America Out of Gas
Commentary: How rising oil prices are obliterating America's superpower status.
May 8, 2008
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[Introduction by Tom Engelhardt]
These days, the price of oil seems ever on the rise. A barrel of crude broke another barrier Wednesday—$123—on international markets, and the talk is now of the sort of "superspike" in pricing (only yesterday unimaginable) that might break the $200 a barrel ceiling "within two years." And that would be without a full-scale American air assault on Iran, after which all bets would be off.
Considering that, in the wake of the September 11, 2001 attacks, oil was still in the $20 a barrel price range, this is no small measure of what the Bush administration years have really accomplished. Today, it's hard even to remember not 9/11, but 11/9—November 9, 1989—the day that the Berlin Wall fell, signaling that, soon enough, after its seventy-odd year life, that Reaganesque Evil Empire, the Soviet Union, was heading for the door. In 1991, it disappeared from the face of the Earth without a whimper. Until almost the last moment, top officials in Washington assumed it would go on forever; and, when it was gone, most of them couldn't, at first, believe it. Soon enough, however, the event was hailed as the greatest of American triumphs—"victory" not just in the Cold War, but at a level never before seen. Finally, for the first time in history, there was but a single superpower on the planet.
At the dawn of a new century, the administration of George Bush the younger, packed with implacable former Cold Warriors, came to power still infused with that sense of global triumphalism and planning to rollback what was left of the old Soviet Union, an impoverished Russia, into an early grave.
Almost seven and a half years later, as Michael Klare so vividly indicates below, an observer might be pardoned for wondering whether there hadn't been two super losers in the Cold War. Had the Soviet Union, the weaker of the two great powers of the second half of the last century, simply imploded first, while the U.S., enwreathed in a cloud of self-congratulation, was almost unbeknownst to itself also slowly making its way toward an exit? And, as a final irony, Klare—author of the not-to-be-missed new book Rising Powers, Shrinking Planet—points out, energy has refloated Russia, even as it's sinking us. Tom Engelhardt
America Out of Gas
How rising oil prices are obliterating America's superpower status.
By Michael T. Klare
Nineteen years ago, the fall of the Berlin Wall effectively eliminated the Soviet Union as the world's other superpower. Yes, the USSR as a political entity stumbled on for another two years, but it was clearly an ex-superpower from the moment it lost control over its satellites in Eastern Europe.
Less than a month ago, the United States similarly lost its claim to superpower status when a barrel crude oil roared past $110 on the international market, gasoline prices crossed the $3.50 threshold at American pumps, and diesel fuel topped $4.00. As was true of the USSR following the dismantling of the Berlin Wall, the USA will no doubt continue to stumble on like the superpower it once was; but as the nation's economy continues to be eviscerated to pay for its daily oil fix, it, too, will be seen by increasing numbers of savvy observers as an ex-superpower-in-the-making.
That the fall of the Berlin Wall spelled the erasure of the Soviet Union's superpower status was obvious to international observers at the time. After all, the USSR visibly ceased to exercise dominion over an empire (and an associated military-industrial complex) encompassing nearly half of Europe and much of Central Asia. The relationship between rising oil prices and the obliteration of America's superpower status is, however, hardly as self-evident. So let's consider the connection.
Dry Hole Superpower
The fact is, America's wealth and power has long rested on the abundance of cheap petroleum. The United States was, for a long time, the world's leading producer of oil, supplying its own needs while generating a healthy surplus for export.
Oil was the basis for the rise of first giant multinational corporations in the U.S., notably John D. Rockefeller's Standard Oil Company (now reconstituted as Exxon Mobil, the world's wealthiest publicly-traded corporation). Abundant, exceedingly affordable petroleum was also responsible for the emergence of the American automotive and trucking industries, the flourishing of the domestic airline industry, the development of the petrochemical and plastics industries, the suburbanization of America, and the mechanization of its agriculture. Without cheap and abundant oil, the United States would never have experienced the historic economic expansion of the post-World War II era.
No less important was the role of abundant petroleum in fueling the global reach of U.S. military power. For all the talk of America's growing reliance on computers, advanced sensors, and stealth technology to prevail in warfare, it has been oil above all that gave the U.S. military its capacity to "project power" onto distant battlefields like Iraq and Afghanistan. Every Humvee, tank, helicopter, and jet fighter requires its daily ration of petroleum, without which America's technology-driven military would be forced to abandon the battlefield. No surprise, then, that the U.S. Department of Defense is the world's single biggest consumer of petroleum, using more of it every day than the entire nation of Sweden.
From the end of World War II through the height of the Cold War, the U.S. claim to superpower status rested on a vast sea of oil. As long as most of our oil came from domestic sources and the price remained reasonably low, the American economy thrived and the annual cost of deploying vast armies abroad was relatively manageable. But that sea has been shrinking since the 1950s. Domestic oil production reached a peak in 1970 and has been in decline ever since—with a growing dependency on imported oil as the result. When it came to reliance on imports, the United States crossed the 50% threshold in 1998 and now has passed 65%.
Though few fully realized it, this represented a significant erosion of sovereign independence even before the price of a barrel of crude soared above $110. By now, we are transferring such staggering sums yearly to foreign oil producers, who are using it to gobble up valuable American assets, that, whether we know it or not, we have essentially abandoned our claim to superpowerdom.
According to the latest data from the U.S. Department of Energy, the United States is importing 12-14 million barrels of oil per day. At a current price of about $115 per barrel, that's $1.5 billion per day, or $548 billion per year. This represents the single largest contribution to America's balance-of-payments deficit, and is a leading cause for the dollar's ongoing drop in value. If oil prices rise any higher—in response, perhaps, to a new crisis in the Middle East (as might be occasioned by U.S. air strikes on Iran)—our annual import bill could quickly approach three-quarters of a trillion dollars or more per year.
While our economy is being depleted of these funds, at a moment when credit is scarce and economic growth has screeched to a halt, the oil regimes on which we depend for our daily fix are depositing their mountains of accumulating petrodollars in "sovereign wealth funds" (SWFs)—state-controlled investment accounts that buy up prized foreign assets in order to secure non-oil-dependent sources of wealth. At present, these funds are already believed to hold in excess of several trillion dollars; the richest, the Abu Dhabi Investment Authority (ADIA), alone holds $875 billion.
The ADIA first made headlines in November 2007 when it acquired a $7.5 billion stake in Citigroup, America's largest bank holding company. The fund has also made substantial investments in Advanced Micro Systems, a major chip maker, and the Carlyle Group, the private equity giant. Another big SWF, the Kuwait Investment Authority, also acquired a multibillion-dollar stake in Citigroup, along with a $6.6 billion chunk of Merrill Lynch. And these are but the first of a series of major SWF moves that will be aimed at acquiring stakes in top American banks and corporations.
Ron Paul 2008