Bush...while making his buddies money at OUR expense...is now sending OUR money...TO ALL THE WRONG PEOPLE....why?
because SHEEPLE VOTED FOR HIM
Some oil money is up to no good
By David J. Lynch, USA TODAY
In case $3-per-gallon gas isn't depressing enough, consider what your gas money pays for: A bull market in Saudi stocks. Handouts for Fidel Castro. And weapons for anti-American terrorists.
Oil-producing states haven't seen a windfall like this since the twin price shocks of the 1970s. Persian Gulf countries this year will earn about $291 billion in oil revenue vs. $61 billion in 1998, when oil prices tanked, according to the Institute of International Finance (IIF). For every $1 increase in the price of a barrel of oil, Venezuela, the No. 4 source of U.S. imports, reaps almost an additional $1 billion a year.
In several oil-producing countries, soaring oil prices are complicating U.S. foreign policy or blunting commercial opportunities for American companies. Irans' mullahs, locked in a standoff with the U.S. over Tehran's nuclear ambitions, are bolstered by an oil-rich economy that the International Monetary Fund says will grow 6% this year and next.
Biggest exporters
Countries that exported the most crude oil to the USA in June, in thousands of barrels per day:
Country
June 2005
Pct. of total
Canada
1,696
16.1%
Mexico
1,616
15.3%
Saudi Arabia
1,564
14.8%
Venezuela
1,292
12.2%
Nigeria
896
8.5%
Iraq
608
5.8%
Angola
397
3.8%
Algeria
292
2.8%
Ecuador
288
2.7%
United Kingdom
269
2.5%
Total of top 10
8,918
84%
Source: Energy Information Administration
Thanks to surging oil revenue, Mexico is able to delay the politically painful step of opening its oil fields to foreign oil companies, says Roger Tissot, country director for the consultancy PFC Energy.
Of course, not every dollar spent at the pump props up a desert autocrat or funds global terror. Norway, a major producer of North Sea crude, uses its oil export earnings to fund its citizens' retirement program.
The Persian Gulf oil states are investing about half of their increased oil revenue in the region, spurring luxury hotel construction in places such as Dubai and sending shares on the Saudis' Tadawul All-Shares index up 79.7% this year.
The other half of the windfall is being funneled into international markets, according to Howard Handy, the IIF's director for the Middle East and Africa. "We estimate $360 billion to $400 billion will be looking for a home outside the region in 2005 and 2006 combined," he says.
That's a significant sum, but it is being divided among a greater number of destinations than during previous booms. In the 1970s, most foreign investment by gulf states ended up in U.S. markets, which dominated global investing even more than today. Then-secretary of State Henry Kissinger encouraged Saudi investment so that the most influential member of OPEC would be discouraged from damaging the U.S. economy with future oil embargoes, says Rachel Bronson, director of Middle East studies for the Council on Foreign Relations.
Today, though it's impossible to track specific figures, the Saudis and other Arab states are placing more of their investments in non-U.S. holdings, including euro-dominated securities that didn't exist at the time of the first oil price shocks. Riyadh also no longer reflexively steers most major contracts to U.S. firms. In January 2004, for example, the Saudis bypassed Chevron and awarded lucrative natural gas exploration contracts to Russian, Chinese and European companies.
Following the Sept. 11 attacks, the Saudis met U.S. demands by ending government support for Islamic charities linked to terrorism. But individuals in the kingdom continue to send cash to groups that support anti-American terrorists.
"We know wealthy Saudis are funding terror. With higher oil prices, they just have more money to do so," Bronson says.
Soaring oil prices also are causing problems closer to U.S. shores. In Venezuela, President Hugo Chavez, flush with record oil revenue, is sending subsidized oil shipments to Cuba's Fidel Castro and increasing military spending. Earlier this month, Venezuela announced a purchase of long-range surveillance radars from China. The U.S. has accused Chavez of funneling arms to leftist rebels in neighboring Colombia, which he denies.
At home, Chavez has lavished oil money on his constituents in Venezuela's poorest neighborhoods. Through "Mission Mercal," a network of government-run groceries, Chavez provides half-priced food to more than 10 million people.
The social largesse cements the president's political standing. But economists such as Claudio Loser, former head of the IMF's Western Hemisphere department, say such spending can't continue indefinitely. Already, inflation is galloping at 18% annually and is expected to hit 25% next year.
Big oil producers should have learned one lesson from earlier booms: High prices don't last forever. Oil prices now are around $65 per barrel. But with greater production expected from non-OPEC producers such as Angola, Brazil and Azerbaijan, prices will drop to around $40 per barrel in 2007-08, says Jim Burkhart, director of oil market analysis for Cambridge Energy Research Associates.
That will spell trouble for some oil nations, including Venezuela. "The risk is what happens when oil prices decline and governments have to align their spending with fewer resources," he says.
Despite today's easy-money atmosphere, there's no need to envy the oil producers. Many face daunting developmental challenges that have gotten worse since the last oil boom.
Saudi Arabia's population has exploded from 5.7 million in 1970 to 25 million today. That has driven down per-capita oil export revenue from more than $22,000 in the early 1980s to less than $5,000 today.
"Even with oil at $65 a barrel," says Bronson, "they can't solve all their economic problems." |
