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Article Update Note 03-10-2009: The current world-wide financial crisis is resulting in a stronger dollar and declining oil prices. A global recession (the first since WWII) is reducing demand. Lower demand and the stronger dollar has push oil prices below $50 a barrel with new forecast it could drop to $25 if the global recession continues through 2009. Listen to the video report.
As we rejoice over lower gas prices we must not forget the long-term trend of rising world consumption remains in tact. And just as investment speculation contributed to the rise in oil prices -people now feel the fear of world reccession has push prices down at historic speeds. Prices at the pump have tumbled even faster -below $ 1.75 a gallon in the 4th QTR of 2008. Prices have climbed back up from $34 a barrel to $48 in March 2009. But even if Oil falls back down to $30 that is a price above the level of the 2001-2002 recession level prices -which was not a world recession.
 
My Article below I wrote in March of 2007 with video reports added in 2008. It explains the historic relationship between the dollar and the price of oil. Even with the biggest global recession since the great depression as of 3-10-2009 oil prices stood at $48 a barrel -more than double their 2002 and late 90's price levels.
 
My Article below I wrote in March of 2007 with video reports added in 2008. It explains the historic relationship between the dollar and the price of oil. Even with the biggest global recession since the great depression as of 3-10-2009 oil prices stood at $48 a barrel -more than double their 2002 and late 90's price levels.
 

Everyone understands world demand for Oil is rising. But why have Oil prices climbed so high - so fast? And why has the dollar fallen so low? If we are in a ression why hasn't gasoline prices fallen back to $2.65 a gallon? Is the Peak Oil Theory -Myth or Reality? Who was the last American President asking America to reduce dependence on foreign oil?

THE AMERICAN DOLLARS 35 YEAR MONOPLY ON THE CURRENCY FOR BUYING OIL IS ENDING

Educational Editorials© by William M Wright BBA, MBA / 03-01-2007 / 05-09-2008 update

New Paradigm Hypothesis: Our Weak Currency Means Oil Will Cost More In Dollars. Even If American Consumption Declines Oil Prices May Decline Much Less Than Expected If The Dollar Stays Weak Against The Euro.
This Article will help you understand why it is possible for the price of oil to remain above $75 even with high USA inventories and a ression. It will also help you understand how the price of Gold could remain above $800 ounce with inflation rates well below the late 70’s and early 80’s.
The Iraq Connection
Many people suggest invading Iraq was critical to securing our oil supplies even though the facts show we get very little from Iraq. Other astute thinkers say it was critical to defending the falling dollar. I would argue that our skyrocketing national deficit resulting from the trillion dollars spent in occupation and reconstruction of Iraq pushed the falling dollar off a cliff.
Most of us grew up in a world where America was the worlds Locomotive for growth but we are rapidly becoming the economic Caboose.
 
One bright light of this US Dollar value decline is demand for American capital goods such as Boeing Aircraft, John Deer farming equipment and Caterpillar construction equipment is booming. Currencies like the Euro which have risen over 30% verses the dollar, make USA quality products a bargin to world buyers. And owners of these stocks over the last five years have been rewarded with hugh gains.

In 1971 demand for the dollar was assured

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. This legitimize the Saudi Arabia monarchy and provide military cover. The rest of OPEC followed suit and also accept only dollars.

Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the worlds demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.
 
The economic essence of this arrangement was that the dollar was now backed by oil.
As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured. Thus, Imperial survival dictated that oil be sold only for dollars.

Saddam Hussein was the first to demand Euro's
The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present.

Some people argue that Bush’s Shock-and-Awe in Iraq was not about Saddam’s nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. Two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars.
No longer could the world buy oil from Iraq with Euros.
The Iran Connection
 
Some people say, the Iranian government has finally developed the ultimate nuclear weapon. That weapon is the Iranian Oil Bourse (IOB) that was slated to open in March 2006 but has yet to open. Oil Bourse is just a fancy European word for Oil Exchange or Oil Market. It will be based on a “Euro-oil-trading mechanism” that naturally, implies payment for Oil in Euro. In economic terms, some people say this represents a much greater threat to the hegemony of the dollar than Saddam’s, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this Euro oil system:

The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the Euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the
Americans.

The key larger oil consuming countries, most notably China and India, have already announced their support for the IOB. China and India, along with Russia, are powers that have at various times backed Iran's right to establish its own nuclear program.

 

 

The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. The Russians have inherent economic interest in adopting the Euro as the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism.

The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk.

Should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. Although opening an oil bourse has so far been unsuccessful, Iran has had success in asking its petroleum customers to pay in non-dollar currencies. As of October 3, 2007, Iran currently receives non-dollar currencies for 85% of its oil exports with euros composing 65% and yen 20%. Iran is currently planning on moving the remaining 15% of dollar denominated.

oil exports to other currencies such as the United Arab Emirates dirham. While Iran's nuclear program has become a major focus of the international media, there are many who strongly believe that the program is only a cover story for the Bush administrations true motive in a possible attack against Iran.

Analysts say the real concern for the United States is not Iran's nuclear program but Iran’s plan to open its own oil exchange— The Iranian Oil Bourse (IOB) — with the alleged goal of becoming the dominant center of the Middle East's oil trade in Euros'.

The 1979 Iran Revolution transformed Iran for a USA backed monarchy to an Islamic republic. There has been a long history of Iranian distrust for the Western powers every since 1953 when the Allied Powers and CIA restore the Iranian monarchy in Iran.With American troops in Afghanistan to the east of Iran and to its west are our troops in Iraq - America already has Iran surrounded. And with all the Bush administration talk of military intervention is it any wounder there is constant friction between Washington and Tehran.
The sad truth is - this friction has only served to make the Iranians oil more valuable and American consumer cost soar at the pump.
 

How the value of the Dollar and Oil relate

By Jack Money

Published: June 8, 2008

 

When the value of the dollar falls, it seems the price of oil is going up.

 

But when greenbacks show some strength, the price of oil seems to always head the other way.

So it seems an easy argument to make that the record-setting prices a barrel of oil is getting these days are attributable to the weakened U.S. dollar used to buy and sell the commodity.

 

Today, experts contacted by The Oklahoman examine the question. While they agree there is a relationship between the prices of the two, each offers unique interpretations of how the two interact.

 

Yes, but ...

Sue AnnHamm, manager of crude oil marketing at Continental Resources Inc. in Enid, said traders of both the dollar and oil watch the prices on each and make adjustments accordingly, knowing that when the price of oil increases, the U.S. trade deficit also increases — since crude oil is such a large part of the country's imports.

 

The nation's economic health suffers as more money leaves the country to buy the oil, Hamm said. "This causes the value of the dollar to decline, and so trades of currencies reflect this declining value,” she said.

 

"Oil prices are also adjusted as the value of the dollar in relation to other currencies changes.

 

"Since the majority of the oil traded in the world is priced in U.S. dollars, as the value of the dollar declines, and all other things equal, then the price for a barrel of oil in U.S. dollars increases.”

 

But Hamm adds that relationship does not fully explain changes in the values of the dollar and oil during the past five years because the price of oil has increased at a much-higher percentage than other currencies' values against the dollar.

 

"Obviously, the two are not in lockstep and have different underlying issues affecting their prices and value,” she said.

 

Other factors Hamm attributes to rising oil prices are demand increases in China, India, and oil-exporting countries such as Saudi Arabia, Kuwait, the United Arab Emirates, Iran and Mexico.

 

"So, to answer your question about the relationship between the value of the dollar and the price of oil, yes, there is a correlation with price changes in one contributing to a price change in the other,” she said. "However, they each have unique factors contributing to their pricing.”

What else?

Steve Agee, an Oklahoma City University economist who also is president and chief operating officer of Agee Energy and chairman of the Oklahoma Energy Resources Board, said the last time a barrel of oil cost the same in dollars and euros was in December 2002 when oil was about $25 in each currency, he said. Now, it costs about $1.60 in United States dollars to buy a euro. But oil costs more in euros, too.

 

Agee agreed that growing oil demand is helping drive its price higher, but other factors are pushing prices, Agee added. "The first is speculation by large institutional investors. These institutional speculators are pouring billions of dollars into the commodities futures markets, speculating of course that commodity prices will rise,” he said.

Assets allocated to commodity index trading strategies have increased from $13 billion at the end of 2003 to $260 billion in March, and prices of about 25 commodities in the market have risen during the same time by an average of 183 percent, he said. While annual Chinese demand for crude oil has increased during the last five years by 920 million barrels, institutional speculators' demand for crude oil futures has increased by 848 million barrels, he said. Low interest rates are driving investors into commodities, too, he added. "This is why commodity prices have continued their upward march over the first half of 2008,” Agee said.

 

Another questionFadel Gheit, managing director of oil and gas research at New York's Oppenheimer & Co., sees value the of a dollar and the price of a barrel of oil tracking like the other two analysts. But to him, oil prices are being inflated by excessive speculation and are not supported by market fundamentals. "After all, oil prices doubled from a year ago despite weaker demand outlook because of the recession and without any supply disruption,” he said. "I have seen oil cycles before in my 30 years in the business and this is another one. I believe we are in an oil price bubble when oil prices go up on good news, bad news, or no news, as was the case in the last few years and especially in the last 12 months.”

 

Gheit said his question remains one of how regulators can continue to "allow this fleecing of America to continue.” He said commodities markets' margin requirements have not been raised, and that investment banks are free to engage in the markets not only as interest owners, but also as brokers and clearing agents. "This cannot be going on for this long without government approval, which may be the case as part of a long-term strategy to force China to float its currency,” Gheit said. "That would help ease our trade deficit.”


Excerpts from a current article on this topic:

The Nation - 06/12/2007
Wall Street, Iraq and the Declining Dollar
by Ken Miller
In February of this year, Rep. Henry Waxman's Committee on Oversight and Government Reform revealed fresh details of how the Coalition Provisional Authority dumped $12 billion in cash--in $100 bills--into Iraq in 2004. Multiple flights of huge C-130 transport planes were required to deliver 363 tons of greenbacks--a modest portion of the $510 billion we have spent so far in Iraq and Afghanistan.
By certain measures, this may not be America's most expensive war. But the worst economic effects are yet to come.

No matter how the Iraq War ends, it is clear that the United States is incapable of militarily securing territory against the wishes of a hostile population. And the Iraq War is at the heart of two alarming trends that are likely to have a negative impact on America's position in the world: The demand for oil is rising while the supply is declining, and the demand for the US dollar is declining while the supply of dollars is rising.
In this asymmetrical war, our enemies are spending a fraction of our costs on improvised explosive devices, chlorine gas and suicide bombers, while we invest heavily in noneffective multi-billion dollar weapons systems and force structures.
America’s trade deficits caused by to much spending have created a current account deficit equal to 6.2 percent of GDP, sending trillions of dollars into the hands of foreigners. While we continue to import goods of much greater value than those we export, thus flooding the world with dollars, Bush has pursued a policy of what some have dubbed "military Keynesianism"--that is, the combination of low taxes and high military expenditures. This forces the Federal Reserve to print money and foster easy credit policies, which will eventually result in higher interest rates, inflation or both.

So the printing presses are spewing out more dollars, which are being collected by China, Japan and others. And those countries are showing signs of concern that they have too much of their foreign exchange reserves tied up in our currency. Likewise, certain other nations are evidencing a declining interest in accepting the dollar as a medium of exchange. It was in October 2000 that Saddam insisted that Iraq's oil be paid for in euros. But now Russia wants payment for the energy it exports in rubles. Venezuela and Iran insist on euros. Kuwait has recently unpegged its dinar from the dollar in favor of a basket of currencies.
http://www.thenation.com/doc/20070625/miller

The Three Cousins:  Interest Rates, Dollar Value and Commodity Prices

  

 

 

 

 

 

 

 

 

 

 

 

The Day The Oil Bubble Burst

Educational Editorials© by William M Wright BBA, MBA

Over seven years from 2001 to 2008 oil prices climbed as world economies were booming and demand grew. But buy late 2007 world supplies of oil were begining to exceed demand yet prices continued to climb into 2008. Why?

Listen to the 60 minutes special report "The Price of Oil" to learn how Investment flows pushed prices higher in 2008 even as world demand was begining to fall in late 2007.

 

 

The Price of Oil and the Iraq War

Warning #1:IRAQReading this Article may cause strokes or heart attacts in American taxpayers. Please read last for the safety of your sanity.

http://www.guardian.co.uk/Iraq/Story/0,,2008189,00.html

Warning #2: IRAN learn who helped topple the first Iran democracy and how it resulted in modern day hate for the USA and Britain. Watch the last three video's below.

IRAQ Strategic Plan 1st Invade the country that had nothing to do with 9/11. 2nd Destroy the Iraq military and hang the man who our enemies the Iranians hated. 3ed Rebuild and rearm the Iraq Army. 4th Rebuild the destroyed and declining Iraq infustruture with American taxpayer money. 4th Get the world to forgive over $110 billion in unpaid Iraq debt. 5th Destroy the value of the dollar by spending a trillion on a unnessasary war. 6th Renege on promise to American taxpayers to use Iraq oil to repay America for reconstruction. 7th Get ask to leave by the Iraq government and pray who ever stays in power likes us. 8th Give away large sums of on-going money and aid to Iraq after we leave to insure they like America. Note: The State of Ohio is requesting the federal government invasion and occupation of Ohio to rebuild crumbling infustruture and insure on-going aid.

 

IRAQ - BILLIONS IN TAXPAYER COST TURNING INTO TRILLIONSwhile the value of Iraqi oil reserves quadruples how much goes to repay taxpayers?

Educational Editorials© by William M Wright BBA, MBA / 06-01-2007 / 05-01-2008


Does anybody remember? Bush officials said oil money would help pay for Iraq reconstruction. Well it’s report card day. So, where’s the oil money? Is the five year War connected to our rising gasoline prices and the falling U.S. Dollar?


In selling the war to voters, Bush administration officials said overthrowing Saddam Hussein would cost as little as $50 billion, and that much of the reconstruction could be paid for with the Iraq's oil revenue. Prior to the invasion Iraq's oil was only worth $25-30 a barrel...today it's worth $100-125 a barrel...4 times more. So, how much of that Iraq profit is going to pay for Iraq's reconstruction? Zero! How much of the gain is going to repay the American military and taxpayer for Iraq's "liberation"? Zero!

Total U.S. spending in Iraq, on both military and reconstruction, has now topped $368 billion through 2007, according to the Congressional Budget Office. The war in Iraq now estimated to cost the United States nearly $2 trillion over the next ten years, has many taxpayers wondering what happened to all that oil money that was supposed to help pay for the war.

 

The stunning four year report card truth: Yes, the serge has helped better control insurgents but the price tag is an even greater deficit...weaker dollar and higher gas prices for US consumers.

Iraq is still lucky to pump 2.5-3.0 million barrels of oil a day. Before the invasion Iraq's production was 2.6 to 2.7million barrels, according to the london-based Centre for Global Energy Studies. Decades of war, neglect and now saboteurs, have nearly halved production from a high of 3.5 million barrels in the late 1970s.

Now after five years of American occupation and taxpayer money there is no to little increase in oil output. In 2006 output was below where it was when the United States first invaded in 2003, and some experts say that Iraq could see production fall by 200,000 barrels a day per year under present conditions.


Proceeds from Iraq's current oil sales - about $30 billion a year in 2006 - go to funding the Iraqi government. In fact, the Iraqi government is nearly entirely dependent upon oil for its funding, with crude accounting for at least 90 percent of its budget.

The American taxpayer is now stuck with the trillion dollar Iraq mess. And let’s not forget your soaring fuel cost bill. So, the next time you fill up your gas tank remember to be grateful we liberated Iraq and brought stability to the middle-east.

The Wright Question®: here are the questions, "Now that the value of Iraqi Oil Reserves has quadrupled - who will benefit?" and "How will American taxpayers ever receive any reimbursement for reconstruction cost? and "What has our blood and money accomplished for America?


 

Excerpts from a current article on this topic:

Iraq's troubles push oil costs up

Dallas Morning News 11/10/2007
By Jim Landers


The spike in oil prices shaking the U.S. economy right now is something of a self-inflicted wound stemming from a war gone awry.

Bush administration officials predicted Iraqi oil production would soar after Saddam Hussein was gone, to levels of 6 million barrels a day or more, and that Iraq would be able to rebuild with its own oil revenues. Instead, Iraqi oil production remains in the doldrums –below pre-war levels. The crippling of Iraq's oil production since the start of the war amounts to one of the biggest disruptions in world oil supplies since World War II, according to statistics compiled by the U.S. Department of Energy.

Without this disaster, oil prices would be much lower today, said David Kirsch, a former State Department energy analyst who now manages oil market intelligence for PFC Energy consultants in Washington.

"If not for the war, we'd have cheaper oil, and more of it," he said.

But the paradox of shortage in the face of abundance is also explained by "greed and ineptitude" on the part of U.S. contractors and project managers, says Amy Myers Jaffe, an energy expert with the James A. Baker III Institute for Public Policy at Rice University.

Mrs. Jaffe has examined Iraq's oil situation for much of the last three years, writing reports for the Baker Institute and for the congressionally appointed Iraq Study Group chaired by former Secretary of State James Baker and former Democratic U.S. Rep. Lee Hamilton.

"The more I heard, the angrier I got," she said. "The Iraqis believed in the U.S. ingenuity thing, but we came in and were completely inept."

The greed was worse, she said.

"So many Americans were trying to line their pockets. From an Iraqi's perspective, if I see the Americans do it, why the hell wouldn't I? We created that problem. It would take the IG [special inspector general for Iraq reconstruction] the rest of his life to come up with even one-tenth of the things that were done," Mrs. Jaffe said.

Stuart Bowen, the inspector general, has called corruption and the theft of oil by organized criminals "a second insurgency." Others say it's so bad that the insurgents have financed their war against the U.S. military with stolen crude oil.

The New York Times last year disclosed a classified U.S. report estimating Iraqi insurgents collected between $25 million and $100 million a year from oil smuggling and other criminal activity involving the state-owned oil industry, aided by "corrupt and complicit" Iraqi officials.

Former Federal Reserve Chairman Alan Greenspan made news recently by writing in his memoirs, "I'm saddened that it is politically inconvenient to acknowledge what everyone knows – that the Iraq War is largely about oil."

President Bush and others in his administration have repeatedly denied oil was a motive. But the war came at a time when there was growing concern worldwide about surging demand for gasoline and other fuels in fast-growing nations like China and India, as well as in the United States.

http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-IraqOil_10bus.ART.North.Edition1.42010ac.html


 

A Life Time Of Medical And Disability Cost

Educational Editorials© by William M Wright BBA, MBA 06-05-2007 update

Total U.S. spending in Iraq, on both military and reconstruction, has now topped $368 billion through 2007, according to the Congressional Budget Office. We know about the military and reconstruction cost. We know the human life lost. But now add to that a life time of human medical and social service cost for those who survived.

The direct cost to American taxpayers of invading Afghanistan and Iraq and reconstruction are rapidly climbing to one trillion. But those cost measure what has been spent and can not measure the cost of American and Iraqi civilian blood lost nor the cost of a life time of medical and disability payments. Nearly 3,900 American soldiers have died and more than 28,500 troops have been wounded in Operation Iraqi Freedom. A recent Harvard study found that the cost of caring for those wounded over the course of their lifetime could ultimately cost more than $660 billion.

Now consider the lifetime of physiological and financial cost resulting from just one battle. Here is just one of a thousand stories that puts a human face on those cost. And the one question this young man (Blake Miller) has is "In Iraq like Vietnam - What did we accomplish?"