Charles E. Carlson
Chuck discusses this article:
Two excellent studies in the Financial Times of London (FT) revealed that much of the cost of the war in Afghanistan has been hidden. The full costs are unknown to the Defense Department itself. In the article: “$1 Trillion Cost of Longest US War Hastens Retreat from Military Intervention,” it was noted: “’The dirty secret about this war is that the Pentagon or anyone else in the government cannot tell you how much it has actually cost us,’ says an administration official.” Financial Times also explained the oil collapse on Nov 27, 2014 in a study: “Oil plunges as OPEC tests the mettle of US shale industry.” Read together, the two research papers tell us that much of the US shale oil boom is in fact an unstable bubble made possible by US serial wars in the Middle East. Inflated prices of gasoline, fuel oil, and diesel have allowed the development of the otherwise unprofitable giant oil shale deposits in Texas and North Dakota, as well as many smaller deposits that are being extracted by the controversial process known as fracking. Funding has all too often involved non-recourse loans or bonds sold to investors who do not understand that the price of oil could go down.
The enormous $1tn bill for the 13-year Afghan conflict, which has never been detailed by the government, will add to the pervasive scepticism about the war in the US. ©Reuters
The supply was reduced and price elevated by paralyzing Middle Eastern counties that have the cheap oil the world needs. The USA continues to throttle production from the lowest cost oil producers: Iraq, Libya, Iran. Sanctions on Russia appear to be a part of this tactic.
The world-wide impact of the energy bubble is also staggering. According to a Goldman Sacks report quoted in the December 18th Bloomberg News: “After crude prices dropped 49 percent in six months, oil projects planned for next year are the undead — still standing upright, but with little hope of a productive future. These zombie projects proliferate in expensive Arctic oil, deep water-drilling regions and tar sands from Canada to Venezuela… They looked at 400 of the world’s largest new oil and gas fields — excluding U.S. shale — and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70.”
Since 1990, US wars have had the effect of creating an artificial shortage that raised prices at the pump from about one dollar per gallon of gas to over four dollars at the peak. These high oil prices allowed financing of the shale oil industry on the false premise that $100 or more per barrel of oil is a permanent and necessary condition. FT discloses that the highest cost US shale oil operations must get $115 per barrel of oil to break even, and the current price is less than half that.
Shale oil drilling required rapid advances of old technology, called hydraulic fracturing, with far-reaching local community consequences that are only now being fully examined by competent public interest groups and regulators.
The true cost of the wars that helped create high-priced oil remains elusive. FT states: “The enormous bill for the 13-year conflict, which has never been detailed by the government, will add to the pervasive skepticism about the war in the US, where opinion polls show a majority of Americans believe it was a bad idea.” The authors of the article, Geoff Dyer and Chloe Sorvino, go on, “With the Iraq war having already cost the US $1.7 trillion, according to one study, the bill from the Afghanistan conflict is an important factor in the broader reluctance among the American public and the Obama administration to intervene militarily in other parts of the world — including sending troops back to Iraq.” FT reports: “John Sopko, the government’s special inspector-general for Afghanistan, whose organization monitors the more than $100 billion that has been spent on reconstruction projects in the country, said that “billions of dollars” of those funds had been wasted or stolen on projects that often made little sense for the conditions in Afghanistan.” John Sopko stated the amount the US had spent on reconstruction was more than the cost of the Marshall Plan to rebuild western Europe. Sopko is quoted: “My auditors tell me things [about spending plans] and I say, ‘you have to be making this up, this is Alice in Wonderland’. Since 2001, the government has appropriated $765 billion for the war in Afghanistan:”
The FT report itemized equipment never used and lavish structures built that have never been occupied, and shocking ongoing commitments that were previously undisclosed. The report also claims half a trillion dollars more in future medical and pension costs have already been committed for soldiers who have left the military, and “One estimate is that medical spending on veterans from both Iraq and Afghanistan has so far reached $134 billion, and this can only get worse.” FT discloses: “Since 2001, the defense department’s base budget has increased by $1.3 trillion more than its own pre-9/11 forecasts. The future bill from the Afghan war is likely to run into hundreds of billions of dollars more. The Pentagon has indicated it wants funding of $120 billion for 2016-2019 for operations in Afghanistan, although the eventual cost will depend on the future mission that the White House decides on…The two wars have also added to the Pentagon’s fast-growing pension bill: the military pension system has an unfunded liability of $1.27 trillion, which is expected to rise to $2.72 trillion by 2034.”
We can not know the ultimate cost of the wars or how it will be paid for. In truth it can not be paid, for if the 2015 federal budget is just over a trillion dollars, which congress approved without any statement of how much will be in deficit. It is foolish to think three times that huge amount for future military pensions can ever be paid with real money, in addition to an admitted $17 trillion of federal debt.
The long-lasting result from all our wars has been and will be inflated money. The government denies the existence of inflation, but gasoline was about a dollar a gallon at US pumps before the Kuwait oil fields were set on fire in January 1991 during the G.H.W. Bush regime’s first war on Iraq, and hamburger was about a dollar a pound, remember?… Is there inflation in your home?
USA serial wars have also utterly destroyed the countries we have invaded and that also has a cost. After the first destruction of Iraq’s army in Kuwait, but before the USA occupied Iraq, a group of traveling Americans toured there. One of them, a Missouri farmer named Archie Bloomhorst, reported his amazement in learning that every Iraqi was then entitled to a modest allocation of gasoline at a cost of about five cents per gallon, from the government that controlled the production. It seems no one in Iraq was too poor to heat his house or put fuel in a car. Those who did not need their allocation could sell it. Thus Iraq’s oil was shared with every citizen. Now it’s under control of international oil companies. The intrinsic, per barrel value of Iraq’s deposits are double or triple the value of USA “tight” oil shale deposits. Before the US destroyed Iraq, its government could sell oil at $20-30 per barrel on the international market and could still afford to virtually give an allocation of gasoline to each Iraqi citizen. Now Iraqis are living in poverty.
FT‘s expose on shale oil development explains that the Saudis and their little rich cousins, the several Emirates, who together control OPEC, have decided not to cut productions and sales to drive the price back up. Since July, the price of crude oil has free fallen from over $100 per barrel to well under $60, great news for almost everyone but the oil companies. The phony wars, including the proposed one on ISIS, have resulted in this upward multiplication of all prices.
Peace saves energy and promotes lower prices. We US citizens have been scammed again to accept serial wars that ultimately destroy us financially, if not morally. Most of us will not, or can not, leave our country, we belong here. So it’s up to us to change it, or die watching our leaders cheat and steal from us. Which will it be?
Notes:
“$1 trillion cost of the longest US war hastens retreat from military intervention,” Geoff Dyer & Chloe Sorvino, Financial Times, Dec. 14, 2014: http://www.ft.com/cms/s/2/14be0e0c-8255-11e4-ace7-00144feabdc0.html
“Oil plunges as OPEC tests the mettle of US shale industry,” Anli Raval & Neil Hume, Finacial Times, Nov. 27, 2014: http://www.ft.com/intl/cms/s/0/eda2b8a6-7645-11e4-a777-00144feabdc0.html#axzz3MO2APnbU
“Bankers See $1 Trillion of Zombie Investments Stranded in the Oil Fields,” Tom Randall, Bloomberg, 12/18/2014: http://www.bloomberg.com/news/2014-12-18/bankers-see-1-trillion-of-investments-stranded-in-the-oil-fields.html
