Why A Middle East Ceasefire Hasn't Happened Yet? Oil

Why A Middle East Ceasefire Hasn't Happened Yet? Oil

Here's a major shock. The super-powers that are influencing the lack of a U.S.-led ceasefire are the "Big Oil" companies and the House of Saud.

I can't remember the last time President Bush or Vice President Dick Cheney let energy companies influence major policy initiatives, can you? [sarcasm]

It's all about oil

If this war was taking a bite out of Exxon or the House of Saud, a ceasefire would have been imposed.

So why am I writing now? The answer is that, while I don't speak Arabic or Hebrew, I am completely fluent in the language of petroleum.

This Thursday, Exxon is expected to report the highest second-quarter earnings of any corporation since the days of the pharaoh: $9.9bn in pure profit collected in just three months. This is courtesy of an oil shortage caused by pipelines on fire in Iraq, warlord attacks in Nigeria, the lingering effects of the sabotage of Venezuela's oil system by a 2002 strike... The list goes on.

Exxon's Brobdingnagian profits simply reflect the cold axiom that oil companies and oil states make their loot not by finding oil but by finding trouble. Finding oil increases supply, and increased supply means decreased price; finding trouble, however, - wars, coups d'etat, hurricanes, whatever - can disrupt supply, raising the price of oil.

A couple of examples from today's Bloomberg newswire:

Crude oil traded above $75 a barrel in New York as fighting between Israeli and Iranian-backed Hezbollah forces in Lebanon entered its 14th day... Oil prices rose last month on concern that supplies from Iran, the world's fourth largest producer, may be disrupted in its dispute with the United Nations over its uranium enrichment.


And, according to a trader:

'I still think $85 is likely this summer. I'm really surprised we haven't seen any hurricanes.'

Am I saying that Tehran, Riyadh and Houston oil chieftains conspired to ignite a war to boost their petroleum profits? I can't imagine it. But I do wonder whether Bush would let Olmert have an extra week of bombings, or the potentates of the Persian Gulf would allow Hamas and Hizbullah to continue their deadly fireworks if by doing so they would cause the price of crude to crash.

You know and I know that if this war took a bite out of Exxon or the House of Saud, a ceasefire would be imposed quicker than you can say "Let's drill in the Arctic."