----- Original Message ----- From: "Gary Denton" <[EMAIL PROTECTED]> To: "Killer Bs Discussion" <brin-l@mccmedia.com> Sent: Wednesday, November 30, 2005 3:58 PM Subject: Re: Bitter Fruit
On 11/29/05, Dan Minette <[EMAIL PROTECTED]> wrote: > > > So, if I understand your point correctly, Bush went to war so that a > few > > > key industries could make about 10 billion per year in profit for a > couple > > > of years? He was not only wrong, but happily sacrificed thousands of > > > lives, hundreds of thousands of dollars, much of the military readyness > of > > > the US, just so a few key friends could make, compared to the 11+ US > > > ecconomy, chump change? > > > > > > In particular, if you compare the profits from this war to the chance > of > > > getting further tax cuts through, dosen't it seem like an inefficient > way > > > to get money to the wealthy? > > > > This was in response to your comment you cut off. Bush didn't care > > about the economy as a whole, the people he most associated with like > > the war business just fine. > > I realize you said that....but I wanted to be clear. He only associated > with a small subset of the wealthy? Most people in the oil business > assumed that the general effect of the attack would be an increase in oil > production by Iraq, which would have a net effect of lowering prices and > hurting the oil business. So, for Bush, the profits of military suppliers > was much more important than the profits of oil companies, oil service > companies, etc. He'd rather make sure that Seattle did OK than Houston, > for example? >Again there is some distortion or non-understanding of my answer - >Bush or Cheney did not only go to war so a few companies would make >billions of war-related dollars. >The oil companies that meet with Cheney before the war were interested >in dividing up Iraq's oil reserves and oil infrastructure. They met >with them is known - that was despite extensive efforts to keep it >secret - most of the people who met with him were leaked as shown when >several members lied to Congress about it. (Interesting that the GOP >Senator refuse to put them under oath which just drew attention to the >lies when they came out over the next couple days.) The fact that >Iraq was a good part of the discussion came out including maps of Iraq >oil fields. I'm sure you read a report that stated that, but I've read lots of reports on all sorts of things like that and I take them with a very large grain of salt: e.g. I really really don't believe that the evidence for Clinton murdering his aids is reliable. So, I would check the versimilitude of such reports. The DOE has, at it's website http://www.eia.doe.gov/emeu/cabs/iraq.html the following: <quote> In December 2004, Iraq's State Company for Oil Projects (SCOP) awarded a $150 million contract -- the first post-Saddam era upstream deal -- to Turkey's AvrAsya Technology Engineering, for development of the Khurmala dome. Development of Khurmala is aimed at increasing Khurmala production from 35,000 bbl/d to 100,000 bbl/d, helping to compensate for declines in output at the mature Kirkuk field. In addtion to Khurmala, in April 2005, SCOP reportedly granted a contract to Canada's OGI Group to help develop the Hamrin field, located southwest of Kirkuk, and with a production potential of 60,000 bbl/d or higher. Work is scheduled to take 18 months to complete. <end quote> It's not just the DOE. For example, the BBC reported Shell deciding not to tender an offer due to secruity and the small size of the contract, but that an Irish firm did tender offers. http://news.bbc.co.uk/2/hi/business/3879839.stm <quote> Iraq's interim government is expected to award the first three post-war oil production contracts by the end of August, industry sources say. Irish firm Petrel has confirmed it has put in bids for all three contracts on offer so far, making the final lists. However, Shell told the BBC it had declined to enter the tendering process for at least the first of the three. The big firms are said to be put off by the small size of the current deals, and the ongoing security situation. <end quote> Longer term contracts are going to wait until the long term government is in. That makes sense to me. Everything that has been done up to now indicates that there is bidding on contracts...and nothing indicates that a few American oil companies are being given oil. >So - yes oil companies wanted to divide up Iraq. Yes, large American >companies and many not so large were promised huge contracts. Yes, >American companies got huge contracts with practically no oversight. >The corruption in Iraq reconstruction and security is currently >estimated at ten times that of the oil-for-food scandal. Well, let's see. All of the oil sales were controlled by Hussein and that totaled about 2 million barrels/day. In 2001-2002, oil prices were in the $25 range, so lets just say an even 15 billion year. The security and reconstruction outsourcing clearly isn't 150 billion/year, so how can that be true? Who did the estimating? > > But, there is a real difference between that and a president starting a war > so a small subset of the rich can make some money, while other of his rich > friends lose their chance at additional tax breaks. >Under this President who among the rich has lost tax breaks? If you've been following the news, things are looking a lot dimmer for getting all of the tax breaks he's asked for through....with the budget conscious conservatives becoming very nervous. > 3) Make sure that American based oil companies, instead of French based oil > companies, British based oil companies, or Netherlands based oil companies > have contracts to produce the oil. >3 - with some elements of the others. OK, then how in the world can the relatively modest income profit for doing that compensate oil companies for the lower oil prices that would result from the extra production? Both supply and demand are relatively inelastic with respect to price. For example, world consumption appears to have increased between 2004 and 2005, even though prices have gone up considerably during that time. For the opposite extreme, consider 1999. Oil prices fell to $10/barrel in 1999. If you look at the DOE site I listed, you will see that this drop coincides with a significant rise in Iraq oil production. That wasn't the only reason. The 1998 burst of the Asian investment bubble resulted in a slowing of the increase in oil consumption. IIRC, theexcess production capacity (outside of Saudi Arabia which tried to serve as a swing producer) was ~5 million barrels per day. This caused prices to drop to 10 dollars a barrel. >I had an uncle who worked for Schlumberger, which is a multinational >more owned by US investors. But, the family, as of the '80s at least, owned enough to make hostile takeovers impossible. That's why Schlumberger could hold on to a great deal of cash. Their wireline monopoly in much of the world was a cash cow for years. They had billions in cash when companies were taken over and gutted for much less. The reason they felt safe, while Gearhart didn't, is that it would be near impossible to gain control of the company against the family's wishes. >I am not sure what you mean here. >Which of my statement are you denying or feel my views are incorrect. >That most of the Cheney team - shorthand - did not plan for years to >take over Iraq? The strongest paper that I saw at the project for a new American Century suggested that we actively support a rebellion in Iraq...up to the point of preventing a slaughter if the Republican guards attacked the rebellion. >That Cheney did not meet with the oil company executives before the >war began to divvy up oil contracts for Iraq? I don't think that happened. >That the CPA was intent on securing American long term contracts? The members of the CPA were mainly concerned with bugging out. Don't you remember who was running the finances after a year? A bunch of 20-something who admited to being in way over their heads. Their previous experience was doing things like managing a day care center. >That profit considerations are not a higher concern for companies than >overall US economic and foreign policy? That's probably true. So, why would they support an action that would cut their profits? That's the part of the claim that totally baffles me. >What are you saying I am you all are dead wrong about. Very often I >feel we are talking past each other. That the war in Iraq would have a positive effect on the profits of oil companies and oil service firms. Everyone thought that, if Iraq's production were to get back on line, oil companies would be hurt. There was some worry that the days of 10 dollar oil would return. No one expected that Bush would be so absolutely inept that oil production would be lower 2.5 years after the end of the war. If it went up to about 4.5-5 million barrels/day, it would have had a significant negative impact on oil prices. The difference would be 4-5 million barrels/day spare capacity vs. about 1 million barrels/day spare capacity including the swing production from Saudi Arabia. (If that was included before, the excess capacity would have been about 9 million barrels/day. Based on past experience, that would probably give us oil in the $25-$30 dollar a barrel range. Oil companies, at least those that owned oil fields or shared in the profits from the fields, made a lot of money in the 3rd quarter. Exxon (the largest company) made about 10 billion, while Shell, the third larges, made about 9 billion in profits...in only 3 months. With $25 oil, and 5 million barrels/day, the total cash flow from the Iraq fields is about $11 billion/quarter...a bit more than the profit of the largest oil company Clearly, operating companies don't get all of the money paid for the oil as pure profits. If the risk factor could be lowered (which obviously cuts possible losses)**, then an operating company that made 5% of this revenue as profit for itself would be doing fairly well. (In other words, companies would jump at the chance to make that kind of profit). Let's say they get a big chunk, and get 10% as their profit. That's still less than 5 billion/year profit. Now, that's nothing to sneeze at, but much smaller than the profits seen in 3 months by only one company. We can see the importance of price by noting that, assuming costs are independent of market price, each increase of a dollar a barrel results in an increase in the profit to all the producers (including the nationalized oil companies of course) of about $30 billion/year. Dan M. ** If things stay risky, then there is a real chance a company would lose a lot of money in a contract in Iraq. Just look at the billions lost in investing in Russian oil. Companies might not bid on a contract that gives them 5% of revenue because there would be a real chance that they would end up with a much smaller revenue flow than projected, and have their expense exceed their earnings. So, I think looking at what companies would do in a stable environment is a reasonable way to determine nominal profit rates. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
