Here, in its entirety, for
posterity or for sticking up on your fridge, is a lovely little,
unsigned editorial from Saturday's NYT:
How well do you know your dog? The answer is, not nearly as well as
your dog knows you. Given the right incentives, humans can certainly be
perceptive enough. But most dog lovers discover, sooner or later, that
dogs have an alertness to the behavioral signs of their owners that
humans rarely equal. And that's nothing. Scientists have recently
discovered that dogs can distinguish, with almost unerring accuracy,
between breath samples from people with lung cancer and from people
without. The dogs have to be trained to do it, of course. But the fact
that they can do it at all is remarkable. There aren't enough biscuits
in the world to teach a human to smell at such an extraordinary level
of subtlety.
This news will give pause to almost anyone who lives with a dog. Just
what a dog "knows" is hard to say, because the human idea of "knowing"
is so closely related to the ability to express what you know. Even
trained cancer-sniffing dogs express their knowledge - their
distinction between samples - only by sitting or not sitting. But this
is what always happens. We tend to forget the extraordinary powers of
the animals we live with simply because we live with them. We tend to
humanize them, which means, if nothing else, that we tend to reduce
them - in terms of their sensory powers - to our muddling level. We can
barely take in the fact that when a dog comes up and sniffs us, it is
really giving us a nasal M.R.I.
Not that this will change the dynamic of our relations with man's best
friend. For a while - remembering the cancer-sniffing dogs - some of us
will wonder when we see our pets cock their heads, "What are you
looking at?" But time will pass, and humans will be humans, and we will
forget, at our end of the leash, that the beast we are walking with may
already know things about us that we will discover only too late.
Since
the 1970s, the price of oil has been set, not by OPEC, but by buyers
and sellers through two independent exchanges in New York and London.
The US has been able to substantially control this price through most
of the intervening period because (1) all three exchanges quote the
price and transact only in $USD, so the US does not need to worry about
the free-fall of its currency interfering with their ability to buy,
(2) oil companies and oil nations friendly to the US have been
overstating their reserves in an effort to counter the growing evidence
that global production is about to peak, and (3) the OPEC countries
have substantial leeway in adjusting production levels to 'moderate'
prices. Recently, OPEC producers friendly with the US have been
producing well beyond sustainable capacity, using forced water
injection and other methods in their wells to increase oil flow per day
beyond sustainable levels in an effort to keep the market price from
rising too quickly. When you control the currency of the transaction,
the information flow on production and reserves, and the rate of
production, you pretty much control the price, at least in the short
run. And when your economy is utterly dependent on foreign oil, you are
really motivated to control that price.
Why
would OPEC be complicit in this? Many of the non-democratic members,
notably Saudi Arabia, need arms, intelligence, and political support to
fend off insurrection from their people. There have also been times
(even quite recently, believe it or not) when OPEC members have needed
support from customers to keep demand high so that the price does not
fall significantly -- their economy depends heavily on demand for oil.
The US provides huge military and political support to the Saudis and
others, and most US administrations have encouraged waste and
discouraged conservation. Like the US-China co-dependency for
manufactured goods, the US-Saudi co-dependency for oil ensures an
artificially low price to US corporations and consumers in return for
political support and sustained high demand for producers. Deals with
the devil (or perhaps between devils).
Neither
of these massive market distortions is sustainable, of course. And
there is a rash of new information suggesting that, for oil at least,
the end of this devil's bargain is near:
In late 2000, Iraq,
annoyed by the decline in the $USD, announced that from that time on
they would sell and settle only in euros. We all know America's
response to that. Since the US occupation, Iraq oil sales are back to
using the $USD.
As a result of the recent hurricane season, Gulf of Mexico production, which destroyed
115 oil platforms and damaged 183 pipelines, remains down 27% from
pre-hurricane levels, and only 10% more production is expected by the
onset of the next hurricane season. Rita and Katrina also caused
hundreds of oil spills, which received almost no publicity in the media.
Iran recently announced
that the consequence of any embargoes or other sanctions against it
(threatened because of their refusal to stop nuclear research &
development) would be a huge spike in oil prices to over USD$100/barrel
(it has recently jumped to $68). European leaders confirmed that, thanks to the insatiable demand for oil by China and India, this was no idle threat.
Almost every day brings new warnings about the unsustainability of the US trade deficit. New York Federal Reserve
President Timothy Geithner said
yesterday the massive and growing U.S. current account deficit
presented "a threat to the world economy." As a result, the value of
the $USD dropped 1% in a single day yesterday against a basket of other
currencies.
On Friday Kuwait confessed that its actual oil reserves, which previously accounted for 10% of the world's total, were less than half what it had previously reported.
Shortages are already starting to occur in areas of high demand, or due to political instability. This week Turkey lost its supply of natural gas when Iran cut supplies, citing cold weather problems. And recent pipeline sabotage in Russia has cut off supplies to Georgia and Armenia.
Iran proposed in 2004 to create a bourse (market) for its oil, to be denominated in euros.
It is scheduled to open this spring. Iran is already accepting and
settling orders with European customers in euros. But the new bourse
will enable any country (especially China and India) to dump their $USD
reserves in favour of the healthier euro, making them less dependent on
the value of the $USD. This could precipitate a collapse of the $USD,
domino-style, as countries scurry to switch from dollars to euros
before the dollar falls further. That would mean that customers --
especially China -- would take a bath on the trilions of $USD reserves
it is sitting on to back its receivables from the US, and would likely
cause them to abandon the dollar for future trade in favour of the euro
(and revalue their currency). The artificially-suppressed price of
Chinese goods would therefore soar in the US market, with two
consequences: (a) a sharp drop in Chinese sales to the US, damaging the
Chinese economy, and (b) a sharp spike in inflation in the US, as
measured by the consumer price index, damaging the US economy. In order
to hide the impact of this change and stave off panic selling of the
$USD, the US Fed has agreed to stop publishing data
on eurodollars -- the amount of money countries other than the US are
holding in $USD to secure oil payments and $USD receivables.
Iran
has recently started pulling its assets out of Europe and shifting them
to Asian banks (all Iranian bank accounts in the US were frozen in the
1970s as punishment for Iran's overthrow of the US-backed Shah). $8B
has been shifted already. Dale* speculates that this means Iran has
already made a deal with China to sell its oil to them, whether
sanctions against Iran come into effect or not. I suspect that would
require another oil market to be established in Asia, perhaps
denominated in some 'basket' of Asian currencies. That would be a
win-win for Iran and for China. Some European banks have stopped doing business with Iranians already, presumably in anticipation of the imposition of sanctions.
Here's
an interesting article on this whole subject published recently in the
dubious Moonie-owned right wing paper chain. The Moonies, thanks to
their purchase of UPI, now have a seat in the inner circle of Bush
media contacts -- a seat on Air Force One. Are the Moonies warning us,
or Bush, of the possible consequences of invading, or not invading Iran?
And here's a recent, sobering overview of the vulnerability of the entire oil market, written by a former British oil industry executive.
Anyone want to give me odds on $100/barrel oil at some point before the end of this year?
*Thanks to Dale Asberry for most of the links above, and for connecting the dots.
Chart
is from peakoil.net. Part of the thin white band on this chart will be
the only benefit the US will receive for the destruction of the ANWR
and the massive damage to Alaska's fragile ecosystem.
MADE IN CANADA
trust your
instincts 
