The Russian Connection

Why Are U.S. Oil Prices Dropping So Far and So Fast?

Cold War III:  The Ukrainian economy is in free-fall, something the U.S. media never talks about.  Faith in the Ukrainian banking system and economy is disappearing, the hryvnia currency has been halved in value and Ukrainian industrial production is cratering.  Ukraine has no money to pay for Russian gas and its foreign currency reserves are very low.  In Russia due to the drop in oil prices, the ruble has dropped so low in value that efforts by the Russian government central bank might not stem the tide.  There are now runs on food and other tangible goods as a recession is taking hold.  Some are even speculating about a ‘palace coup’ in Russia, which is a goal of U.S. foreign policy.  This could destabilize 1/6^th of the globe if it came about, with no gain to the working classes.  The working classes of both countries are suffering due to the fight among the rulers.

You’ve heard of the somewhat bogus theory of ‘supply and demand’ – as if product over-production by firms is the only thing that drops prices.  Not really.  Over-production is built into a system of unplanned production – the capitalist market.  Which shows that the ‘magic hand’ of the market is really not very magical after all.  Government policy has a large role, as do the owners of those products and what they do in relation to production.  So does class struggle like strikes and the weather, war, advertising and lack of demand due to poverty, inequality or massive recessions.  Need we mention oligopolies and general price fixing, which has become the norm among world-spanning oligopolies.  OPEC is just such a world-spanning price-fixing cartel.   "Supply & demand" is pablum fed to the U.S. media and beginning Econ. 1001 students.

And when the geo-political aims of the dominant capitalist governments and the dominant capitalist ‘producers’ coincide?  Not hard to predict.  Patrick Smith is a former reporter for the International Herald Tribune and an active opponent of America’s aggressive foreign policy.  He was one of the first to point out that Kerry’s visit to Jeddah in early November came at the same time as a further hardening of U.S. policy towards Russia over the Ukraine.  Smith’s article appeared November 13 in Salon.com.  Kerry’s visit also came at a time when Russia had again proposed to process Iran’s uranium so it could not be used for weapons, a deal Iran finally accepted.  In other words, a deal over the Iranian nuclear issue was at hand.  A deal that would upset both the U.S. and the Saudis.  They don’t want a deal.

In Smith’s words, based on his inside source:

 

“…the visit had to do with Washington’s unabated desire to ruin the Russian economy. To do this, Kerry told the Saudis 1) to raise production and 2) to cut its crude price. Keep in mind these pertinent numbers: The Saudis produce a barrel of oil for less than $30 as break-even in the national budget; the Russians need $105.”

To this day, the Saudi Royal Family (and the little Gulf principalities that follow in their wake) are still refusing to cut production as they would normally do, because they too want to damage Russia’s economy – and Iran’s and Venezuela’s.  These are all countries that do not jump to the dictat of the U.S.  Just today the Saudi’s again denied a reporter’s question that they had an interest in undermining the Russian economy. 

The message from the blinkered American news media is that ‘oh, oil fracking is the source of overproduction and the low costs of oil. Ain’t cheap prices great?”  Oil fracking is only a small part of the world industry however.  And indeed, the U.S. fracking industry could become collateral damage.  Some companies are already producing oil they cannot afford.  If oil drops below $55 a barrel, Bloomberg sees a third of the industry shutting down.  Many firms started up due to the almost free-money policy of the Federal Reserve.  This has created the present oil and gas fracking bubbles, along with some others like in rental housing, and the stock market gas itself.  It has been recently reported by Smith that the gas fracking industry in the U.S. is really behind sanctions - as they want to separate Russian gas from Europe and take over that market.

If you remember in Chile in 1973 the American government, the CIA and the ‘intellectuals” at the University of Chicago promised to make the “Chilean economy scream.”  This was because a socialist, Allende, had been elected president.  Not long after that, a military coup sponsored by the U.S. occurred, and the Pinochet dictatorship was established.  This tactic has not changed 41 years later.  Now they want to make the ‘Russian economy scream.’  Just like they tried to make the Cuban economy ‘scream’ for 53 years.  Or the Iraqi economy ‘scream’ after the first Gulf War, which killing hundreds of thousands and went on until Bush II’s invasion.  Or the continuing boycott against Iran.  Or Yeltsin’s and America’s idea of introducing capitalism overnight in Russia, which created a 10 year depression after the Yeltsin-led counter-revolution in 1991.  This made Russian workers and farmers scream. 

It is people that they want to make scream.  That is the price for bringing Ukraine into the U.S. orbit.  Which is part of why Obama just signed a bill put forward by Republican hardliners to give military weapons to Ukraine.  This will aid the Ukrainian fascist militias fighting pro-Russian separatists.  Ukraine has now dropped its unaligned status.

The hardships these policies are having on the Ukrainian and Russian peoples is growing.  The working classes in these two countries need to organize themselves independently. But this is not a an even situation.  It once again proves that any time the U.S. comes around seeking to promote ‘democracy’ they are really there to destroy.  Beware of American governments bearing gifts. 

Red Frog

December 22, 2014