Summary: Why are oil prices so high? After inflation they’re above 1980 record highs. Peak oil enthusiasts have explanations (usually wrong, like their forecasts). There are many factors at work, including one simple but hidden reason: American foreign policy. The USA has played a large role in the suppression of oil production in three major oil producers, including two nations with some of the world’s largest petroleum reserves — and having the greatest potential for increased production. Perhaps it’s a coincidence that we’ve intervened in three oil producing nations, and high oil prices are an accidental by-product of our good intentions.
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Contents
- Iran
- Iraq
- Libya
- Another perspective
- For More Information
(1) Iran
After a long history of interference in Iran’s government, we initiated an ever-tightening and broadening array of sanctions on Iran after the 1979 revolution — continuing until today. See a list here; Wikipedia has details on US sanctions and the UN sanctions the US promoted. For analysis see the Council on Foreign Relations and the US Institute of Peace (USIP).
For analysis of sanctions impact on Iran’s oil industry see this USIP report: part one and part two. They’re working. Iran produced 6 million barrels/day of oil in 1974. In July their exports hit a five-month high of 600 thousand b/day.
Iran has vast untapped reserves. See the EIA’s report on Iran. From the EIA:
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(2) Iraq
Following Iraq’s invasion of Kuwait, in August 1990 the UN imposed a broad array of financial and trade sanctions on Iraq, which lasted until the US invasion and subsequent destabilization of Iraq.
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The below graph is by James Hamilton. The dotted line shows their potential, which US actions have helped remain in the indefinite future. For details see the EIA report on Iraq.
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(3) Libya
On 17 March 2011 the UN Security Council passed Resolution 1973 which authorized US and others’ involvement in the Libyan civil war. As with Iraq, our well-intentioned intervention has crashed their oil production. For details see the EIA report on Libya.
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(4) Another perspective on oil and US geopolitics
The key to a great story is not who, or what, or when, but why.”
— Elliot Carver, in Tomorrow Never Dies (1997)
Why has the US done these things? To find the reason, see the result. Widespread suffering? Hopefully not. Setting the Middle East ablaze? Unlikely. Higher oil prices? That would imply that oil companies (and perhaps others, such as the Saudi Princes) have a powerful influence on US policy makers — sufficient to trump the interests of the US people.
That would imply that we don’t clearly see the world. Like President Kennedy the athletic family man in fact being a womanizing near-cripple. Or the US and UK government keeping the war-winning ULTRA code-breaking secret for 29 years after WW2. Or any of the other things we didn’t know in 1963, so that our picture of the world was radically wrong.
Is it possible our vision of the world is as blind today as it was then?
(5) For More Information
See all posts about
Posts about peak oil:
- When the King of Saudi Arabia talks about oil, we should listen , 2 July 2008
- Red Alert: the Saudi Princes have annouced the arrival of Peak Oil , 11 July 2008
- Important: Recovering lost knowledge about exhaustion of Earth’s resources (such as Peak Oil), 27 January 2011
- A look at forecasts for peak oil – and the end of civilization, 13 July 2012
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Dont forget sanctions against Russia, and the now leagal export of energy from america will raise domestic prices. I think the gov. is doing this so that domestic fracking can continue as unconventional oil needs higher prices (at least $60 a barrel and increasing) in order to b viable.
http://www.infomine.com/ChartsAndData/ChartBuilder.aspx?z=f&gf=110537.USD.bbl&dr=10y&cd=1
I wasn’t sure myself so I found this chart. Looks like Oil peaked around the Lehman crash, rose quickly from the bottom in the following years, but since 2011 or so has been going basically nowhere, bouncing between $100-$120 or so.
Cathryn,
Long time prices should be looked at in real terms, adjusted for inflation. Real oil prices are roughly at or above their 1980 peak.
See the EIA calculator (it shows average price of US oil imports): http://www.eia.gov/forecasts/steo/realprices/
The assertion that America’s oil prices are high willfully ignores the prices Europe and Japan pay. This chart shows that Japan is currently paying around $16 per gallon for gasoline, while the going price for a gallon of gas in Europe is about $12. Anyone who wants to know why America spends over one trillion dollars a year for our military now has the answer.
Thomas,
I was referring to the price of oil determined by supply and demand, which by convention is the price of crude oil.
You are referring to the price consumers pay, which includes the cost of transportation, refining, marketing, profits at each level — and several layers of taxes.
These are quite different things. The retail price includes many factors irrelevant to my analysis, and hence is misleading.
By the way, crude oil prices are at or near record levels in real terms — not just “America’s”.
Previous link was wrong. Here’s a rundown of European gasoline prices. Average European price: $7.61 per gallon, dwarfing U.S. prices. $8.12/gallon in Germany, $9.02/gallon in Italy. America’s gas prices look cheap by comparison. Source: “Gas Prices in U.S. Still Dwarfed by European Costs,” International Business Times, February, 2012.
A large part of the high cost of European and Japanese gasoline prices comes from taxes imposed by the government, which is a smart way to encourage conservation. By comparison, America refuses to impose European-style taxes on U.S. gasoline, resulting in vast numbers of gas-guzzling Hummers and SUVs clogging American roads.
Source: “Gasoline Prices in America: How Do They Compare?” 14 September 2012.