According to the latest data from the US Department of Energy, the United States is importing 12-14 million barrels of oil per day. At a current price of about $115 per barrel, that’s $1.5 billion per day, or $548 billion per year. This represents the single largest contribution to America’s balance-of-payments deficit, and is a leading cause for the dollar’s ongoing drop in value. (…)

While our economy is being depleted of these funds, at a moment when credit is scarce and economic growth has screeched to a halt, the oil regimes on which we depend for our daily fix are depositing their mountains of accumulating petrodollars in “sovereign wealth funds” (SWFs) - state-controlled investment accounts that buy up prized foreign assets in order to secure non-oil-dependent sources of wealth. At present, these funds are already believed to hold in excess of several trillion dollars; the richest, the Abu Dhabi Investment Authority (ADIA), alone holds $875 billion.

The ADIA first made headlines in November 2007 when it acquired a $7.5 billion stake in Citigroup, America’s largest bank holding company. The fund has also made substantial investments in Advanced Micro Systems, a major chip maker, and the Carlyle Group, the private equity giant. Another big SWF, the Kuwait Investment Authority, also acquired a multibillion-dollar stake in Citigroup, along with a $6.6 billion chunk of Merrill Lynch. And these are but the first of a series of major SWF moves that will be aimed at acquiring stakes in top American banks and corporations. (…)

Foreign ownership of key nodes of our economy is only one sign of fading American superpower status. Oil’s impact on the military is another.

(…) The US Department of Defense is the world’s single-biggest consumer of petroleum, using more of it every day than the entire nation of Sweden. (…)

Every day, the average GI in Iraq uses approximately 27 gallons of petroleum-based fuels. With some 160,000 American troops in Iraq, that amounts to 4.37 million gallons in daily oil usage, including gasoline for vans and light vehicles, diesel for trucks and armored vehicles, and aviation fuel for helicopters, drones, and fixed-wing aircraft. With US forces paying, as of late April, an average of $3.23 per gallon for these fuels, the Pentagon is already spending approximately $14 million per day on oil ($98 million per week, $5.1 billion per year) to stay in Iraq. Meanwhile, our Iraqi allies, who are expected to receive a windfall of $70 billion this year from the rising price of their oil exports, charge their citizens $1.36 per gallon for gasoline.

When questioned about why Iraqis are paying almost a third less for oil than American forces in their country, senior Iraqi government officials scoff at any suggestion of impropriety. “America has hardly even begun to repay its debt to Iraq,” said Abdul Basit, the head of Iraq’s Supreme Board of Audit, an independent body that oversees Iraqi governmental expenditures. (…)

Certainly, however, our allies in the region, especially the Sunni kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) that presumably look to Washington to stabilize Iraq and curb the growing power of Shi’ite Iran, are willing to help the Pentagon out by supplying US troops with free or deeply-discounted petroleum. No such luck. Except for some partially subsidized oil supplied by Kuwait, all oil-producing US allies in the region charge us the market rate for petroleum.

As far as they’re concerned, we’re now just another of those hopeless oil addicts driving a monster gas-guzzler up to the pump - and they’re perfectly happy to collect our cash which they can then use to cherry-pick our prime assets. (…)

President Bush believed that he could convert an impoverished and compliant Russia into a major source of oil and natural gas for the United States - with American energy companies running the show. This was the evident aim of the US-Russian “energy dialogue” announced by Bush and Russian President Vladimir Putin in May 2002. But if Bush thought Russia was prepared to turn into a northern version of Kuwait, Saudi Arabia, or Venezuela prior to the arrival of Hugo Chavez, he was to be sorely disappointed.

Putin never permitted American firms to acquire substantial energy assets in Russia. Instead, he presided over a major recentralization of state control when it came to the country’s most valuable oil and gas reserves, putting most of them in the hands of Gazprom, the state-controlled natural gas behemoth.

Once in control of these assets, moreover, Putin has used his renascent energy power to exert influence over states that were once part of the former Soviet Union, as well as those in Western Europe that rely on Russian oil and gas for a substantial share of their energy needs. In the most extreme case, Moscow turned off the flow of natural gas to Ukraine on January 1, 2006, in the midst of an especially cold winter, in what was said to be a dispute over pricing but was widely viewed as punishment for Ukraine’s political drift westwards. (The gas was turned back on four days later when Ukraine agreed to pay a higher price and offered other concessions.)

Gazprom has threatened similar action in disputes with Armenia, Belarus, and Georgia - in each case forcing those former Soviet SSRs to back down.

{ Michael T Klare/Asia Times | Continue reading }

artwork { Jean-Michel Basquiat, Peruvian Maid, 1985 | acrylic and oil painstick on wood }

READ MORE >> economics, USA, Basquiat, oil | May 28th, 2008