TayoD:

@The One,
So why is everyone shouting "free trade"? Don't you believe in free trade any more when the issue doesn't suit you?

the US shouts "free trade" only when it suits them. The same people telling our governments to cut subsidies are still heavily subsidising their own farmers. It is all about self interest.

@Davidylan,

It is all about self interest.

That is exactly my point.

@Davidylan,

If we did not spend 20 years on fruitless turn around maintenances we'd be able to refine our own oil and sell at cheaper prices just as its done in other oil produciing states. That we have to pay the prevailing world price for crude oil drilled in our backyard has more to do with our own inefficiency than OPEC.

It is not that simple. Even with the refining capacity, the oil will still have to be sold to the investors at the market price and they will in turn make their profits off the consumers - Nigerians.  Isn't that one of the major reasons why price of petrol was increased recently? It was done to make it profitable for those that will be buying the refineries from the Federal Government! They will buy the oil at market rate and must sell it for a profit. The lower the market rate, the less the consuming public will have to pay.

TayoD:

@Davidylan,
It is not that simple. Even with the refining capacity, the oil will still have to be sold to the investors at the market price and they will in turn make their profits off the consumers - Nigerians. Isn't that one of the major reasons why price of petrol was increased recently? It was done to make it profitable for those that will be buying the refineries from the Federal Government! They will buy the oil at market rate and must sell it for a profit. The lower the market rate, the less the consuming public will have to pay.

this makes me wonder, how do other oil producing nations manage to sell gas to their citizens at rock bottom prices?

@Tayod

You are engaging in reverse integration instead of forward integration. If what you are concerned about are the Nigerian people, then what you should be asking for is that the proceeds of high oil prices be used to re-engineer our system such that the current prices of oil will not be too much of a burden on an average consumer because he earns enough to afford it. But your stand only suggests that the interests you are protecting are that of Americans rather than Nigerians

This freedom of expression thing can be painful sometimes. See the kind of thought pattern that someone is expressing. That a country has the right to deny other countries freedom of association.

The end times are truly here. First it was missile defence system, now it is outright banning of a mutually beneficial friendship. Olodumare! What has this world turned into?

Even one congressman in the US has already said this whole process is counter productive. If the bill passes next year, the US government will sue OPEC to its courts, the OPEC countries will not attend. They will then become less friendly with the US, and begin to sell preferentially to China and India.
The US and some of its allies will place sanctions on the OPEC countries, the OPEC countries will place total oil sanctions on the US.

The US will begin buying more crude from the Non-OPEC countries. Supplies will not meet demand, prices will soar. The highly oil dependent economy of the US will slow own massively. Perhaps final collapse. Well, they may even begin to threaten military action, no one will listen.

The truth is, previously, this was not possible because any OPEC country which refused to sell to the US will not have any other massive market because Russia produces far more than it can consume. Unfortunately, there's now India and China; ever willing to scoop up the last drop of oil at a good price.

Also, the OPEC countries have always been obedient to the US in trying to regulate prices and make sure prices do not skyrocket because they feared that if prices of oil became so high, the US and other developed countries would develope newer, cheaper fuels and make crude oil useless, thereby crumbling the economies of the oil producing countries. But after 20 years, where is cold fusion? Where is hydrogen fuel, Nuclear fueled engines, where are solar vehicles and how far with biofuels? These are fuels that would take the next 40 years before they come into everyday use. The next 40 years by which time OPEC would have finished selling its crude oil and used the revenues to develope these new forms of energy and start a new cartel.

What some people refuse to realise is that there is a limit to this crude oil. It is not everlasting. So why sell it for less? You have 5 billion doughnuts and you want to be selling 5 million everyday just because you want the price to come down and to make your customers happy with you. Then when you finish selling them at that cheap price and you have nothing left to sell, what do you do?

Some of you just mention crude oil as if it is dust. Do you know the various products that can be gotten from crude oil? Even synthetic food can now be manufactured from crude oil. Petroleum Jelly, lubricants and engine oils, jet fuel, rocket fuel, plastics and polythene, laptop computer and electronics casings, mobile phone casings, car bodies and interior accessories, insecticides, paints, gasoline, credit cards, ID cards, footwear, buttons, DVDs, toys, condoms, medical equipment and various forms of bulletproof material.

Don't you think even at $70/barrel, we're still cheating ourselves?

I have said it. The US is not going to wait for its downfall. It is carefully crafting it.

@Davidylan,

this makes me wonder, how do other oil producing nations manage to sell gas to their citizens at rock bottom prices?

They are able to that because they all subsidize the product for their citizens. I'll explain why this economics doesn't work for Nigeria in my response to Denex.

@The One,

You are engaging in reverse integration instead of forward integration.

Your opinion.

If what you are concerned about are the Nigerian people, then what you should be asking for is that the proceeds of high oil prices be used to re-engineer our system such that the current prices of oil will not be too much of a burden on an average consumer because he earns enough to afford it.

Isn't that weird. Rather than provide affordable products to my citizens, I would rather try to get as much as possible from my sales to other countries in the hope that my citizens will one day get to the level where they can afford my voluntary high price! For your information, much of the governments income goes into subsidizing the products. The more the price increases, the more the government will make and the more they will have to spend in subsidy. How helpful to nigeria is that?

But your stand only suggests that the interests you are protecting are that of Americans rather than Nigerians

I am not protecting any one's interests here. All I'm getting at is that OPEC was set up for selfish reasons and why shouldn't other nations take actions in their selfish interests. Besides, not all the OPEC countries are equal members. How did they arrive at the quota for each nation?

@Denex,

This freedom of expression thing can be painful sometimes. See the kind of thought pattern that someone is expressing. That a country has the right to deny other countries freedom of association.

I will overlook your sly invectives for the sake of not derailing this thread. I never said the US has the right to deny anyone the freedom of association. That is just what you choose to read into it. What I am saying is that the US has every right to work against the interest of any organisations whose objectives run contrary to her interests. Same is true for anyone.

The end times are truly here. First it was missile defence system, now it is outright banning of a mutually beneficial friendship. Olodumare! What has this world turned into?

Your ability to exagerate no be small.

Even one congressman in the US has already said this whole process is counter productive. If the bill passes next year, the US government will sue OPEC to its courts, the OPEC countries will not attend. They will then become less friendly with the US, and begin to sell preferentially to China and India. The US and some of its allies will place sanctions on the OPEC countries, the OPEC countries will place total oil sanctions on the US.

That is not an impossible scenario. Hopefully, the apparent likelyhood of this happening should get the U.S. to wake up and utilize the nuclear technology that they have. The shortfall will be obtained from non-OPEC countries and exploration of oil in Alaska. This will definitely bring down the price of oil for other nations of the world.

The US will begin buying more crude from the Non-OPEC countries. Supplies will not meet demand, prices will soar. The highly oil dependent economy of the US will slow own massively. Perhaps final collapse. Well, they may even begin to threaten military action, no one will listen.

And the higher the price, the more Nigerians will have to pay for it. the domino effect will reverberate all over the world.

The truth is, previously, this was not possible because any OPEC country which refused to sell to the US will not have any other massive market because Russia produces far more than it can consume. Unfortunately, there's now India and China; ever willing to scoop up the last drop of oil at a good price.

That is true. At the same time, they will not want to lose the american market because prices will surely fall when that happens.

Also, the OPEC countries have always been obedient to the US in trying to regulate prices and make sure prices do not skyrocket because they feared that if prices of oil became so high, the US and other developed countries would develope newer, cheaper fuels and make crude oil useless, thereby crumbling the economies of the oil producing countries. But after 20 years, where is cold fusion? Where is hydrogen fuel, Nuclear fueled engines, where are solar vehicles and how far with biofuels? These are fuels that would take the next 40 years before they come into everyday use. The next 40 years by which time OPEC would have finished selling its crude oil and used the revenues to develope these new forms of energy and start a new cartel.

You really think the oil producing countries will develop the next major energy source? You are kidding right? Which one among them has anything close to it except Russia? Can you tell us if any funds exist to go into this research by OPEC? The organisations leading the way in this respect are the major oil companies owned by the US and Europe. So you see how your persuasion is more imagined than real!

What some people refuse to realise is that there is a limit to this crude oil. It is not everlasting. So why sell it for less? You have 5 billion doughnuts and you want to be selling 5 million everyday just because you want the price to come down and to make your customers happy with you. Then when you finish selling them at that cheap price and you have nothing left to sell, what do you do?

Of course everyone realise that the oil will not be there forever. So how much money can they make in the next 50 years that will replace the goodwill and cooperation of the other countries for the next 1,000 years? The US just lacks the political will to break off the dependence on OPEC in well calculated steps in very short years. When they finally realised that they are faced with two evils, they will know that the nuclear option is the lesser one.

Some of you just mention crude oil as if it is dust. Do you know the various products that can be gotten from crude oil? Even synthetic food can now be manufactured from crude oil. Petroleum Jelly, lubricants and engine oils, jet fuel, rocket fuel, plastics and polythene, laptop computer and electronics casings, mobile phone casings, car bodies and interior accessories, insecticides, paints, gasoline, credit cards, ID cards, footwear, buttons, DVDs, toys, condoms, medical equipment and various forms of bulletproof material.

I don't believe there is need for this statement as I trust everyone here is aware of the various uses of petroleum.

Don't you think even at $70/barrel, we're still cheating ourselves?

Please think about what Nigerians will have to pay to be able to afford this. The funny thing si that OPEC's limitation of our output limits how much we can make, and if prices keep increasing, Nigerians will pay more and the government will also pay more for subsidies. Do you know that OPEC countries have to sell in dollars which helps the value of that currency. If we were not part of OPEC, we would sell with naira and they will also help our currency.

I have said it. The US is not going to wait for its downfall. It is carefully crafting it.

You think the world itself will be fine if US falls?

@ TayoD, your arguments make a whole lot of sense especially the realisation that if we were selling in Naira we wont be in the exchange rate hole that we are in now.

- If OPEC broke up it would give the US a lot more bargaining power, the ability to deal exclusively with certain countries since the OPEC quotas would no longer be necessary and each country can export as much as they want. I think the main target of this bill is Venezuela, Saudi Arabia and Iran. As long as the US is forced to do oil business with them they have the opportunity to do and say whatever they please.

In the end oil will not last forever, perhaps 40 more yrs. Within that time frame the US would have developed alternative sources of fuel. Just imagine a world where oil finishes, Africa and the middle east will virtually collapse! Help your family over to this side of the atlantic before that happens lol.

@Tayod

I sympathize with your views, only that they are a little bit uninformed. I ordinarily wouldn't say this but to put things in proper perspective let me tell you that I am an oil industry professional who has been into the technical and commercial side of the business and has been priviledged to listen to experts in this business the world over talk about these issues.

Let me state my case maybe you will appreciate what i've been saying.

1) Oil is still the energy for the nearest future and by that I mean at least the next 50 years. Research is going on for alternative sources but if you ask those who are in the know, they will tell you that it isn't feasible to get those at the scale needed to replace oil in the nearest future.

2) You seem to think that paying for fuel products costs a lot of money? It is govt propagand and you are buying it hook, line and sinker? I personally think the subsidy talk is bullshit. Please look up write-ups by Austin Avuru, a renomned oil industry player on this subsidy business and you will get more enlightened about it. For the sake of this topic, let us agree that fuel prices are being subsidized. How much does fuel subsidy cost? Last year they said it was 300 billion naira right? What we should be asking is "what is the marginal revenue accruing from this increased prices of crude oil?". Over the last year Nigeria added about $15 billion dollars to her foreign reserves from the sale of crude not to talk about the ones that were spent on running govt at all 3 levels. Therefore, what stops the govt from taking $3 - $4 billion dollars from the proceeds to subsidize prices for the citizens if that is the route we chose to go.

3) On the question of local refining, it is wrong to say that will not affect local prices of fuel. The marketers all currently say there is a cost associated with transporting the crude from elsewhere so if you remove that won't it bring down prices even if it is private enterprises that run the refineries? OIt might not bring the price down to the level we want but at least it will reduce the claimed "subsidies".

I have been in foreign countries where they can't just fathom the way we go about these things when we discuss it. They say we will rather sell crude and buy value-added refined products which erodes part of the benefits we derive from the high prices. BUT EVEN THEN, THE NET EFFECT IS THAT WE DO NOT SPEND UP TO 20% OF THE GAINS ON SUBSIDY AND THIS IS THE PART I WANT YOU TO UNDERSTAND.

@The One,

I sympathize with your views, only that they are a little bit uninformed.

Really? We'll see about the misinformation.

I ordinarily wouldn't say this but to put things in proper perspective let me tell you that I am an oil industry professional who has been into the technical and commercial side of the business and has been priviledged to listen to experts in this business the world over talk about these issues.

Perspective acknowledged. Please put inot perspective also that I work as an Engineer/Project Manager within the power industry. While my specialization is in transmission line designs, I have the priviledge of working with professionals involved in every aspect of power generation to utilization. I recently sat in a presentation by the experts given the responsibility to provide the way forward in regards to energy to about 7 Governors here in the United States. So my perspective goes beyond just oil.

Let me state my case maybe you will appreciate what i've been saying.

I understand your case, but do you understand mine? While OPEC is set up to protect the interests of its member countries, every other country including the US have the right to challenge the organization to protect their interests.

1) Oil is still the energy for the nearest future and by that I mean at least the next 50 years. Research is going on for alternative sources but if you ask those who are in the know, they will tell you that it isn't feasible to get those at the scale needed to replace oil in the nearest future.

While oil is a very important source of energy, there is over-reliance on it considering the fact that it can be effectively replaced by other sources that are available now. It's use can be totally eliminated in few years for the generation of electricity while its use in cars cannot be eliminated for a few years.

2) You seem to think that paying for fuel products costs a lot of money? It is govt propagand and you are buying it hook, line and sinker? I personally think the subsidy talk is bullshit. Please look up write-ups by Austin Avuru, a renomned oil industry player on this subsidy business and you will get more enlightened about it. For the sake of this topic, let us agree that fuel prices are being subsidized. How much does fuel subsidy cost? Last year they said it was 300 billion naira right? What we should be asking is "what is the marginal revenue accruing from this increased prices of crude oil?". Over the last year Nigeria added about $15 billion dollars to her foreign reserves from the sale of crude not to talk about the ones that were spent on running govt at all 3 levels. Therefore, what stops the govt from taking $3 - $4 billion dollars from the proceeds to subsidize prices for the citizens if that is the route we chose to go.

Your calculation omits the fact that local consumption is rising which means the Government has to subsidise more refined and imported products while our quota with OPEC remains at a stand still. Our needs are increasing but our income is virtually stagnant. Why do you think Iran finds itself in such a mess too?

3) On the question of local refining, it is wrong to say that will not affect local prices of fuel. The marketers all currently say there is a cost associated with transporting the crude from elsewhere so if you remove that won't it bring down prices even if it is private enterprises that run the refineries? OIt might not bring the price down to the level we want but at least it will reduce the claimed "subsidies".

I never considered the issue of transporting the oil but rather on the effect of its high cost on the citizenery. The higher the cost of crude oil, the higher will be the cost of the refined product. When that happedns, the government will either have to subsidize more or the citizens will have to pay more. Someone has to pay somewhere.

I have been in foreign countries where they can't just fathom the way we go about these things when we discuss it. They say we will rather sell crude and buy value-added refined products which erodes part of the benefits we derive from the high prices. BUT EVEN THEN, THE NET EFFECT IS THAT WE DO NOT SPEND UP TO 20% OF THE GAINS ON SUBSIDY AND THIS IS THE PART I WANT YOU TO UNDERSTAND.

I have no data to confirm the percentage spent on subsidies so I will appreciate if you can provide one. I hope the numbers are not just taken from thin air. In any case, the lower the percentage spent on subsidy, the more Nigerians have to pay for it. Imagine how much the government must have been spending on subsidy if we still have to pay sixty something bucks per liter when 20% of our revenue is spent on subsidy. And can you quantify the inflation that has taken place due to lower subsidy? The 80% that the oyinbos are wondering what happened to is eaten up by the inflation caused from the high crude oil prices. It is just a big mess!

In any case, my major point remains the U.S. has the right to fight OPEC as much as OPEC has the right to retaliate. I guess everyone will back down eventually as the confrontation will not help anyone.

"The US has the right to fight OPEC" I said it that these people will come and they will prove that the US even has the right to Nuke Nigeria if it does not provide its oil needs.

The greencard seekers will not stop. They say that OPEC has the right to protect its members interests but they are not saying US too has the right to protect its own interests. They say US has the right to fight OPEC.

@ denex, it seems you have a personal vendetta against the US. Ever been denied visa?

@davidylan

Never applied. Used to love the US when it was still moderate. Since Bush took over the White House, the level of extremism has become alarming.

The man Bush has turned America into what nobody ever envisaged. From rigging elections to economic collapse. Go check economic figures between Bush's seizure of the White House and September 11. Fed the American people with blatant fallacies, massively cut down on the rights of people in the US. He even sought to move the last elections from November.

The man is a dictator! Did you see him free Scooter Libby? Can you see what his vice President is doing. Shutting down agencies that are meant to oversee and scrutinize his actions.

Now Cheney has even claimed that he is not part of the executive arm of government. These people are radicals. A vice president who claims not to be part of the executive arm of government.

I know George Bush is not in support of the NOPEC. But he is only doing that for his and Cheney's personal oil interests and benefits. You think George Bush is not happy with the rise in price of Crude Oil? In a statement months ago when asked what could be done as Oil prices were heading towards $70, he said things would stabilize naturally. George Bush in support of a free market? A man who is not even in support of a free world.

The damage that the Bush regime is causing in the US will take more than 10 years to recover. It's really annoying that one man can make useless of 18 years of the lives of 300 million people.

@ denex, its hard for me not to call you a hypocrite because ultimately that is the attitude you exhibit here.
You are always found loudly yelling that we should channel our energies at Nigeria rather than Isreal and the middle east who care nothing for us. Yet here you are expending valuable energy slagging off George Bush! Blimey! It seems you care so much more for America than the Americans themselves!

No matter what situation Bush leaves the Americans in they will still remain technologically and economically more than 1000 yrs ahead of Nigeria. Perhaps you are better off wasting all that stress getting Yar A dua to rebuild Nigeria. Americans dont think Bush is a dictator, learn to solve your own problems before crying more than the bereaved. When all is said and done you will still go cap in hand to beg the US for funds and investment!

denex:

@davidylan

Never applied. Used to love the US when it was still moderate. Since Bush took over the White House, the level of extremism has become alarming.

What level of extremism are you talking about here?

denex:

The man Bush has turned America into what nobody ever envisaged.

As bad as it is, millions of people would rather die queueing for a visa to the USA.

denex:

From rigging elections to economic collapse. Go check economic figures between Bush's seizure of the White House and September 11.

Nigerians are the last people qualified to make comments on American elections. Check your electoral figures for the 2007 elections before casting stones. And as for the economic figures, at least u can go on the internet and find out US economic figures easily, can the same be said of your own country? What is the state of your mono-economy now or still waiting for US investors to come and bale u out?

denex:

Fed the American people with blatant fallacies,

The same lies and worse that Nigerians have been living on for 47 years?

denex:

massively cut down on the rights of people in the US.

At least the Americans have more rights than the average Nigerian. Is your country not the same one where journalists are charged for sedition?

denex:

He even sought to move the last elections from November.

At least he did not attempt to doctor the constitution to give himself a third term

denex:

The man is a dictator!

Can he be honestly worse than obasanjo?

denex:

Did you see him free Scooter Libby?

Did you see how Obasanjo freed and even rewarded Andy Uba the election rigger with a position as a member of the PDP board of trustees?

denex:

Can you see what his vice President is doing. Shutting down agencies that are meant to oversee and scrutinize his actions.

at least he is not going awol fighting his president on the pages of newspapers.

denex:

Now Cheney has even claimed that he is not part of the executive arm of government. These people are radicals. A vice president who claims not to be part of the executive arm of government.

Could he be worse than Atiku who accused the president of corruption?

denex:

I know George Bush is not in support of the NOPEC. But he is only doing that for his and Cheney's personal oil interests and benefits.

And for whose benefits was privatisation? Transcorp anybody?

denex:

The damage that the Bush regime is causing in the US will take more than 10 years to recover. It's really annoying that one man can make useless of 18 years of the lives of 300 million people.

The damage Nigeria is in will take more than 100 years to recover not to talk of reach the stage the US is in at present. Maybe you shld be more annoyed at the way obasanjo and the PDP has impoverished 80% of a population of 150million people who live on less than $1 a day. Bad as you think the situation here is, every single one of those 300million Americans enjoys a far higher standard of living than you will ever hope to enjoy in 500 yrs!

Face your problems and leave the Americans alone!

Bros T,

I don't know if you have read through this write-up by Simom Kolawole of Thisday. If not, please do as it talks about some of the issiues. On the source of the amount spent on subsidy, I'll look that up and post here.

http://www.thisdayonline.com/nview.php?id=82423

Simon Kolawole
Lagos

Fact #1: At the current pump price of N70 per litre for petrol, Nigerians are paying $86.95 per barrel of crude oil, as against the $69 price in the international market. Help me do the calculation: in every barrel of crude oil, you can refine 159 litres of Premium Motor Spirit (PMS), popularly known by its street name: petrol (source: OPEC website). At N70 per litre, therefore, we pay N11,130 per barrel. At the exchange rate of $1 to N128, that is $86.95 per barrel. In fact, my calculation is wrong: from the same barrel, you will get, as by-products, brake fluid, insecticide, engine oil and roughly 1,000 other products. Mind you: everything from one and same barrel, not a different barrel. So we are probably paying between $200 and $300 per barrel at the end of the day, by the time we add the costs of importing the by-products.

Fact #2: When we pay N70 per litre in Nigeria, we are actually funding the economies of other countries. That is the real subsidy. Nigerians do not enjoy any subsidy on fuel; it is foreign refineries and foreign economies that do. Every litre of fuel is taxed at the refineries. You then add export duties, shipping charges, all sorts of tariffs and demurrage at our seaports, among other charges. What we call subsidy in Nigeria, therefore, is actually composed largely of unnecessary costs simply because we have woefully failed to refine the products at home. Our drainpipes, also known as refineries, have continued to perform below expectation, if they perform at all. When I travelled to Saudi Arabia in 2005, I discovered that a litre of fuel was N35, at a time it was selling at N60 or so in Nigeria. Now if Nigeria opted to import from Saudi, it could end up costing as much as N60 after all the charges we would have incurred along the way. So the largest percentage of the "subsidy" we are actually talking about here goes into other countries' economies.

Fact #3: For as long as our refineries are run by government, and for as long as we fail to add to the local refining capacity, we will remain entangled in this bizarre "subsidy and scarcity web." Our population is exploding; more and more people are buying cars; power problems mean more and more people are using petrol-powered generators. Therefore, demand for PMS is on the rise while we produce virtually nothing at home. Since the 18 licensed refineries have not been constructed because of "regulated pricing" and the huge investments involved which cannot be recouped in the short-run, the government should take the bull by the horns and build refineries which-I stand by my suggestion-should then be sold off to interested buyers, maybe on the stock exchange. Former president, Chief Olusegun Obasanjo, spent billions of dollars on refurbishing refineries that refused to come out of their epileptic seizures. That amount was enough to build two refineries that can each refine 100,000 barrels per day-or a total of 30 million litres of PMS per day, which is our current daily consumption. For eight years, his advisers told him not to build refineries. See where we are now! I hope President Yar'Adua will not repeat this mistake.

Myth #1: If crude oil is sold to local refineries at the budget benchmark ($40), rather than the international price ($69), there will be corruption akin to the forex fraud under Gen. Sani Abacha when dual exchange rate bred a generation of rent collectors. In truth, crude oil is not the same thing as currency. If a refinery gets 10,000 barrels of crude daily, its PMS output should be around 1.5 million litres per day. This is easily verifiable by the regulatory agencies. It's not like a wad of dollar travelling from one fraudulent banker to a faceless roadside hawker. More so, it costs between $3 and $6 to drill a barrel of crude oil in Nigeria, and when other charges and taxes are added, it will come to an approximate cost of $10. Then it is sold at a politically determined price of $69 per barrel in the international market, which is about seven times the cost of production. Why on earth should we sell crude oil to ourselves at $69 per barrel? What would be the rationale? If we sell crude to local refineries at $69 per barrel, then at the current pump price of N70, we would end up paying $86.95 per barrel (and maybe $300 if you add the cost of the by-products) for a commodity we have in super abundance. It's like saying a tuber of yam in Gboko should sell for the same price in Lagos. I can't understand or accept the rationale.

Myth #2: Fuel is not a social product but a commodity like any other, and should therefore not be subsidised but priced like any other commodity. On the surface, you cannot fault this argument. But something is missing in the logic. When you have an economy like ours that runs principally on fuel, there will be social unrest if the pricing is not "nudged" by the government. Fuel affects every life in Nigeria. Mass transit is nonexistent. Power failures mean there is heavy reliance on generators. Transportation is indeed a major component of production cost. The difference between the price of a tuber of yam in Gboko and Lagos is that high because of expensive transportation. Therefore, every little upward adjustment in fuel price leads to a rise in the cost of living and a fall in the standard of living. Our lives depend on petrol and any attempt to deny this fact will lead to incessant strikes, worsening poverty and economic contraction. The compromise we can reach is that a large percentage of "fuel subsidy" should be sustained until we attain local sufficiency in refining. That is fair enough.

Myth #3: It is more beneficial to subsidise agriculture than fuel. In truth, Nigerians will feel the impact of subsidised fuel more than subsidised agriculture for two reasons. One, subsidised fuel does not discriminate against the beneficiaries. Whereas I can drive to a filling station and buy fuel without belonging to any political party, experience with subsidised fertilisers and tractors is that they are a political tool employed to favour party members. Two, with tens of millions of farmers in Nigeria, how do you manage the subsidy in a fair and balanced manner? It looks very complicated, given our administrative "expertise". We should remember the infamous commodity boards. Farming subsidy is very good, but our history testifies against its impact on the masses. In any case, we can subsidise fuel and farming if we like!

Myth #4: We should spend fuel subsidy on infrastructural development instead. In truth, one does not stop the other. The argument for fuel price increases in the last 20 years is that there would be enough money to spend on hospitals, construct roads and build schools. No study has yet established a direct link between increases in fuel price and provision of infrastructure. It is just a convenient excuse to increase fuel price. If the budgets for education all over the country truly get spent on education and not embezzled, of course our education system would be among the best in the world. It has nothing to do with fuel subsidy as far as I know.

Myth #5: Subsidy is evil. On the contrary, subsidy is an interventionist tool meant to create economic stability, redistribute wealth and maintain some social order. In the UK, a litre of unleaded petrol is about £1, but almost half is tax. This is for two main reasons (1) to raise revenue for the state (2) to discourage use of private cars in favour of mass transit like buses and trains. However, public transport is subsidised. Train companies get about £1.5 billion every year as subsidies. Bus transport is also subsidised. Education is free up till secondary school level. Farmers get subsidies. Healthcare is free. Unemployed people get "dole". Children and elderly people get medicine free. All these are different forms of subsidy, financed by tax payers' money. We will talk about "tax payers' money" some other day, but my focus today is: what does the Nigerian state give to its citizens? No electricity, no roads, no drugs in the hospitals, no chemical in the school lab, no books in the library, no unemployment benefits, nothing. The closest to something is "fuel subsidy"-even when we are already paying $86.95 per barrel-and we are now being told that our fuel is too cheap. Yet, the politicians have stolen more than enough money to build another country for themselves!

Myth #6: Like GSM tariffs, petrol price will crash if government fully deregulates the sector. Well, when diesel pricing was fully deregulated, it was selling for N60 per litre. Today, two years after, it is heading for N100. It sold for N120 earlier this year. Kerosene price has been on a free fall too. But that is not even my point.
We cannot compare GSM with oil. Nigeria hopelessly depends on importation of petroleum products. We don't fix the price of crude. So, no marketer can just wake up one day and say because of competition, he would reduce pump price to N1 per litre! But in GSM, we don't import airtime.

So, tariffs and acquisition costs are entirely the decisions of the operators. By the time we stop importing fuel, we will realise that the current petrol price is the most excessive gain ever made in the history of mankind.

Conclusion: Private investors are interested in profits, not people, and will not build refineries now because it is a long-term investment. If President Yar'Adua does not want to be a failure like Obasanjo, he should close his eyes and invest in a new refinery that can churn out at least 15 million litres of PMS per day. Government should not run the refinery; God forbid. It should lease out the management and sell its interest off later. The priority now is to stop importation altogether. We can then discuss the little matter of crude oil pricing and profit margins later. The undeniable fact is that at N70, we are already paying too much for petrol, although it is excusable because we rely on imports.

@davidylan

you should have simply told me that you were looking for a post to quote, unquote, requote and subquote. See how small your initial post was, three lines. Before I gave you raw material to work with.

I see that you Multiple Personality Disorder has started again.

You came to this thread saying Oh why is America trying to do this. Next thing the nut just loosened and here you are.

It's amazing the way your psychoanalysis is going. MPD is already confirmed but I'm still trying to establish SAD and childhood abuse.

Let go some more. You're proving to be quite a formidable patient.

@ denex, it took you 6 solid hours to come up with a response and this is all you could muster? look at all the pages here and show me just one post that degenerated to the ridiculous, disgraceful, immature and harebrained level that yours predictably went to.
You made a post and i duly responded, sadly you had ABSOLUTELY nothing to say except to come up with attacks against my personality simply because you were exposed for the hypocrite and intellectual cesspool that you are.

Yes i do not subscribe to the US attempts to out law OPEC as i believe there has to be freedom of association but READ your own last post again critically! NOT A SINGLE reference was made to OPEC and the US bill. VIRTUALLY everything was just another of your ill-advised and poorly thought out diatribe against the person of George Bush and America.

That all you could come up with was insults shows that at least you consider that my post makes sense. I will no longer respond to your posts anymore unless you once again attack my person because i consider you an intellectual dead weight and nothing but a waste of space.

Thank you.

"DENEX, IT SEEMS YOU HAVE A PERSONAL VENDETTA AGAINST THE US."

"EVER BEEN DENIED VISA?"

that statement was yours. In fact it was an entire post from you. O sacred and issue focusing davidylan, I wonder what that has to do with discussing Oil Cartels.

And the rate at which you keep laughing about Nigerians lining up for visas and mocking them to send their families over to the other side of the atlantic, you forget that your own queueing has not ended yet.

Maybe is you spent more time on the tasks that would enhance the speed of approval for your greencard, maybe you wouldn't be this uptight and frustrated.

awww cry baby denex, did you see the icon after that post that you DELIBERATELY forgot to include in your last rebuttal? It was to indicate that it was made as a light hearted joke. In case you need me to remind you, it was made in response to your ill-advised statement accusing those who support the US bid to outlaw OPEC as "greencard" seekers.

"The US has the right to fight OPEC" I said it that these people will come and they will prove that the US even has the right to Nuke Nigeria if it does not provide its oil needs.

The greencard seekers will not stop. They say that OPEC has the right to protect its members interests but they are not saying US too has the right to protect its own interests. They say US has the right to fight OPEC.

This was the very FIRST post that strayed away from the focus of this thread so you could take a jibe at those who see things differently. Thank God for others who even though in opposition have prefered to argue from the standpoint of issues.

Wait. All this shambolic monologues you're having above, does it excuse your post?

"DENEX, IT SEEMS YOU HAVE A PERSONAL VENDETTA AGAINST THE US."

"EVER BEEN DENIED VISA?"

are these not the types of hypocritical displays you keep complaining about. You condemn personal attacks yet you are the champion of personal attacks on this forum.

moyinoluwa adenuga, you have grown to become that hypocrite DAVID DYLAN.

denex:

Wait. All this shambolic monologues you're having above, does it excuse your post?

"DENEX, IT SEEMS YOU HAVE A PERSONAL VENDETTA AGAINST THE US."

"EVER BEEN DENIED VISA?"

are these not the types of hypocritical displays you keep complaining about. You condemn personal attacks yet you are the champion of personal attacks on this forum.

moyinoluwa adenuga, you have grown to become that hypocrite DAVID DYLAN.

Coming from someone who FIRST accused others of being "greencard seekers" you really think you've got a valid point? Such a tool!

lol it seems you think you make a point by just posting. No sir, i did not attack you personally (well unless you want to see it that way to excuse your earlier disgrace of a post) but that was made in light hearted jest sir and if you had thought that was a personal attack why did you not say so earlier? why bring it up now so you can use it to excuse yourself?

You sir are the disciple of Afam. See what you have turned this thread into simply because i took apart your shambolic and inchoate attempt at Bush bashing. Keep it up and you can even put up my family tree too if that makes you happy.

@davidylan

Moyinoluwa, there is no way you could have made a light hearted joke. Your heart is heavy with depression and hardened with an array of opinionated views to select from.

There is no way you could make a lighthearted jest.

denex:

@davidylan

Moyinoluwa, there is no way you could have made a light hearted joke. Your heart is heavy with depression and hardened with an array of opinionated views to select from.

There is no way you could make a lighthearted jest.

you really need a leg to stand on and you latched unto that shaky one legged stool of a post? What do you make of your "greencard seekers" post? It was made as a light hearted joke too? 
I have no time for ignorant hypocrites like you who desperately need the internet to prove that they have more than space between their ears. I'm enjoying myself watching two great men fight for the wimbledon crown.

Sorry if my oppinionated views show u up for the tool you are. 

I suggest you watch more TV. What even happened to your large appetite? You use binge eat a lot before. Anyway, whatever you do, stop trying to use people on Nairaland as replacement for Shannon.

Take up some other hobby too besides TV. Get yourself a Wii or PS 3.

denex:

I suggest you watch more TV. What even happened to your large appetite? You use binge eat a lot before. Anyway, whatever you do, stop trying to use people on Nairaland as replacement for Shannon.

Take up some other hobby too besides TV. Get yourself a Wii or PS 3.

why do i get the impression someone is feeling so hurt, crushed and despondent? 
So you go as far as to go dig up my history to use as sling stones? What a huge shame considering i don't see you as important enough to go digging for your name, what you do as a hobby and whether you have family or not. Frankly i care not if denex is just one more faceless hypocrite who needs the internet to feel in charge of their miserable lives. you spend so much time and energy looking for ways to bash Bush, denigrate the US and insult personalities that it is a wonder you have time for any other thing at all.

and as for me binge eating. . .  what a complete idiot! Please do come up with better insults, you're putting yourself to shame.

The history of the PetroDollar could be described as a syndicate contract between the United States and Saudi Arabia to subsidize the USDollar, to prop up the Western banking system, to enable the Arab royals (sheiks & emirs) to continue to claim their national treasures as their private property.
The USGovt requirse three extremely important concessions from the Saudi Royal family. They stand as cornerstones to the PetroDollar system (if not defacto standard):

The Saudis must honor oil sales only in US$ transactions from their vast production fields across the kingdom.
They must recycle their vast ill-gotten wealth (due to its private nature) in New York and London banks, so as to support the US$-based banking system, and thus enable the funding of vast loan portfolios for Western usage.
They must purchase vast military weaponry in order to secure their grip of power and to keep stability in the hostile Persian Gulf region.
OPEC refuses to confront the USA, since it owns no military and is quite dependent upon the USA for its protection. They sell us oil to the us which protect their leadership



PETRODOLLAR & IRAN & IRAQ
by Jim Willie CB
April 19, 2007

Home: Golden Jackass website
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Jim Willie CB is the editor of the “HAT TRICK LETTER”

For specific detailed analysis of the Gold, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and Fed monetary policy, see instructions for subscription to my newsletter research reports, which include stock recommendations positioned to rise in the commodity bull market.

The focus on gold and the USDollar alone lacks a crucial factor in maintaining the world currency reserve on its fragile pedestal. The PetroDollar is a term used to describe the close relationship between the USDollar and the crude oil export business dominated by Saudi Arabia, manifested in the superstructure of the global banking system. So one could say the oil world provides the pool from which the US$ exchange rate valuation is applied and enforced. The gold community pays far too little attention to crude oil factors in my opinion, but Adam Hamilton does indeed. Gold investors love to point to Iran war tensions as a factor to lift the gold price, but they might overlook how the associated earthquakes in banking shift the very ground under the world currency reserve.

Iran has begun to sell its oil in euro currency transactions, already to China, and next to Japan. The gold market should rejoice, when they are actually not paying attention to this grand development. Petro sales outside the US$ realm represent the first of several tectonic shifts in global banking. Direct impact is assured to gold, once the certain changes are realized to bank systems. Imagine Japan changing the emphasis of their entire FOREX reserves management because they purchase a large block of crude oil from Iran, and pay in euros. How much more Persian Gulf oil will China purchase? How much will their future bills be due in euro terms? This article contains a capsule summary taken from the energy section of the April Hat Trick Letter, with a finale based in dark humor.

As a preface, the Gulf Arab currency talks ended with little progress in Medina Saudi Arabia. The meeting was to work toward a monetary union plan by its deadline of 2010. Governor of the United Arab Emirates central bank Al-Suweidi cast doubt in January that the six key Persian Gulf oil producers could hammer out any currency exchange rate regime as preparation for a single currency. The group wishes to clinch a deal like what the European Union has in place. My gut says such a unified currency would help defend the USDollar and its unofficial oil standard, by means of a single controllable device. The USGovt and bankers might require this device in order to exert strong influence on the increasingly independent sheikdoms scrambling to prevent massive losses in the foreign reserves.



Great strain has come when Persian Gulf nations, friendly sheikdoms, decide to diversify their vast FOREX holdings away from US$-based securities. When Qatar last autumn announced some minor diversification of their national FOREX savings account, the US Military ordered a pullout of several thousand troops. There lies evidence of a connection, the quid pro quo in the protection game to fortify the sheiks in power, as they each sit atop national treasures. When South Korea in 2005 twice suggested similar diversification of their FOREX account, suddenly US Military exercises were conducted off their shore, visible from the office buildings. Anyone who misses the linkage between foreign reserves held in US$-based securities and US Military support for the global banking system is at best in need of broader exposure, and at worst ignorant, compromised, or deceived. The USDollar is backed by many forces and factors, including a powerful military on an increasing basis. For four years running, the military has had a prominent presence in the center of the Middle East, inside Iraq.

THE PETRODOLLAR BACKGROUND

The history of the PetroDollar could be described as a syndicate contract between the United States and Saudi Arabia to subsidize the USDollar, to prop up the Western banking system, to enable the Arab royals (sheiks & emirs) to continue to claim their national treasures as their private property. Without the contract, the United States would not be able to perpetuate the privilege abused by the USGovt and Wall Street, whereby money is printed at will, private entities benefit routinely, trillion dollar budgets are hammered out, and no process exists either for foreign participation or approval. Bear in mind that the Saudi economy has among the highest national debt per capita among prominent nations, and has a pathetic per capita income among its citizens. The Saudi royals have cornered their national treasure, invested broadly across the world in private accounts, in a manner which seems totally beyond simple reproach.

The USGovt requirse three extremely important concessions from the Saudi Royal family. They stand as cornerstones to the PetroDollar system (if not defacto standard):

The Saudis must honor oil sales only in US$ transactions from their vast production fields across the kingdom.
They must recycle their vast ill-gotten wealth (due to its private nature) in New York and London banks, so as to support the US$-based banking system, and thus enable the funding of vast loan portfolios for Western usage.
They must purchase vast military weaponry in order to secure their grip of power and to keep stability in the hostile Persian Gulf region.
An aside, to drive home the point of corruption among Saudi royal families. The dirty little secret in Saudi business life is what is called ‘appropriation’ among the citizens. The royals are attempting to halt the practice, but that is like Wall Street attempting to eliminate insider information used for profitable gain. Royal underlings extort independent business owners into selling their businesses for 10% of value, under threat of imprisonment on trumped up charges like tax evasion, sexual misconduct, or other serious crimes.

The basis of the PetroDollar contract is that the Saudis keep firm its foundation, that being a strong link between the USDollar and oil sales. A better description is that OPEC members, led in particular by the Saudis, have subsidized the USDollar since 1971 when Nixon broke the Bretton Woods Accord for the gold backed USDollar. That is why in my work, the name PetroDollar Standard has been used, despite the lack of any formal standard. It is a de facto standard. Such a link between oil and US$ serves as a fait accompli for entire national banking systems being US$-based in their foundations. The PetroDollar basis for banking is not well understood nor publicized. That is because its vulnerability is so huge, and US institutions take it for granted. Foreign nations discuss the concept, while US circles do not.

If the PetroDollar prop were to be removed, entire national banking systems like the Japanese or Korean or German would shift, which would come as a delivered shock wave to the USTreasury Bond complex. The USTBond system is the active working manifestation of the USDollar, the world reserve currency. Large blocks of FOREX reserves held in US$-based securities would undergo change if the system changed, all harmful to the USDollar. Nowhere has the vulnerable condition of the PetroDollar been more pronounced than in the year 2000 when Saddam Hussein demanded payment for oil in euro currency. Probably near the top in reasons why Iraq was annexed and its oil reserves commandeered, his euro-based oil sales remain near the bottom in stated reasons in the subservient US press & media, if mentioned at all. That issue has returned to the forefront, with Iran.

ENTER THE ISLAMIC REPUBLIC OF IRAN

Iran has, with some measure of hesitation if not trepidation, traveled down the same path as Saddam. Back in the summer of 2005, Tehran leaders indicated their intention to create an Iranian Oil Exchange by September of that same year on the Isle of Kish. For various reasons, they delayed. Back then my sources informed me that fear of connection with European and London banks was a deep concern. Once integrated, the Western banks could inflict damage by formal bank seizures or blockage in some manner. Tehran officials also were fearful of computer viruses injected by probing Westerners. Iranian leaders are not so much kooks as thieves, who like their Saudi counterparts, raid their national treasures. In Tehran the practice is more akin to ‘skimming’ from operations whereas in Riyadh it is outright plunder of wealth.

On March 28-th, The International Herald Tribune provided an update on Iranian oil finances, with of course little or no coverage inside the US press. To do so would have put forth a secondary motive for pressure aimed at Iran by the United States. Their national affairs have been reported frequently, mainly nuclear in nature. Little focus has been given to tangents aligned with the oil business and banking systems tied to the PetroDollar itself. The IHT piece said “‘More than 50% of Iran’s oil income is paid in other currencies. We are reducing the dollar share and asking clients to pay in other currencies,’ Sheibany said. Sheibany said that almost all of Iran’s European clients and some of its Asian customers have accepted making payments in non-dollar currencies.” This is the first public admission, or boasting, made by an Iranian official on non-US$ oil sales. This is highly significant, and could be construed as a realistic cause for war by those who choose to think without the usage of red state prisms or blue state prisms.

Iranian oil sales attack the fragile global banking system extended from the Western dominated financial world. There are only two important props to the United States Govt and Economy, according to William Engdahl: ownership of the US$ world reserve currency, and command of the US Military. This was conveyed at the Munich Gold conference last November in a brief private conversation. He is a brilliant man who has specialized in the political, financial, and military aspects of the oil wars, with particular emphasis on the United States versus Russia. See his website which concerns itself with Geopolitics & Geoeconomics (click here).

Japan and China have been pushed into a corner by Iran. Of course, neither nation wishes to anger the United States. The precedent is important for payment in oil in euro transactions, much like a crack in the dike. If Chinese leaders were to push for all their oil imports to be purchased in euro terms, then the USGovt and its USDollar and its USTBonds have a big problem indeed. Japan continues to pay for oil sales from Iran in USDollars. Tokyo leaders are dragging their feet. Tehran leaders want euros for their oil sales, but to date do not demand euros, that is clear. Nippon Oil Corp, a major Japanese refiner, along with other purchasers from Japan, received ‘inquiries’ from Iran to pay for oil sales in euros. It seems like Tehran wants Japanese firms to ‘volunteer’ to pay in euros.

To further complicate the matter, the USGovt has pressured Japan not to purchase Iranian oil. The cited reason was ‘doing business with terrorist states’ or something to that effect. Consequently, more Iranian oil has been purchased by China and South Korea. In the process Japan has been left vulnerable. Watch both Japan and China in this tug of war, the former subservient, the latter unruly. Details on these several relevant points are provided in the April report.

Something is worth stressing related to the Shanghai Coop Org cited at the end of the outlined points. The SCO has the potential muscle of OPEC for new energy supply but also the potential military power of NATO on the security side. Obstructing, undermining, and interfering with the SCO formation and cooperation might be an integral motive for the USGovt and US Military as it engages Iran on its embryonic nuclear program. SCO is a very big problem, also never mentioned in the US press.

Mixed into the dangerous bubbling cauldron is Israel, which has been openly threatened by Iran’s leader Ahmadinejad (aka My Dinner Jacket) in a manner to whip up emotion regularly. Mullahs are bad business men, who do not think or plan beyond the next few months, hence do not invest prudently in future oil production. Their refinery business leaks enormous amounts of oil and end product, as much as Iranian leaders leak blather as though addressed to school pep rallies.

This is a cat & mouse game, but a deadly one. A crack in the PetroDollar foundation coincides with US Military pressure put upon Iran for its ‘nuclear ambitions’ when the true motive might be to avert fracture of the PetroDollar system. This is otherwise known as a protection racket coming unglued (see next section).

FLASHBACK TO APRIL 2005 (FULL CIRCLE 360)

What is described on the periphery of the PetroDollar foundation is a protection racket. Financial support is provided, or money is outright extracted, from one wealth center or source (here the Saudis with USTBond support), in return for prevention of their ouster from corrupt rule and access to a national treasure. Check out my past public article “PetroDollar & Protection Racket” (click here) from April 2005, which is still highly relevant today. Since the time of that written article, Norway has moved to sell oil in euro transactions in the Brent Crude market. The PetroDollar superstructure, so labeled since it includes not only transactions but also banking systems, is as shaky and weak now as the US Economy and banking system is vulnerable to the housing and mortgage crisis underway. That is not a coincidence in my view.

This article has resulted in more reader comments and kudos from fellow analysts than any other article penned by me, bar none. It hit a nerve. Here, two years late, the PetroDollar factor serves as the crosshairs for weapons aimed. The target is not Iraq but rather Iran. In fact the forces described are more relevant today than when written, since the Iraq War is going so badly, military forces are stretched fatigued recycled, more questions arise on accurate intelligence information (falsified or politically steered), and another war is seen as an additional morass and larger disaster potentially.

Taken as excerpts from the 2005 article, several quoted points made are:

What we have is a system for purchasing minerals and resources, totally bound in US$ denomination pricing and transaction settlements. The most visible element is energy trade, whose supplies clearly make for the largest bill payments.

The PetroDollar system is the practical commercial flipside, the visible evidence to the USDollar as world currency reserve in central banks. The financial effect is for banking systems across the globe to accumulate reserves in US$-based assets. What began as a checking account for oil payments has morphed into a gigantic bloated beast of a dangerous financial pyramid whose foundation has corroded and weakened as the USDollar bear market progresses.

The EuroDollar was created for many purposes. One was to facilitate payment for energy supplies in US$ terms, without the necessary step to convert trade surpluses back to DeutscheMarks or Swiss francs or British pound sterling. A EuroDollar is a US$ held in European banks, not converted to local currency units, and serves as a buttress to support the PetroDollar system.

The world is ‘obliged’ to sop up and purchase all the debts we generate, whether they approve or not of our policies, behavior, tendency, or justification for military actions. Almost without enforced discipline, the US system has evolved with unchecked abuse on a massive scale.

US federal debt, mortgage debt, and indirectly household debt are all absorbed by Asia. Exporters are somewhat bound to buy our US Treasury debt in order to continue selling in our market. Foreign central banks have few alternatives to sock away $20 to $30 billion per month, each month, every month.

Asia feels obliged to continue, in order to keep their industries and work force busy (avoid unemployment), and to prevent their banking systems from imploding. They cannot abandon support for the USDollar, and demonstrate that support with frequent central bank interventions.

The PetroDollar system is under new attack. Russia and fringe nations of OPEC are responsible for dissension. Their motive is self-preservation. Rather, they desire a stable or rising currency. If a nation can manage to trade a host of commodities (like oil, natural gas, copper, iron, cotton, coffee) in euro denomination, that national economy would be far less subject to the distress of systemic rising prices.

The Iraq War [had] numerous grounds for its justification, surely the weapons of mass destruction among them (although not taken seriously by me here). Also, stemming the sale of Iraqi crude oil in euro denomination was another motive, which in my view was far more important even in March 2003, just as important two years later now. The PetroDollar system is that important to defend.

OPEC refuses to confront the USA, since it owns no military and is quite dependent upon the USA for its protection. They sell us oil; we protect their leadership (see Kuwait and Saudi Arabia and Qatar).

The new Shanghai Cooperative Group represents a potential supply network which will have member nations of China, India, Russia, former Soviet Republics, and Iran as its core. Energy (crude oil & natural gas), industrial metals, and more are to be bought and sold by this new network, outside OPEC and its gaggle of disunity and diverse puppet strings held by Washington DC. The COOP is a direct answer to the corrupted OPEC cartel, which seems overly influenced by US leaders.

Pricing oil in euros helps nations to reduce domestic price inflation within their own economies, and to add to incoming revenue from oil sales. Removal of the PetroDollar system [would] have a magnificent effect on the crude oil price or the USDollar exchange rate or US Treasury yields. An effect on currencys and bonds as a secondary effect. Then we might see a gold effect. An acceleration down with USDollar could trigger a world bank crisis.

ENERGY TIDBITS, BROAD IMPLICATIONS

The stability of the PetroDollar depends heavily on keeping the confidence of the Persian Gulf oil producers. JPMorgan activities emanating from the Bank of Baghdad cannot be dismissed. Effectively, after JPMorgan was chosen to run the Iraqi Central Bank, they began issuing letters of credit using Iraqi oil assets to collateralize the loans. What exactly is this powerful bank and derivative book (mis)manager doing with the entrusted Letters of Credit on payments for Iraqi oil? When my writing expressed distrust of US Administrators and their integrity in managing the Iraqi oil, the response was hate email. My distrust was justified. The advent of a large new phenomenon in crude oil futures contracts coincides with the arrival of JPM and the US presence in Iraq. See the data for evidence and oily fingerprints. Details are provided in the April report, where some fine sleuth detective work by Rob Kirby is cited.

When explaining the crude oil price, politics and war account for most variation, not economics bound by supply & demand. It might be

the prospects of Iran War, or the military barrage probe on Beirut in summer 2006
the grand scale of US Military sale of crude oil & diesel in late summer 2006
the Goldman Sachs Commodity Index adjustment of the gasoline weight just three months before the US Midterm Elections
the State of the (dis)Union message related to the Strategic Petroleum Reserve
the total relaxation of pressure on Iran during those same Midterm Elections
the latest pressure on Iran.

its all politics

Well, now that the US has set itself against OPEC, we may as well start selling our Crude Oil in the more valuable and stable euro, rather than continue with the slipping and sliding dollar.

But first, it is adviseable that we dump all foreign reserves held in the dollar and opt for the euro instead. As this new Oil trade in euro will increase it's value and simultaneously reduce the value of the dollar as there will be less demand for the dollar.

That makes sense. I see no reason why a German would be buying crude from Nigeria in dollars when none of them actually use the dollar in the real sense of it.

I guess the Petrodollar system was initially viable when the dollar was very stable. But such is no more the case right now.

opec woud guaranty us security and it helps save up our reserves. i think we are better off in opec.