[News] Are They Really Oil Wars?

[Anti-Imperialist News]

http://www.counterpunch.org/zadeh07092008.html
July 9, 2008

Shell Games


Are They Really Oil Wars?

By ISMAEL HOSSEIN-ZADEH

A most widely-cited factor behind the recent U.S. 
wars of choice is said to be oil. “No Blood for 
Oil” has been a rallying cry for most of the 
opponents of the war. While some of these 
opponents argue that the war is driven by the 
U.S. desire for cheap oil, others claim that it 
is prompted by big oil’s wish for high oil prices 
and profits. Interestingly, most antiwar forces 
use both claims interchangeably without paying 
attention to the fact that they are diametrically-opposed assertions.

Not only do the two arguments contradict each 
other, but each argument is also wanting and 
unconvincing on its own grounds; not because the 
U.S. does not wish for cheap oil, or because Big 
Oil does not desire higher oil prices, but 
because war is no longer the way to control or 
gain access to energy resources. Colonial-type 
occupation or direct control of energy resources 
is no longer efficient or economical and has, 
therefore, been abandoned for more than four decades.

The view that recent U.S. military adventures in 
the Middle East and the broader Central Asia are 
driven by energy considerations is further 
reinforced by the dubious theory of Peak Oil, 
which maintains that, having peaked, world oil 
resources are now dwindling and that, therefore, 
war power and military strength are key to access 
or control of the shrinking energy resources.

In this study I will first argue that the Peak 
Oil theory is unscientific, unrealistic, and 
perhaps even fraudulent. I will then show that 
war and military force are no longer the 
necessary or appropriate means to gain access to 
sources of energy, and that resorting to military 
measures can, indeed, lead to costly, not cheap, 
oil. Next, I will demonstrate that, despite the 
lucrative spoils of war resulting from high oil 
prices and profits, Big Oil prefers peace and 
stability, not war and geopolitical turbulence, 
in global energy markets. Finally, I will argue a 
case that behind the drive to war and military 
adventures in the Middle East lie some powerful 
special interests (vested in war, militarism, and 
geopolitical concerns of Israel) that use oil as 
an issue of “national interest”­as a façade or 
pretext­in order to justify military adventures 
to derive high dividends, both economic and geopolitical, from war.



Has Oil Really Peaked­and Is It Running Out?

Peak oil thesis, as noted above, maintains that 
world oil reserves, having reached their maximum 
capacity, are now dwindling­with grave 
consequences of oil shortage and high energy 
prices. While this has led many to call for more 
vigorous conservation, it has led others to argue 
in favor of unrestrained exploration and 
extraction of oil reserves, especially those 
located in the Alaskan Wildlife regions.

Significant policy and/or political implications 
follow from the view that oil is running out. For 
one thing, this view provides fodder for the 
cannons of war profiteering militarists who are 
constantly on the look out to invent new enemies 
and find new pretexts for continued war and 
escalation of military spending. For another, it 
tends to disarm many antiwar forces that accept 
this thesis and, therefore, “internalize 
responsibility for U.S. foreign policy every time 
they fill their gas tank. Thus they own the wars.”[1]

The Peak Oil thesis serves as a powerful trap and 
a clever manipulation in that it lets the real 
forces of war and militarism (the 
military-industrial complex and the pro-Israel 
lobby) “off the hook; it is a fabulous 
redirection. All evils are blamed on a commodity 
upon which we are all utterly dependent.”[2]

The fact, however, is that there is no hard 
evidence that oil has peaked, or that global oil 
reserves are shrinking, or that the current 
skyrocketing price of oil is due to a supply 
shortage. (As shown below, there is actually an oil surplus, no shortage.)

Peak oil theory is not altogether new. It was 
originally floated around in the 1940s, arguing 
that world oil reserves would be exhausted within 
the next two decades or so. It then resurfaced in 
the 1970s and early 1980s in reaction to the oil 
price hikes of those years­which were, 
incidentally, precipitated not by oil shortages 
but by international political convulsions, 
revolutions and wars. But it died down once the 
price of oil fell back to pre-crises levels.

As recent geopolitical convulsions in the Middle 
East (especially the U.S. war on Iraq, and the 
resultant booming speculation in oil markets) 
have triggered a new round of oil price hikes, 
Peak Oil theory has once again become 
fashionable. The theory is being promoted not 
only by war profiteers and proponents of an 
unbridled domestic oil exploration and 
extraction, especially in Alaska, but also by 
some apparently antiwar liberals such as Michael 
T. Klare and James H. Kunstler.[3]

Peak oil theory is based on a number of 
assumptions and omissions that make it less than 
reliable. To begin with, it discounts or 
disregards the fact that energy-saving 
technologies have drastically improved (and will 
continue to further improve) the efficiency of 
oil consumption. Evidence shows that, for 
example, “over a period of five years (1994-99), 
U.S. GDP expanded over 20 percent while oil usage 
rose by only nine percent. Before the 1973 oil 
shock, the ratio was about one to one.”[4]

Second, Peak Oil theory pays scant attention to 
the drastically enabling new technologies that 
have made (and will continue to make) possible 
discovery and extraction of oil reserves that 
were inaccessible only a short time ago. One of 
the results of the more efficient means of 
research and development has been a far higher 
success rate in finding new oil fields. The 
success rate has risen in twenty years from less 
than 70 percent to over 80 percent. Computers 
have helped to reduce the number of dry holes. 
Horizontal drilling has boosted extraction. 
Another important development has been deep-water 
offshore drilling, which the new technologies now 
permit. Good examples are the North Sea, the Gulf 
of Mexico, and more recently, the promising 
offshore oil fields of West Africa.[5]

Third, Peak Oil theory also pays short shrift to 
what is sometimes called non-conventional oil. 
These include Canada's giant reserves of 
extra-heavy bitumen that can be processed to 
produce conventional oil. Although this was 
originally considered cost inefficient, experts 
working in this area now claim that they have 
brought down the cost from over $20 a barrel to 
$8 per barrel. Similar developments are taking 
place in Venezuela. It is thanks to developments 
like these that since 1970, world oil reserves 
have more than doubled, despite the extraction of 
hundreds of millions of barrels.[6]

Fourth, Peak Oil thesis pays insufficient 
attention to energy sources other than oil. These 
include solar, wind, non-food bio-fuel, and 
nuclear energies. They also include natural gas. 
Gas is now about 25 percent of energy demand 
worldwide. It is estimated that by 2050 it will 
be the main source of energy in the world. A 
number of American, European, and Japanese firms 
have and are investing heavily in developing fuel 
cells for cars and other vehicles that would 
significantly reduce gasoline consumption.[7]

Fifth, proponents of Peak Oil tend to exaggerate 
the impact of the increased oil demand coming 
from China and India on both the amount and the 
price of oil in global markets. The alleged 
disparity between supply and demand is said to be 
due to the rapidly growing demand coming from 
China and India. But that rapid growth in demand 
is largely offset by a number of counterbalancing 
factors. These include slower growth in U.S. 
demand due to its slower economic growth, 
efficient energy utilization in industrially 
advanced countries, and increases in oil 
production by OPEC, Russia, and other oil producing countries.

Finally, and perhaps more importantly, claims of 
“peaked and dwindling” oil are refuted by the 
available facts and figures on global oil supply. 
Statistical evidence shows that there is 
absolutely no supply-demand imbalance in global 
oil markets. Contrary to the claims of the 
proponents of Peak Oil and champions of war and 
militarism, the current oil price shocks are a 
direct consequence of the destabilizing wars and 
geopolitical insecurity in the Middle East, not 
oil shortages. These include not only the raging 
wars in Iraq and Afghanistan, but also the threat 
of a looming war against Iran. The record of 
soaring oil prices shows that anytime there is a 
renewed U.S. military threat against Iran, fuel prices move up several notches.

The war also contributes to the escalation of 
fuel prices in indirect ways­for example, by 
plunging the U.S. ever deeper into debt and 
depreciating the dollar, or by creating favorable 
grounds for speculation. As oil is priced largely 
in U.S. dollars, oil exporting countries ask for 
more dollars per barrel of oil as the dollar 
loses value. Perhaps more importantly, an 
atmosphere of war and geopolitical instability in 
global oil markets serves as an auspicious ground 
for hoarding and speculation in commodity 
markets, especially oil, which is heavily 
contributing to the recently soaring oil prices.

As much as 60% of today’s crude oil price is pure 
speculation driven by large trader banks and 
hedge funds. It has nothing to do with the 
convenient myths of Peak Oil. It has to do with 
control of oil and its price. . . . Since the 
advent of oil futures trading and the two major 
London and New York oil futures contracts, 
control of oil prices has left OPEC and gone to 
Wall Street. It is a classic case of the ‘tail that wags the dog.’[8]

Wall Street financial giants that created the 
Third World debt crisis in the late 1970s and 
early 1980s, the tech bubble in the 1990s, and 
the housing bubble in the 2000s are now hard at 
work creating the oil bubble. By purchasing large 
numbers of futures contracts, and thereby pushing 
up futures prices to even higher levels than 
current prices, speculators have provided a 
financial incentive for oil companies to buy even 
more oil and place it in storage. A refiner will 
purchase extra oil today, even if it costs $115 
per barrel, if the futures price is even higher.[9]

This has led to a steady rise in crude oil 
inventories over the last two years, “resulting 
in US crude oil inventories that are now higher 
than at any time in the previous eight years. The 
large influx of speculative investment into oil 
futures has led to a situation where we have both 
high supplies of crude oil and high crude oil 
prices. . . . In fact, during this period global 
supplies have exceeded demand, according to the US Department of Energy.”[10]

The fact that the skyrocketing oil prices of late 
have been accompanied by a surplus in global oil 
markets was also brought to the attention of 
President George W. Bush by Saudi officials when 
he asked them during a recent trip to the kingdom 
to increase production in order to stem the 
rising prices. Saudi officials reminded the 
President that “there is plenty of oil on the 
market. Iran has put some 30 million barrels of 
oil that it can't sell into floating storage. ‘If 
we produced more oil, it wouldn't find buyers,’ 
says the Saudi source. It wouldn't affect the price at all."[11]

And why producing more oil “wouldn’t affect the 
price at all”? Well, because what is driving the 
soaring oil prices is not shortage but 
speculation: “with so much investment money 
sloshing around in the commodities markets, the 
Saudis calculate they have no hope of controlling 
short-term price fluctuations. They blame the 
recent price run-ups on speculation and fear of 
shortages [not real shortages], factors they say are beyond their control.”[12]

War for Cheap Oil?

The widely-shared view that the U.S. desire for 
access to abundant and cheap oil lurks behind the 
Bush administration’s drive to war in the Middle 
East rests on the implicit but dubious assumption 
that access to energy resources requires direct 
control of oil fields and/or oil producing 
countries. There are at least three problems with this postulation.

First, if control of or influence over oil 
producing countries in the Middle East is a 
requirement for access to cheap oil, the United 
States already enjoys significant influence over 
some of the major oil producers in the 
region­Saudi Arabia, Kuwait, and a number of 
other smaller producers. Why, then, would the 
U.S. want to bring about war and political 
turmoil in the region that might undermine that 
long and firmly-established influence?

Let us assume for a moment that the 
neoconservative militarists are sincere in their 
alleged desire to bring about democratic rule and 
representational government in the Middle East. 
Let us further assume that they succeed in 
realizing this purported objective. Would, then, 
the thus-emerging democratic governments, 
representing the wishes of the majority of their 
citizens, be as accommodating to U.S. economic 
and geopolitical objectives, including its oil 
needs, as are its currently friendly rulers in the region? Most probably not.

Secondly, and more importantly, access to oil no 
longer requires control of oil fields or oil 
producers­as was the case in times past. For more 
than a century, that is, from the early days of 
oil extraction in the United States in the 1870s 
until the mid-1970s, the price of oil was 
determined administratively, that is, by 
independent producers operating in different 
parts of the world without having to compete with 
each other. Under those circumstances, colonial 
or imperial wars of conquest and occupation were 
crucial to the control of oil (and other) resources.

Beginning with the 1950s, however, that pattern 
of local, non-competitive price determination 
began to gradually change in favor of regional 
and/or international markets. By the mid 1970s, 
an internationally competitive oil market emerged 
that effectively ended the century-old pattern of 
local, administrative pricing. Today, oil prices 
(like most other commodity prices) are determined 
largely by the forces of supply and demand in 
competitive global energy markets; and any 
country or company can have as much oil as they 
wish if they pay the going market (or spot) price.[13]

To the extent that competitive oil markets and/or 
prices are occasionally manipulated, such 
subversions of competitive market forces are 
often brought about not so much by OPEC or other 
oil producing countries as by manipulative 
speculations of financial giants in New York and 
London.  As was discussed earlier, gigantic Wall 
Street financial institutions have accomplished 
this feat through “innovative” financial 
instruments such as establishment of energy hedge 
funds and speculative oil futures markets in New York and London.[14]

It is true that collective supply decisions of 
oil producing countries can, and sometimes does, 
affect the competitively determined market price. 
But a number of important issues need to be considered here.

To begin with, although such supply manipulations 
obviously affect or influence market-determined 
prices, they do not determine those prices. In 
other words, competitive international oil 
markets determine its price with or without oil 
producers’ supply manipulations. Such supply 
managements are, however, designed not to create 
volatility in energy markets, or chronic oil 
price hikes. Instead, they are designed to 
stabilize global oil prices because oil exporting 
countries prefer stability, predictability and 
long-term planning for their economic development 
and industrialization projects. Here is how Cyrus 
Bina and Minh Vo describe this relationship:

As a result, we conclude that the global oil 
market is the prime mover [i.e., prime 
determinant of oil price] and OPEC indeed follows 
its trajectory accordingly and consistently. . . 
. When market price (both spot and futures) is 
falling, OPEC decreases its output; when market 
price is rising, OPEC attempts to increase its 
output; and when market price is steady, OPEC 
keeps its output unchanged. . . . And, this is a 
kind of oil market we have experienced after the 
dust settled following the crisis of 
de-cartelization and globalization of oil industry in the 1970s.[15]

Producers’ policy to sometimes curtail or limit 
the supply of oil, the so-called “limited flow” 
policy, is designed to raise the actual trading 
price above the market-determined price in order 
to keep high-cost U.S. producers in business 
while leaving low-cost Middle East producers with 
an above average, or “super,” profit. While for 
low-cost producers this limited flow policy is 
largely a matter of making more or less profits, 
for high-cost U.S. producers it is a matter of 
survival, of being able to stay in or go out of 
business­an important but rarely mentioned or acknowledged fact.

A hypothetical numerical example might be helpful 
here. Suppose that the market-determined, or 
free-flow, price of oil is $30 per barrel. 
Further, suppose this price entails an average 
rate of profit of 10 percent, or $3 per barrel. 
The word “average” in this context refers to 
average conditions of production, that is, 
producers who produce under average conditions of 
production in terms of productivity and cost of 
production. This means that producers who produce 
under better-than-average conditions, that is, 
low-cost, high productivity producers, will make 
a profit higher than $3 per barrel while 
high-cost, low efficiency producers will end up 
making less than $3 per barrel. This also means 
that some of the high-cost producers may end up 
going out of business altogether. Now, if the 
limited flow policy raises the actual trading 
price to $35 per barrel, it will raise the 
profits of all producers accordingly, thereby 
also keeping in business some high-cost producers 
that might otherwise have gone out of business.

Furthermore, supply manipulation (in pursuit of 
price manipulation) is not limited to the oil 
industry. In today’s economic environment of 
giant corporations and big businesses, many of 
the major industries try, and often succeed in 
controlling supply in order to control price. 
Take, for example, the automobile industry. 
Theoretically, automobile producers could flood 
the market with a huge supply of cars. But that 
would not be good business as it would lower 
prices and profits. So, they control supply, just 
as do oil producers, in order to manipulate 
price. During the past several decades, the price 
of automobiles, in real terms, has been going up 
every year, at least to the tune of inflation. 
During this period, the industry (and the economy 
in general) has enjoyed a many-fold increase in 
labor productivity. Increased labor productivity 
is supposed to translate into lower costs and, 
therefore, lower prices. Yet, that has not 
materialized in the case of this industry­as it 
has in the case of, for example, pocket calculators or computers.

Another example of price control through supply 
manipulation is the case of U.S. grain producers. 
The so-called “set aside” policy that pays 
farmers not to cultivate part of their land in 
order to curtail supply and prop up price is not 
different­nay, it is worse­ than OPEC’s policy of 
supply and/or price manipulation.

It is also necessary to keep in mind that OPEC’s 
desire to sometimes limit the supply of oil in 
order to shore up its price is limited by a 
number of factors. For one thing, the share, and 
hence the influence, of Middle Eastern oil 
producers as a percentage of world oil production 
has steadily declined over time, from almost 40 
percent when OPEC was established to about 30 
percent today.[16] For another, OPEC members are 
not unmindful of the fact that inordinately high 
oil prices can hurt their own long-term interests 
as this might prompt oil importers to economize 
on oil consumption and search for alternative 
sources of energy, thereby limiting producers’ export markets.

OPEC members also know that inordinately high oil 
prices could precipitate economic recessions in 
oil importing countries that would, once again, 
lower demand for their oil. In addition, high oil 
prices tend to raise the cost of oil producers’ 
imports of manufactured products as high energy 
costs are bound to affect production costs of those manufactured products.

War for Expensive Oil?

Now let us consider the widely-shared view that 
attributes the Bush administration’s drive to war 
to the influence of big oil companies in pursuit 
of higher oil prices and profits. As noted, this 
is obviously the opposite of the “war for cheap 
oil” argument, as it claims that Big Oil tends to 
instigate war and political tension in the Middle 
East in order to cause an oil price hike and 
increase its profits. Like the “war for cheap 
oil” theory, this claim is not supported by 
facts. Although the claim has an element of a 
prima facie reasonableness, that apparently 
facile credibility rests more on precedent and 
perception than reality. Part of the perception 
is due to the exaggerated notion that both 
President Bush and Vice President Cheney were 
“oil men” before coming to the White House. But 
the fact is that George W. Bush was never more 
than an unsuccessful petty oil prospector and 
Dick Cheney headed a company, the notorious 
Halliburton, that sold (and still sells) services 
to oil companies and the Pentagon.

The larger part of the perception, however, stems 
from the fact that oil companies do benefit from 
oil price hikes that result from war and 
political turbulence in the Middle East. Such 
benefits are, however, largely incidental. 
Surely, American oil companies would welcome the 
spoils of the war (that result from oil price 
hikes) in Iraq or anywhere else in the world. 
 From the largely incidental oil price hikes that 
follow war and political convulsion, some 
observers automatically conclude that, therefore, 
Big Oil must have been behind the war.[17] But 
there is no evidence that, at least in the case 
of the current invasion of Iraq, oil companies pushed for or supported the war.

On the contrary, there is strong evidence that, 
in fact, oil companies did not welcome the war 
because they prefer stability and predictability 
to periodic oil spikes that follow war and 
political convulsion: “Looking back over the last 
20 years, there is plenty of evidence showing the 
industry’s push for stability and cooperation 
with Middle Eastern countries and leaders, and 
the U.S. government’s drive for hegemony works 
against the oil industry.”[18] As Thierry 
Desmarest, Chairman and Chief Executive Officer 
of France’s giant oil company, TotalFinaElf, put 
it, “A few months of cash generation is not a big 
deal. Stable, not volatile, prices and a $25 
price (per barrel) would be convenient for everyone.”[19]

It is true that for a long time, from the 
beginning of Middle Eastern oil exploration and 
discovery in the early twentieth century until 
the mid-1970s, colonial and/or imperial powers 
controlled oil either directly or through control 
of oil producing countries­at times, even by 
military force. But that pattern of colonial or 
imperialist exploitation of global markets and 
resources has changed now. Most of the current 
theories of imperialism and hegemony that 
continue invoking that old pattern of Big Oil 
behavior tend to suffer from an ahistorical 
perspective. Today, as discussed earlier, even 
physically occupying and controlling another 
country’s oil fields will not necessarily be 
beneficial to oil interests. Not only will 
military adventures place the operations of 
current energy projects at jeopardy, but they 
will also make the future plans precarious and 
unpredictable. Big Oil interests, of course, know 
this; and that’s why they did not countenance the 
war on Iraq: "The big oil companies were not 
enthusiastic about the Iraqi war," says Fareed 
Mohamedi of PFC Energy, an energy consultancy 
firm based in Washington D.C. that advises 
petroleum firms. "Corporations like Exxon-Mobil 
and Chevron-Texaco want stability, and this is 
not what Bush is providing in Iraq and the Gulf region," adds Mohamedi.[20]

Big Oil interests also know that not only is war 
no longer the way to gain access to oil, it is in 
fact an obstacle to gaining that access. 
Exclusion of U.S. oil companies from vast oil 
resources in countries such as Russia, Iran, 
Venezuela, and a number of central Asian 
countries due to militaristic U.S. foreign policy 
is a clear testament to this fact. Many of these 
countries (including, yes, Iran) would be glad to 
have major U.S. oil companies invest, explore and 
extract oil from their rich reserves. Needless to 
say that U.S. oil companies would be delighted to 
have access to those oil resources. But U.S. 
champions of war and militarism have successfully 
torpedoed such opportunities through their 
unilateral wars of aggression and their penchant 
for a Cold War-like international atmosphere.

When Vladimir Putin first became president of 
Russia he was willing to allow American energy 
companies to continue with the one-sided 
contracts they had drawn up during Boris 
Yeltsin’s presidency. Putin built a seemingly 
trusting relationship with George Bush who looked 
into Putin’s soul and liked what he saw. The two 
leaders grew even closer in the aftermath of the 
9/11 attacks on World Trade Centre and the 
Pentagon­when Russia provided “help for America’s 
invasion of Afghanistan.” Soon after this 
generous cooperation, however, “Bush repudiated 
the anti-ballistic missile treaty in the belief 
that America could develop the technology for 
winning a nuclear war. This posed a huge strategic threat to Russia.”[21]

Describing the heavy-handed, imperial U.S. policy 
toward Russia, Stephen F. Cohen writes: “The real 
US policy has been very different­a relentless, 
winner-take-all exploitation of Russia's 
post-1991 weakness. Accompanied by broken 
American promises, condescending lectures and 
demands for unilateral concessions, it has been 
even more aggressive and uncompromising than was 
Washington's approach to Soviet Communist Russia.”[22]

Bush’s withdrawal from the ABM treaty not merely 
posed an existential threat to Russia but was 
almost a betrayal of the trust that Putin had put 
in him. This led to Putin’s disenchantment with 
America. “Eventually he seems to have decided 
that every time America transgressed against 
Russian interests he would retaliate by stopping 
another American company from exploiting Russian resources.”[23]

During the past few decades, major oil companies 
have consistently opposed U.S. policies and 
military threats against countries like Iran, 
Iraq, and Libya. They have, indeed, time and 
again, lobbied U.S. foreign policy makers for the 
establishment of peaceful relations and 
diplomatic rapprochement with those countries. 
The Iran-Libya Sanction Act of 1996 (ILSA) is a 
strong testament to the fact that oil companies 
nowadays view wars, economic sanctions, and 
international political tensions as harmful to 
their long-term business interests and, 
accordingly, strive for peace, not war, in international relations.

On March 15, 1995 President Clinton issued 
Executive Order 12957 which banned all U.S. 
contributions to the development of Iran’s 
petroleum resources, a crushing blow to the oil 
industry, especially to the Conoco oil company 
that had just signed a $1 billion contract to 
develop fields in Iran. The deal marked a strong 
indication that Iran was willing to improve its 
relationship with the United States, only to have 
President Clinton effectively nullify it. Two 
months later, sighting “an extraordinary threat 
to the national security, foreign policy and 
economy of the U.S.,” President Clinton issued 
another order, 1259, that expanded the sanctions 
to become a total trade and investment embargo 
against Iran. Then a year later came ILSA which 
extended the sanctions imposed on Iran to Libya as well.

It is no secret that the major force behind the 
Iran-Libya Sanction Act was the America Israel 
Public Affairs Committee (AIPAC), the main 
Zionist lobby in Washington. The success of AIPAC 
in passing ILSA through both the Congress and the 
White House over the opposition of the major U.S. 
oil companies is testament to the fact that, in 
the context of U.S. policy in the Middle East, 
even the influence of the oil industry pales 
vis-à-vis the influence of the Zionist lobby.[24]

ILSA was originally to be imposed on both U.S. 
and foreign companies. However, in the end it was 
the U.S. companies that suffered the most due to 
waivers that were given to European companies 
after pressure from the European Union. In 1996 
the EU pursued its distaste of ILSA by lodging 
complaints with the World Trade Organization 
(WTO) against the U.S. and through adopting 
“blocking legislation” that would prevent EU 
companies from complying with ILSA. Meanwhile, 
the contract that Iran had originally signed with 
Conoco was awarded to TotalFinaElf of France for 
$760 million; the deal also left the door open 
for Total to sign an additional contract with 
Iran for $2 billion in 1997 with their partners Gazprom and Petronas.

In May of 1997 major U.S. oil companies such as 
Conoco, Exxon, Atlantic Richfield, and Occidental 
Petroleum joined other (non-military) U.S. 
companies to create an anti-sanction coalition. 
Earlier that same year Conoco’s Chief Executive 
Archie Dunham publicly took a stance against 
unilateral U.S. sanctions by stating that “U.S. 
companies, not rogue regimes, are the ones that 
suffer when the United States imposes economic 
sanctions.” Texaco officials have also argued 
that the U.S. can be more effective in bringing 
about change in other countries by allowing U.S. 
companies to do business with those countries 
instead of imposing economic sanctions that tend to be counterproductive.

Alas, Washington’s perverse, misguided and 
ineffectual policy of economic sanctions for 
political purposes­often in compliance with the 
wishes of some powerful special 
interests­continues unabated. “Even with the 
increased pro-trade lobbying efforts of the oil 
industry and groups like USAEngage, whose 
membership ranges from farmers and small business 
owners to Wall Street executives and oilmen, the 
lack of support from Washington and the Bush 
administration could not allow them [major oil 
companies and other non-military transnational 
companies] to overtake or counteract the already 
rolling momentum of AIPAC’s influence on Middle 
East policy or the renewal of ISLA.”[25]

Despite the fact that oil companies nowadays view 
war and political turmoil in the Middle East as 
detrimental to their long-term interests and, 
therefore, do not support policies that are 
conducive to war and militarism, and despite the 
fact that war is no longer the way to gain access 
to oil, the widespread perception that every U.S. 
military engagement in the region, including the 
current invasion of Iraq, is prompted by oil 
considerations continues. The question is why?

Behind the Myth of War for Oil

The widely-shared but erroneous view that recent 
U.S. wars of choice are driven by oil concerns is 
partly due to precedence: the fact that for a 
long time military force was key to colonial or 
imperialist control and exploitation of foreign 
markets and resources, including oil. It is also 
partly due to perception: the exaggerated notion 
that both President Bush and Vice President 
Cheney were “oil men” before coming to the White 
House. But, as noted earlier, George W. Bush was 
never more than an ineffective minor oil 
prospector and Dick Cheney was never really an 
oil man; he headed the notorious Halliburton 
company that sold (and still sells) services to oil companies and the Pentagon.

But the major reason for the persistence of this 
pervasive myth seems to stem from certain 
deliberate efforts that are designed to 
perpetuate the legend in order to camouflage some 
real economic and geopolitical special interests 
that drive U.S. military adventures in the Middle 
East. There is evidence that both the 
military-industrial complex and hard-line Zionist 
proponents of “greater Israel” disingenuously use 
oil (as an issue of national interest) in order 
to disguise their own nefarious special interests 
and objectives: justification of continued 
expansion of military spending, extension of 
sales markets for military hardware, and 
recasting the geopolitical map of the Middle East in favor of Israel.

There is also evidence that for every dollar’s 
worth of oil imported from the Persian Gulf 
region the Pentagon takes five dollars out of the 
Federal budget to “secure” the flow of that oil! 
This is a clear indication that the claim that 
the U.S. military presence in the Middle East is 
due to oil consideration is a fraud .[26]

While anecdotal, an example of how partisans of 
war and militarism use oil as a pretext to cover 
up the real forces behind war and militarism can 
be instructive. In the early stages of the 
invasion of Iraq, when the anti-occupation 
resistance in Iraq had not yet taken shape and 
the invasion seemed to be proceeding smoothly, 
two of the leading champions of the invasion, 
Secretary of Defense Donald Rumsfeld and his 
deputy Paul Wolfowitz, often boasting of the 
apparent or pre-mature success of the invasion at 
those early stages, gave frequent news 
conferences and press reports. During one of 
those press reports (at the end of an address to 
delegates at an Asian security summit in 
Singapore in early June 2003), Wolfowitz was 
asked why North Korea was being treated 
differently from Iraq, where hardly any weapons 
of mass destruction had been found. Wolfowitz’s 
response was: "Let's look at it simply. The most 
important difference between North Korea and Iraq 
is that economically, we just had no choice in 
Iraq. The country swims on a sea of oil."[27]

Many opponents of the war jumped on this 
statement, so to speak, as corroboration of what 
they had been saying or suspecting all along: 
that the war on Iraq was prompted by oil 
interests. Yet, there is strong evidence­some of 
which presented in the preceding pages­that for 
the last several decades oil interests have not 
favored war and turbulence in the Middle East, 
including the current invasion of Iraq. Nor is 
war any longer the way to gain access to oil. 
Major oil companies, along with many other 
non-military transnational corporations, have 
lobbied both the Clinton and Bush administrations 
in support of changing the aggressive, 
militaristic U.S. policy toward countries like 
Iran, Iraq and Libya in favor of establishing 
normal, non-confrontational trade and diplomatic 
relations. Such efforts at normalization of trade 
and diplomatic relations, however, have failed 
time and again precisely because Wolfowitz and 
his cohorts, working through AIPAC and other 
war-mongering think tanks such as the American 
Enterprise Institute (AEI), Project for the New 
American Century (PNAC), and Jewish Institute for 
National Security Affairs (JINSA) oppose them.

These think tanks, in collaboration with a whole 
host of similar militaristic lobbying entities 
like Center for Security Affairs (CSA) and 
National Institute for Public Policy (NIPP), 
working largely as institutional façades to serve 
the defacto alliance of the military-industrial 
complex and the pro-Israel lobby, have repeatedly 
thwarted efforts at peace and reconciliation in 
the Middle East­often over the objections and 
frustrations of major U.S. oil companies. It is a 
well established fact that Wolfowitz has been a 
devoted champion of these jingoistic think tanks 
and their aggressive unilateral policies in the 
Middle East. In light of his professional record 
and political loyalties, his claim that he 
championed the war on Iraq because of oil 
considerations can be characterized only as 
demagogic: it contradicts his political record 
and defies the policies he has been advocating 
for the last several decades; it is designed to 
divert attention from the main forces behind the 
war, the armaments lobby and the pro-Israel lobby.

These powerful interests are careful not to draw 
attention to the fact that they are the prime 
instigators of war and militarism in the Middle 
East. Therefore, they tend to deliberately 
perpetuate the popular perception that oil is the 
driving force behind the war in the region. They 
even do not mind having their aggressive foreign 
policies labeled as imperialistic as long as 
imperialism implies some vague or general 
connotations of hegemony and domination, that is, 
as long as it thus camouflages the real, special 
interests behind the war and political turbulence in the Middle East.

The oil and other non-military transnational 
corporations’ aversion to war and military 
adventures in the Middle East stem, of course, 
from the logical behavior of global or 
transnational capital in the era of integrated 
world markets, which tends to be loath to war and 
international political convulsions. Considering 
the fact that both importers and exporters of oil 
prefer peace and stability to war and militarism, 
why would, then, the flow of oil be in jeopardy 
if the powerful beneficiaries of war and 
political tension in the Middle East stopped 
their aggressive policies in the region?

Partisans of war in the Middle East tend to 
portray U.S. military operations in the region as 
reactions to terrorism and political turbulence 
in order to “safeguard the interests of the 
United States and its allies.” Yet, a close 
scrutiny of action-reaction or cause-effect 
relationship between U.S. military adventures and 
socio-political turbulence in the region reveals 
that perhaps the causality is the other way 
around. That is, social upheavals and political 
convulsions in the Middle East are more likely to 
be the result, not the cause, of U.S. foreign 
policy in the region, especially its one-sided, 
prejudicial Israeli-Palestinian policy. The U.S. 
policy of war and militarism in the region seems 
to resemble the behavior of a corrupt cop, or a 
mafia godfather, who would instigate fights and 
frictions in the neighborhood or community in 
order to, then, portray his parasitic role as 
necessary for the safety and security of the 
community and, in the process, fill out his deep pockets.

No matter how crucial oil is to the world 
economy, the fact remains that it is, after all, 
a commodity. As such, international trade in oil 
is as important to its importers as it is to its 
exporters. There is absolutely no reason that, in 
a world free of the influence of the 
beneficiaries of war and militarism and their 
powerful lobbies (the armaments and the 
pro-Israel lobbies), the flow of oil could not be 
guaranteed by international trade conventions and commercial treaties.

Ismael Hossein-zadeh, author of the recently 
published 
<http://www.amazon.com/Political-Economy-U-S-Militarism/dp/0230602282/ref=ed_oe_p/105-1298000-8724441>The 
Political Economy of U.S. Militarism 
(Palgrave-Macmillan 2007), teaches economics at 
Drake University, Des Moines, Iowa.


References

[1] Ron Andreas, reporter/researcher, e-mail correspondence with the author.
[2] Ibid.
[3] Michael T. Klare, Resource Wars: The New 
Landscape of Global Conflict (New York: Holt 
paperbacks 2002); James Howard Kunstler, The Long 
Emergency: Surviving the Converging Catastrophes 
of the Twenty-first Century (Grove/Atlantic, 2005).
[4] Eliyahu Kanovsky, “Oil: Who's Really Over a 
Barrel?” Middle East Quarterly (Spring 2003).
[5] Ibid.
[6] The Wall Street Journal (17 May 2001); cited in Eliyahu Kantovsky, Ibid.
[7] The Wall Street Journal (10 March 1998); cited in Eliyahu Kantovsky, Ibid.
[8] F. William Engdahl, “Perhaps 60% of Today’s 
Oil Price Is Pure Speculation,” financialsense.com (2 May 2008)
[9] Ibid.
[10] Ibid.
[11] Stanley Reed, “Help from the House of Saud: 
Why the leading oil producer wants to cool off 
the market,” Business Week (29 May 2008)
[12] Ibid.
[13] Cyrus Bina and Minh Vo, “OPEC in the Epoch 
of Globalization: An Event Study of Global Oil 
Prices,” Global Economy Journal, Vol. 7, Issue 1 
(2007); for a discussion of the theory and 
history of oil price determination see also, 
Cyrus Bina, “The Rhetoric of Oil and the Dilemma 
of War and American Hegemony,” Arab Studies 
Quarterly 15, no. 3 (Summer 1993); also Cyrus 
Bina, “Limits of OPEC Pricing: OPEC Profits and 
the Nature of Global Oil Accumulation,” OPEC Review 14, no. 1 (Spring 1990).
[14] F. William Engdahl, “Perhaps 60% of Today’s 
Oil Price Is Pure Speculation,” financialsense.com (2 May 2008),
[15] Cyrus Bina and Minh Vo, “OPEC in the Epoch 
of Globalization: An Event Study of Global Oil 
Prices,” Global Economy Journal, Vol. 7, Issue 1 (2007).
[16] Gary S. Becker, “Why War with Iraq Is Not 
about Oil,” Business Week (17 March 2003): 30.
[17] Johnathan Nitzan and Shimshon Bichler. The 
Global Political Economy of Israel (London and 
Sterling, Virginia: Pluto Press, 2002).
[18] Melinda K. Ruby, “Is Oil the Driving Force 
to War?” unpublished Senior thesis, Dept. of 
Economics and Finance, Drake University, Des Moines, Iowa (spring 2004), 10.
[19] As quoted in Ruby, Ibid., P. 13.
[20] As cited by Roger Burbach, 
“<http://www.counterpunch.org/burbach10032003.html>Bush 
Ideologues vs. Big Oil: The Iraq Game Gets Even Stranger,” CounterPunch.
[21] Israel Shamir, The Writings of Israel Shamir, Contributor 45
[22] Stephen F. Cohen “The New American Cold 
War,” The Nation (10 July 2006); as quoted in Shamir, Ibid.
[23] Shamir, Ibid.
[24] Ruby, “Is Oil the Driving Force to War?” pp. 
14-15; see also Herman Franssen and Elaine 
Morton, “A Review of U.S. Unilateral Sanctions 
Against Iran,” Middle East Economic Survey 45, 
no. 34 (26 August 2002), pp. D1-D5 (D section 
contains op eds. as opposed to staff-written articles).
[25] Ruby, “Is Oil the Driving Force to War?” pp. 
16-17; see also David Ivanovich, “Conoco’s Chief 
Blasts Sanctions,” Houston Chronicle (12 February 1997).
[27] The statement was widely reported by many 
news papers and other media outlets. See, for 
example, The Guardian (4 June 2003)




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