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A Militarist Manipulates the Oil Market

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World demand for oil is increasing. Here in the United States, production at the refineries has slowed, leaving rising crude inventories untouched and un-affecting the increased demand, allowing speculators to keep the price of gasoline futures high, sticking it to us at the pump. Consumers in the U.S. are understandably anxious and angry and are looking to find a piece of Big Oil to rip in to. But, it is becoming increasingly evident that Bush's militarism is the main factor fueling the rise.

There isn't one sector of the oil industry that doesn't deserve scrutiny and scorn, but when we step up to chastise the nations the U.S. relies on for our oil supply, it's probably best to remind ourselves that we are competing consumers in a seller's market.

U.S. refineries produce over 90% of the gasoline used in the country. The U.S. gets the majority of its crude oil that our refineries process from foreign sources. Less than 40 percent of that crude oil was produced in the United States. About 50% of our petroleum imports are from the Western Hemisphere, 19% from the Persian Gulf, and 18% from Africa and 13 percent from other regions.

The top sources of US crude oil imports for February, according to the U.S. Energy Information Administration, were:

"Mexico (1.774 million barrels per day), Canada (1.700 million barrels per day), Saudi Arabia (1.418 million barrels per day), Nigeria (1.342 million barrels per day), and Venezuela (1.175 million barrels per day). The rest were Angola (0.464 million barrels per day), Iraq (0.444 million barrels per day), Ecuador (0.222 million barrels per day), Brazil (0.164 million barrels per day), and Algeria (0.163 million barrels per day). Total crude oil imports averaged 9.860 million barrels per day in February, which is an increase of 0.147 million barrels per day from January 2006. The top five exporting countries accounted for 75 percent of United States crude oil imports in February and the top ten sources accounted for approximately 90 percent of all U.S. crude oil imports.

Canada was the largest exporter of total petroleum products again this month averaging 2.249 million barrels per day to the United States which is a decrease from last month (2.311 million barrels per day). The second largest exporter of total petroleum products again this month was Mexico (1.878 million barrels per day) which was an increase from last month (1.796 million barrels per day). Nigeria had a substantial increase in crude oil and total petroleum exports to the U.S. when compared to last months numbers."



If we start at the head of the list, Mexico, a non-OPEC producer, has it's obvious contradictions which could lead Americans to take their oil trade with us for granted. The top three imports from Mexico to the U.S. are transportation equipment, computer and electronic products, and oil. The first two are essentially sustained in the 'maquiladora', U.S. Mexico trade relationship where unfinished materials are passed to Mexico and returned to the U.S. as 'cheap' finished goods. For example, computer and electronic products were the top U.S. export to Mexico, but also our second-largest import from Mexico. Transportation equipment was the second largest U.S. export to Mexico but also our top U.S. import from them.

Oil trade with Mexico, on the other hand, doesn't have the same give and take relationship, but it's reciprocal nonetheless. Oil sales account for about 40%, one-third, of Mexico's government revenue. There was that 1995, $50 billion 'emergency stabilization loan' that the U.S. contributed to, but that was quickly repaid. A great deal of Mexico's economic recovery can be attributed to the rising oil prices.

After Venezuela, Mexico is said to have the second largest oil reserves in the Western Hemisphere. It is also reported that their growing population now consumes six out of every ten barrels produced in their country, unlike oil nations like Saudi Arabia who exports most of what they produce.

Despite their ranking as one of the world's fifth largest crude oil exporter, Mexico's proven reserves appear to be on the decline, and they are still a net importer of refined petroleum products. It would take more than jaw-boning to get the preoccupied and transitioning Mexico to adjust their prices to suit us, especially when the other major producers under OPEC control so much of the market with their manipulation of production. There might be room there, but it's complicated by disputes over the border and other trade issues. I imagine there's an overall American sense that Mexico is at our liege, but I doubt Mexico sees it that way. Although a U.S. case of sniffles can give them a cold, Mexico won't make any move which will affect their bottom line. There will have to be some in kind concession to get what would likely be a mere token decrease in price from them.


Canada is pretty cut and dry, in the tank. Canada is the world's largest producer of energy, after the United States, Russia, China, and Saudi Arabia. Canada's proven reserves have also shown some decline as in Mexico, but they have been able to increase production some through exploration and modifying drilling techniques. The increases have been mostly 'heavy' oil and synthetics.

Canada trades with the United States to the level of almost $400b a year. The United States account for about 85% of Canada's exports of everything. The U.S. accounts for 91% of all Canadian oil(67.4% of their energy supply), natural gas, and electricity exports. Heating needs push Canadian's consumption to high levels per person. Oil revenue remains critical to Canada's economy. Higher prices are a critical component in their economy. Indeed, the lower prices in '97 were a cause of Canadian concern about their overall economic health. There may be room to get Canada to increase production and help lower the overall price of oil, but they are subject to the same pressures as Mexico in their vulnerability to revenue changes and the relatively small impact any of their efforts to increase production would have against the major producers' abilities to band together and manipulate the supply.


That leaves us with export majors like Saudi Arabia, Nigeria, and Venezuela to service the rest of the United States' fuel needs. Lesser producers that we do business with include countries like Iraq, Angola, Brazil . . . Saudi Arabia, Nigeria, Venezuela, and Iraq represent the OPEC members in the bunch. OPEC is responsible for 40% of the world 's production of crude oil and holds more than two-thirds of the world 's estimated crude oil reserves.

Saudi Arabia is the world's largest oil producer, and with about a quarter of the world's proven reserves they also have the world's largest spare production capacity. They have a range of oils, from heavy to very light. Most of their heavier oil is reportedly not in production. The Saudis claimed recently that world demand had not forced them to crack those reserves as some who believe their supply has reached a 'peak' have speculated.

Saudi Arabia is an important supplier to the U.S., but it also takes care of the oil needs of Europe, China, Japan, South Korea, and India. The country provides 20% of the U.S. crude oil imports and that represents about 10% of of what we consume. The U.S. has fostered a strategic relationship with Saudi Arabia which involves the sale and transfer of military equipment, planes and supplies to the monarchy.

In turn, the Saudis maintain an amicable trade relationship with us, often using their position in OPEC to lead other members to adjust their oil production to bring the price down. Conversely, when the price is seen as too low by producers, Saudi Arabia has been able to direct production among OPEC members to bring oil prices within what they consider a reasonable range ($40-$50 a barrel),

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Ron Fullwood, is an activist from Columbia, Md. and the author of the book 'Power of Mischief' : Military Industry Executives are Making Bush Policy and the Country is Paying the Price

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