Oil and the U.S. in Term Paper

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" This argument makes some sense in light of the role OPEC plays and the presumed ties between terrorist regimes like Al Qaeda and oil. In fact, Bin Laden's brother was a stakeholder in President Bush's own Arbusto Oil Company (Wiles 2001). Bin Laden is also believed to have "made a massive profit from trading in oil and gold as well as shares on the eve of the [September 11] suicide attacks blamed on his followers," (Sherwell 2001).

However, CATO institute analysts deny a connection between international terrorism and oil money: "The fundamental problem with the argument is that terrorists don't need oil revenues...terrorists don't rely on oil revenues." (Taylor & Van Doren 2006). Conflicting theories regarding the connection between terrorism and oil aside, the American addiction to oil has undoubtedly motivated the decision to invade and occupy Iraq. Indeed, the lack of any established connection between the Iraqi government and the Al Qaeda terrorist attacks illustrates to what length the Bush administration has gone to bolster support of the occupation. The invasion of Iraq was purported to be based on the presence of WMDs and a direct link between Saddam Hussein's regime and Al Qaeda. Further intelligence reports and investigations have failed to substantiate either of those official claims, and therefore the invasion is highly likely due to Iraqi oil and its strategic position in the Middle East. "Other rogue states have been much closer to acquiring nuclear weapons than was Iraq in early 2003, and others have had more extensive ties to anti-American terrorists," (Duffield 2005). The least credible version points to purported concern for the Iraqi people, but "Saddam's repression against his own, especially the Kurds, has been known for years and tolerated by the U.S.," (Buzzanco 2002). For example, the United States poured aid money into Iraq during the Iran-Iraq war. Buzzanco (2002) remarks: "Once the war ended, Saddam killed many thousands of his own Kurdish population with chemical weapons. Meanwhile, U.S. economic aid to Iraq increased." Concern for the Iraqi people and the "liberation" propaganda touted by the Bush administration during the invasion seem like ridiculous excuses in light of historical fact.

A thorough understanding of the current crisis depends on an investigation of Iraq's modern history as a fabricated nation-state. The United States' only real ally in the invasion of Iraq was Great Britain. Great Britain and the United States were almost single-handedly responsible for the creation of Iraq in the first place. Formerly a part of the vast Ottoman Empire, modern Iraq was created by the United States and Great Britain after the First World War. A report by the Environmental Literacy Council (2007) explains how the "division of spheres of interest in that region were heavily influenced by the potential of oil in the region." This should illustrate the long-standing interest those two nations have had in the region and their mutual attempts to control its oil in the 21st century.

Oil was discovered in Mesopotamia in 1908. However, the importance of Iraq and its oil reserves became did not become fully apparent until the end of World War One. The United States produced more than half of the world's oil until as late as the 1940s (Environmental Literacy Council 2007). Before the First World War, oil was a relatively unimportant commodity used for a blossoming but relatively small automotive industry. An American, Colonel Edwin Drake, drilled the first successful oil well in Pennsylvania in 1859 and at that time, petroleum was used mainly as a source of kerosene for home lighting until the invention of the light bulb.

The United States produced what it needed even during the early decades of the automotive industry. During World War One, though, oil enabled the use of tanks, submarines, planes and other oil-driven heavy artillery. Changes in the global marketplace including the increased demand for fuel-intensive vehicles and machinery led to a radical transformation in the oil industry that placed Iraq and other Middle Eastern nations at the forefront of ensuing political and military quagmires. Buzzanco (2002) notes that "by 1944 American corporations controlled over 40% of Middle East oil reserves, and by 1955 U.S. companies were producing over 50% of oil from the region, and providing Europe with over 90% of its oil imports."

American oil addiction is just a matter of too many SUVs, although gas consumption is a major factor. Oil addiction is due to broader macroeconomic forces such as the hegemony of the American dollar.

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As "the grease that makes capitalism go," oil forms the backbone of the American economy (Cave 2001). Because the American dollar is the benchmark currency against which all others are traded, it is reasonable to say that the global economy as a whole depends on the oil market. Scott notes, "the present value of the U.S. dollar, unjustified on purely economic grounds, is maintained by political arrangements, one of the chief of which is to ensure that all OPEC oil purchases will continue to be denominated in U.S. dollars." Dollar hegemony depends on continued control of the world's oil reserves. More importantly from an economic perspective, dollar hegemony enables the United States to get into as much debt as it has during the Bush administration.

Another reason why macroeconomic forces explain the American addiction to oil has to do with the fact that major U.S. trading partners are actually more dependent on Gulf oil than America is (Duffield 2005). The United States maintains an emergency oil reserve and continues to produce oil domestically, which is why the bush administration pushed for increased exploration of oil fields in Alaska. Furthermore, the United States enjoys friendly political and trade relationships with oil-producing nations like Canada Dominion of the oil industry means not only the regulation of crude oil prices but also of ancillary market forces, as a large number of traded goods and services depend on oil too. Before the invasion of Iraq, its relatively plentiful oil reserves were under-tapped. This was due mainly to a lack of investment in Iraqi infrastructure due to the embargo against the Hussein regime, and to Saddam's own desire to control the supply of Iraqi oil. The under-production of oil as it reaches its peak production globally presents significant economic setbacks for the entire world market. A successful invasion of Iraq meant that the United States and its commercial interests could jump-start production of OPEC's second-largest source of oil. As a result, oil prices would better reflect a realistic supply-demand curve. Oil reserves would also be controlled by U.S.-friendly corporate interests rather than potentially volatile state interests.

Furthermore, Iraq became the first OPEC nation to convert its currency reserves to the Euro (Scott 2003). This overt threat to dollar hegemony may have also instigated the invasion, also explaining why no nation using the Euro supported the war. The switch to the Euro has become an international trend. Clark (2003) also outlines the threat to dollar hegemony and notes that the invasion of Iraq was prompted by "this administration's goal of preventing further OPEC momentum towards the Euro as an oil transaction currency standard, and to secure control of Iraq's oil before the onset of Peak Oil." The Peak Oil concept has been in mild dispute and no source has come up with a definite date for the predicted peak, which would likely depend on how nations like China and India attempt to use oil as their industries develop. Less controversial is the robustness of the Euro as it has gained steadily on the dollar over the last decade.

Scott (2003) emphasizes the need to not only access Iraqi oil reserves but to control those reserves through political, fiscal, and if necessary, military measures. The invasion of Iraq reflects the need to control access to one of the world's largest oil reserves. This supply of oil has remained untapped for decades due to the Hussein regime. As global oil supplies dwindle at the same time as global oil demands increase, access to and control of Iraqi oil became an indispensable strategy. Unless alternative energy sources are discovered, though, world oil supplies will continue to decrease over time with no end in sight. The United States has been involved in thorny political and military entanglements with Iraq and other OPEC nations throughout the 20th century and the Iraq war now is nothing new.

Ironically considering the administration's earlier stance, President Bush "has been citing oil as a reason to stay in Iraq," (Baker 2006). Bush claims that insurgency groups could use oil for political blackmail against the United States and that such a scenario would proliferate terrorism. This may be a genuine motivation to continue occupying Iraq. However, the United States may have dug itself into a hole. In addition to fomenting more anti-American sentiment throughout the world than existed prior to the invasion, the United States has been responsible for.....

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