guardian.co.uk
Obviously, The Guardian is a left-leaning paper, so without endorsing it, I wanted to throw these comments out here for discussion, especially regarding the euro/us$ pricing of oil and the future of opec.
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By invading Iraq, Bush has taken over the Iraqi oil fields, and persuaded the UN to lift production limits imposed after the Kuwait war. Production may rise to 3m barrels a day by year end, about double 2002 levels. More oil should bring down Opec-led prices, and if Iraqi oil production rose to 6m barrels a day, Bush could even attack the Opec oil-pricing cartel.
(snip)
In the 70s, the US agreed with Saudi Arabia that Opec oil should be traded in dollars. American governments have since been able to print dollars to cover huge trading deficits, with the further benefit of those dollars being placed in the US money markets. In return, the US allowed the Opec countries to operate a production and pricing cartel.
Over the past 15 years, the overall US deficit with the rest of the world has risen to $2,700bn - an abuse of its privileged currency position. Although about 80% of foreign exchange and half of world trade is in dollars, the euro provides a realistic alternative. Euro countries also have a bigger share of world trade, and of trade with Opec countries, than the US.
In 1999, Iran mooted pricing its oil in euros, and in late 2000 Saddam made the switch for Iraqi oil. In early 2002 Bush placed Iran and Iraq in the axis of evil. If the other Opec countries had followed Saddam's move to euros, the consequences for Bush could have been huge. Worldwide switches out of the dollar, on top of the already huge deficit, would have led to a plummeting dollar, a runaway from US markets and dramatic upheavals in the US. (cont)
John Chapman
Wednesday July 28, 2004 |
