Despite all the recent talk of soaring prices at the pump, political and economic pundits rarely mention the impact of war and political instability in the Middle East on the skyrocketing price of oil. There is strong evidence, however, that the heightened price of energy is a direct consequence of the destabilizing wars and geopolitical insecurity in the region.
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.
Not long ago the price of oil was about a quarter of what it is today. But soon after the invasions of Afghanistan and Iraq the price of oil began to escalate in tandem with the escalation of war and political turbulence in the Middle East. The fact that the rise in the price of oil has followed the heightened insecurity in oil markets is neither accidental nor a simple correlation; it represents a causality that runs from the heightened insecurity in oil markets to the inflated price of energy.
The war also contributes to the escalation of fuel cost in indirect ways; for example, by plunging the U.S. ever deeper into debt and depreciating the dollar. 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.
Not only are the raging wars in the Middle East responsible for energy price inflation, they are also responsible for price inflation of many other commodities, especially grains and other foodstuff, whose production and transportation depend on fuel. According to the World Bank, food prices have more than doubled over the past three years. The price of rice, the staple for billions of Asians, is up 147% over the past year alone. The mounting food prices have caused hunger and deadly violence in many countries, including Haiti, Egypt, Thailand, Indonesia, Senegal, and Malaysia.
This shows that the disastrous consequences of U.S. wars of choice go beyond Iraq, Afghanistan, and the United States. The skyrocketing costs of fuel and food tend to plunge many of the world economies into a 1970s-style stagflation (a combination of stagnation and inflation) that threatens many lives and/or livelihoods around the globe.
Neoconservative forces in and around the Bush administration and beneficiaries of war dividends""wishing to deflect attention away from war as the main culprit for the skyrocketing energy prices""tend to blame secondary or marginally relevant factors: OPEC, China and India for their increased demand for energy, or supply-demand imbalances in global markets.
Whatever the contributory role of these factors, the fact remains that the current oil price hikes started with the beginning of the Bush administration's wars against Iraq and Afghanistan. Furthermore, a closer examination of these factors reveals that their roles in the current price inflation of oil have been negligible.
The claim that there is a supply-demand imbalance in global energy markets cannot be backed by facts. 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.
Nor can OPEC be blamed for the current energy crisis. 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, OPEC members are not unmindful of the fact that inordinately high oil prices can hurt their own long-term interests as this is bound to prompt oil importers to economize on fuel consumption and search for alternative sources of energy.
For another, OPEC members also know that inordinately high oil prices could precipitate economic recessions in oil importing countries that would, in turn, 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 be reflected in higher costs of those products.
For these reasons leading OPEC members such as Saudi Arabia and Iran have repeatedly stated that they prefer stable, predictable, and moderate oil prices to short-term oil price hikes that result from war, political turbulence and unstable markets.
The political implications of this discussion are clear: to bring down the prices of fuel and food requires bringing home the troops. By lowering the energy costs of production and transportation this will help save our own and many other economies from the plagues of inflation and stagnation. It will bring relief to hundreds of millions worldwide who are burdened by crippling energy bills and the crushing costs of feeding their families.
Not many people would doubt the devastating socio-economic consequences of the U.S. wars of choice, both at home and abroad. The question is: why can't they be stopped?
The answer is that while the war has been ruinous to many, it has been a boon for a few, the powerful special interests who not only benefit from war (both economically and geopolitically), but who have also positioned themselves within the U.S. power structure in ways that allows them to constantly invent new enemies and make new wars in order to further their nefarious interests.