Monday, May 19, 2014

Middle East Clients + Petrodollar Up for Grabs

The sad state of American "state media" is that we must seek foreign media outlets for news the US media suppresses. Black on white crime, teachers molesting students, NSA spying and geopolitical issues are newsworthy in foreign outlets but not in the US. If they do make it, there is heavy filtration and framing to keep the progressive narrative intact. As international relations are about domestic politics, the media mandarins have to play up any gay or transgender angle despite it being the West that is out of step. There have been plenty of rumblings abroad, and it appears Middle East clients might be up for grabs, leading to the end to the petrodollar.

Secretary of Defense, Chuck Hagel, recently stated that the US could not guarantee security for the gulf nations anymore. The New York Times coverage of the speech does not mention the lack of commitment from Hagel, which makes Sec. Hagel's remarks appear to be about the region coming together to get over fractures of the last few years. The following block quote is not referenced by the Times.
“Bilateral ties with the United States and American military presence are not enough to guarantee regional security,” US Defence Secretary Chuck Hagel told a GCC ministerial conference in Riyadh yesterday. “America’s engagement with Gulf nations is intended to support and facilitate, not replace, stronger multilateral ties within the GCC.”

That is a pretty big step away from the Kissinger pledge for security and modernization if you keep buying oil only in dollars 1970s deal. This is important because US military might and patrols of commercial sea lanes are what make the petrodollar work. We are the muscle and the dollar is suppose to have a stable value that would discourage oil producers from demanding gold for oil like the old days. The papers say the US is on the brink of exporting oil. Weird how the US is still importing 9.7 mil barrels per day (crude oil + petrol products) with generational highs in domestic production and suppressed oil use due to an economic depression.

The Saudis are the key as they export so much oil, and they have been sending emissaries to China recently. The Saudis are mad at the US making nice with Iran. The Iran window ends in July, and the prospects do not look good. Iran took the window as an opportunity to strengthen ties to China and Russia, while telling their people over and over that the US had recognized Iran's right to enrichment and having a nuclear program. The Iranians have played this well, while current American friends Israel and the Saudis fume. Hard to see the gains the US made. It is similar to Egypt signing billions in military deals with Russia and planning joint exercises with Russia for the first time in decades. The military men in charge of Egypt do not trust the US, seeking other patrons.

Why should anyone trust the US? Letting Iran play the US like a violin helps none of our supposed allies. The US State Department and CIA moved Mubarak out when bread became too expensive, and has verbally supported the Muslim Brotherhood and democracy over the military's decisions. On top of all of this, the printing presses continue for the dollar devaluation crew. Our clients will look for new dance partners. Oil independence is an illusion. The US oil production is up thanks to technology and private land exploration, responding to the incredibly high price of oil. Those rigs produce far less per well, which means any drop in the price and they are not economical. Our media is there to constantly tell us oil independence is around the corner and that evil Putin hates gays and wants to reform the evil Soviet Empire. Good distractions from the real security concerns in play around the globe. Security, both physical and financial, may push our clients into other arms. When that happens, the petrodollar will be history and no amount of oil rigs will prevent the fallout.


Anonymous said...

You're exactly right that any headline describing "U.S. oil exports" is deceptive and agenda driven. Oil from shale is a fascinating technology story and is reshaping many intercontinental crude and product flows, but as you show, has not fundamentally changed the balance between supply and demand.

dfordoom said...

The sad fact is that the US is not an ally to be relied upon. This has been the case since the 1970s when the US abandoned South Vietnam to its fate. It's only a matter of time before US allies like Japan realise this and start looking elsewhere for allies.