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New Orleans Style Funeral For Allen Toussaint
Nov. 28, 2015 - New York, New York, U.S. - New Orleans style funeral procession for jazz musician Allen Toussaint held in Washington Square Park. Toussaint died on November 10th.
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FEATURE of the Day
America's Latest Political Weapon: Oil
     America's newest weapon is stored in four former salt mines in Texas and Louisiana, more than 1,000 meters below ground. Right there, near the shore of the Gulf of Mexico, is where America's strategic oil reserves are to be found. Around 700 million barrels of this precious raw material sit in these underground chambers, enough to cover the country's entire oil requirements for 35 days.

But this supply is only to be touched in an emergency that is, during crises such as war or a natural disaster, like after Hurricane Katrina in 2005, when dozens of oil rigs were devastated. The stored oil is the last reserve in times of crises, a defensive shield. But now, it seems, it's going to be used as an offensive weapon.

The White House and Congress have agreed to gradually sell part of the country's reserve 8 percent, to be precise over the next few years. Five million barrels are to be sold annually starting in 2018, and that number will rise to 10 million barrels beginning in 2023. That's nearly 60 million barrels turned into revenues by 2025.

It's viewed as a sizeable sum meant ‘to stabilize the budget,’ according to official statements. But selling the oil, which would result in only $3 billion profit, won't be enough to cover the nation's $18 billion in debt.

Perhaps, then, the decision to monetize the oil reserves is motivated by something else. By signaling a willingness to sell its energy reserves, the U.S. is artificially lowering prices and weakening the countries that rely on oil production — Russia, Saudi Arabia and Iran, for example. Though the factors have shifted, the world again is facing a war over the most precious of raw materials.

The steps the U.S. is taking are questionable, economically speaking. The price of oil has fallen by half during the last year alone. In mid-2014, a barrel of oil cost around $100, whereas the current price is below $50. Consumers are therefore able to fill up their tanks and heat their homes for much less, even as energy companies are seeing dramatic drops in profits.

So why did Washington decide to release information about its decision to sell part of its oil reserves while oil prices are so low? Most likely, say experts, because it's as much about politics as it is about money.

Noah Poponak, analyst at Goldman Sachs, says the news is being accompanied by another budget deal that will see the arms expenditure increased by $50 billion a year. ‘This is a serious expansion of the arms budget.’

The stock prices of defense companies Northrop Grumman, Raytheon, Lockheed Martin & Co. are now rising, while energy listings are falling. This is a clear sign that oil has become a weapon amid political turmoil.

Saudi Arabia is suffering most from the falling price of oil, and its public finances are melting away like snow in the desert. The Fitch rating agency is forecasting a 14 percent Saudi deficit, and Standard and Poor’s (S&P) is even more pessimistic, predicting a budget deficit of 16 percent and having downgraded Saudi Arabia's credit rating to A+, with negative prospects. S&P is justifying the downgrade by saying that ’80 percent of Saudi Arabia's revenue comes from oil.’

The regime is partially responsible for this situation. The Saudis have produced more oil than ever before in the last year. In response, other nations have also increased their production, creating a global war over the commodity: the U.S. vs. Russia, the U.S. vs. Iran, Saudi Arabia vs. Iran, but most of all Saudi Arabia vs. the U.S.

The Saudis have long since tried to take down American oil companies via price dumping and flooding the market with more oil than OPEC production quotas require. The sheiks are targeting specific American firms that produce oil via fracking, an extraction method used for difficult-to-reach deposits in which the ground is blasted under extremely high pressure with a mixture of water, sand and chemicals, thereby forcing oil to the surface.

The success of fracking is causing serious concern for Saudi Arabia, which is constantly increasing production quotas to lower oil prices artificially with the hope of forcing its new American fracking rivals to give in. The Saudi strategy could work, as the latest statistics demonstrate that fracking companies are barely making a profit anymore because it's more expensive to extract oil from rock than to drill it from the desert sands. The U.S. Energy Information Administration (EIA) forecasts that fracking production rates will stagnate starting in November.

Lowering prices through overproduction is the weapon of choice for all parties in this oil war, as each seeks to weaken the others. Back in the day, the Saudis actually reduced production when oil became too cheap. But profits are no longer the only concern. They also want to push the U.S. into difficulty.

And the Iranians too, while they're at it. Since sanctions against it were revoked, Iran should again become one of the most important oil suppliers and will begin exporting it next year. Tehran is already warming its engines: two dozen tankers are sitting ready and loaded in their ports, more weapons in the latest global war.

Text Credit: Bertrand Hauger
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