oil producing countries. During 2000-2004 period, the G-7 states made a total of 1,600 billion from oil taxation, as compared to 1,300 billion by the OPEC member states. Thus, OPEC insists that real cause of burden on consumers in Japan, UK, Italy and Germany is high level of taxation (Blame G-7 taxation… 8 Feb 08, Arab News). It is even worse for the developing world. For example a $3.50 a gallon in US with per capita income of $ 42,000 (Encarta 2005) is cheaper than $3.54 a gallon in Pakistan with per capita income of $ 710 (independent observers put it at $ 656) and 86 percent population living below 2 dollar a day. The fate of 750 million Indians living below two dollar a day across the border is no different (Davos Report 2006).
Democrats should push Washington for $50 a barrel freeze because: 1) It is NYMEX where oil prices are decided not by the OPEC. 2) There is sufficient oil in the market (oil price is beyond control: officials 20 April 08 Arab News. 3) US Dept. of Defense is largest purchaser of oil in the world- almost 300,000 barrels a day [excluding overseas imports] for domestic consumption and supporting two US wars. 4) The latest US inventories data shows 14 year high in country´s crude stock, which stands at 308.5 million barrels in the week ending Feb. 22 ( OPEC Meeting…; Mar 7, Arab News). 5) Developing world needs cheaper fuel more than food aid to sustain and maintain domestic economies.
Finally, the oil pricing has more to do with politics than what is being shown in the US and global media. The Democrats therefore have to take a position on ending two wars and upholding US laws in step with the history of Democratic Party to protect rights of average American against the onslaught of Republican backed oil giants and corporate sector. The ´freezing´ of barrel of oil to $50 will not only ease economic pressure on average American but will also bring relief for rest of the world.
In other words, Wall Street is surviving at the cost of main street or common man. If this assertion is right, Isn´t it time Democrats come forward to bring an end to this broad daylight robbery- a 31 US dollar barrel of oil being sold for 117 plus US dollars- and freeze the oil price to 50 dollars a barrel. It is hoped that Obama will rise to the challenge to save an average American and some three billion poor from rest of the world living below two US dollar a day, which is almost half of world total population of 6 billion plus population.
President Chavez in 2007 offered a barrel of oil for $50 to those who wanted to buy Venezuelan oil on long term basis starting with ten-year understanding. Even today Wall Street observers are predicting a normalization of current spike to $80 a barrel in near future. Keeping in view the IMF Dec. 2007 report confirming 30 percent devaluation of dollar the actual price of a barrel of oil comes to 56 dollars.
Democrats therefore have to address the issue of dollar-oil peg vis-à-vis oil prices. The devil lies in the details. Washington model of US economy by virtue of world oil sale pegged to dollar get access to huge cash inflow (liquidity) which in turn allows Wall Street, banks and insurance sector to do business.
However, due to two wars, the credit crisis and mortgage meltdown the flawed fundamentals of conservatives Washington economic model has come to haunt the Wall Street´s ´unchecked´ business practices which solicits only ´leftovers money for commoners´ commonly known as ´trickle down´ effects in third world. These adverse effects of Washington model until now had been covered by banks liberal lending practices, which following credit crunch and mortgage meltdown are being criticized (for further explanation see Conservatism by Roy C. Macridis; Encarta 2005-8 editions).
Today an average American on the street is looking for state intervention to protect its: social security; increase in average hourly wages; rationalization of salary between employer and employee down to the ratio of 7:1 instead of 278:1; (free/subsidized) health care and quality education. Will the Democrats stand up and ´socialize´ America in these areas as part of good governance and govt. effectiveness to bring relief at grassroots.
Democrats need to uphold the laws passed by US Supreme Court in 1936, which recognized poverty as ´hindrances to good life´ and allowed legislation positive state action to promote ´self-fulfillment´, that is, to prevent economic monopoly, abolish poverty, and secure people against the disabilities of sickness, unemployment, and old age. Democrats instead of defending Republicans allegations of ´socialism´ should therefore standup to protect these legal rights of average American and in turn emancipation of rest of the world (for further explanation see Liberalism by Peter Gay; Encarta 2006-8 editions)
The reports of rising food costs, crisis is a diversion and the reports of bio-fuel usurping food land is a cover up. Statistics show that Brazil has only used 2 percent of its agri-land for corn. America is still struggling to reach projected 3 percent of ethanol use to reduce dependence on foreign oil.
The 2008 US oil consumption projections show a flat cum decrease in oil consumption. US govt. March 12 report shows 3.2 percent decrease in oil consumption (Oil market not in control of demand-supply dynamics Mar. 28, Arab News). Saudi Arabia has announced increase in its production to 12.5 million bpd from 11 million bpd. The report shows 20 percent increase each in Chinese and Indian oil consumption (CNN). It is less than 9% of total increase daily global oil put. The daily global output is32 million bpd (Politics extracts heavy price; Feb. 22, Arab News)
Interestingly, the production of oil in Iraq costs $1 to $2 against $31 global average. Reports show western oil companies including US are taking away some 300,000 to 500,000 bpd from Iraq. Iraq has proven oil reserves of 115 billion barrels, which experts believe could well turn out to be at least double ( Iraq oil draft…, 29 Feb, Arab News). It explains reasons for Iraq occupation, Iran´s witch- hunting (reports of attack on it on lines of Cambodia towards the end of Vietnam war) and oil giants backed media uproar over oil draft as occupied Iraq tries to protect its national asset while more and more innocent people die for no fault of their own.
The Iraqi mothers are fed up with servicing their clients in name of Democracy while their minor stand on watch to save the hapless mother from police, militia or virtue commission (documentary run by CNN in Month of Mar. 08 ). Will Obama, Hillary and other Democrats stand up with likeminded international community to uphold fellow beings ´right to life´ as mandated in UN Human Rights Charter and dignity or like Palestine and Kashmir it will be ignored.
The US oil companies´ statistics however show a different situation. Reportedly, five American oil giants posted 123 billion dollar profit for 2007 and US Congress has only asked for 18 billion in tax cuts as average American pays 3.50 dollar a gallon for a barrel of oil that costs 31 dollars in the first place.
On the international level unlike widely believed the reports show that G-7 states are earning more than oil producing countries. During 2000-2004 period, the G-7 states made a total of 1,600 billion from oil taxation, as compared to 1,300 billion by the OPEC member states. Thus, OPEC insists that real cause of burden on consumers in Japan, UK, Italy and Germany is high level of taxation (Blame G-7 taxation… 8 Feb 08, Arab News). It is even worse for the developing world. For example a $3.50 a gallon in US with per capita income of $ 42,000 (Encarta 2005) is cheaper than $3.54 a gallon in Pakistan with per capita income of $ 710 (independent observers put it at $ 656) and 86 percent population living below 2 dollar a day. The fate of 750 million Indians living below two dollar a day across the border is no different (Davos Report 2006).
Democrats should push Washington for $50 a barrel freeze because: 1) It is NYMEX where oil prices are decided not by the OPEC. 2) There is sufficient oil in the market (oil price is beyond control: officials 20 April 08 Arab News. 3) US Dept. of Defense is largest purchaser of oil in the world- almost 300,000 barrels a day [excluding overseas imports] for domestic consumption and supporting two US wars. 4) The latest US inventories data shows 14 year high in country´s crude stock, which stands at 308.5 million barrels in the week ending Feb. 22 ( OPEC Meeting…; Mar 7, Arab News). 5) Developing world needs cheaper fuel more than food aid to sustain and maintain domestic economies.
Finally, the oil pricing has more to do with politics than what is being shown in the US and global media. The Democrats therefore have to take a position on ending two wars and upholding US laws in step with the history of Democratic Party to protect rights of average American against the onslaught of Republican backed oil giants and corporate sector. The ´freezing´ of barrel of oil to $50 will not only ease economic pressure on average American but will also bring relief for rest of the world.