RE: [MLUG - DISCUSSION] Unfolding Universe (discovery channel)

["(8?»" <EMAIL:PROTECTED>]

*Big snips*

At 01:27 PM 6/7/2002 -0500, you wrote:

>Actually, I'm trying to argue that this emphatically not the case.
>*No* commodity is really the basis or foundation of modern society.
>Countries that specialize only in the production of commodities
>have, as a rule, *less* power and smaller economies these days.
>One reason for this is that the primary products of a
>commodity-dependent exporter are...wait for it...commodities.  Lots
>of countries can produce them.  Yes, some commodities can become in
>the short or even slightly longer important enough to have political
>implications.  Consider for a moment: the really infuriating thing
>about the Bush energy policy is that it places supreme importance on
>things that are really not very important, and no emphasis on things
>that could well be.  In other words, it's a bad policy primarily
>because it *uselessly* enriches one industrial sector over others.
>If oil really were as horribly important as you seem to suggest,
>than the Bush policy (while it still might be bad) would be at least
>explicable.

You lost me on that last sentence, but Bush's oil policy focus seems fairly 
self-explanatory to me. We are arguing 2 different things here. I agree 
with you that countries that produce commodities hold no power, since there 
is no ability to differentiate products. That commonality does not negate 
how critical a certain commodity might be when considered in light of 
global supply and demand forces though.


Whoever controls the ability of a commodity to move has an advantage over 
markets. Normally this is not the producer, but with oil, OPEC has created 
an exception. Their control is not absolute, but can still be implemented. 
In 1972, the OPEC embargo proved this to be the case. The embargo was ended 
(for practical purposes) when Venezuela made up the short-fall, becoming 
our largest supplier at the time.

Speaking of Venezuela......


A little more news on the failed coup. 
http://www.gregpalast.com/detail.cfm?artid=153&row=1

According to Greg Palast, the Secretary-General of OPEC warned Chavez of 
the coup. Why? He happens to be head of OPEC, and is working to restructure 
the organization. Chavez's focus is also upon the citizens, not the ruling 
elite, and is trying to change the economic structure to better benefit his 
citizens. The Arab members had/have? been discussing a new embargo against 
the US for their support of Israel. Having Chavez as the head of OPEC 
during such a time would've made it impossible for the US to get Venezuela 
to break the embargo again.

Here is an article predicting the coup
http://www.zmag.org/content/LatinAmerica/wilpertvenez.cfm



> > I cannot think of a single transaction in the world economy that
> > does not rely on oil. You are inferring that being an oil
> > producing country should lead to a strong economy. The reason
> > that most of them are not world powers is that the country
> > doesn't receive the wealth generated by their oil, it all goes
> > west, with the exception of what it takes to payoff those who
> > are safe-guarding it for us.
>
>The world economy certainly does rely on some source or sources of
>energy.  Oil is currently the *cheapest* and best fuel for many
>purposes.  It is the cheapness of oil that is the key point here.
>The reason why oil-dependent countries do not have large economies
>is that they have to produce millions of barrelsful of the stuff,
>and oil production is both capital-intensive and (increasingly)
>technology-intensive.  US oil companies possess both superior
>capital and superior technology.  *They* make out fabulously well
>(pun unintended), which helps create the illusion that oil
>production is a big money venture.  But these days you have to be
>something like Kuwait or have the Permian Basin in your backyard for
>oil to be the basis of anything like a first world economy (or have
>something smaller, some other prospects, and only 4 million people,
>which is the Norwegian strategy.  Really, do the numbers if you
>don't believe me.  All of the crude oil in the world doesn't add up
>to anything really that impressive.

I wouldn't say that oil is the cheapest (many costs other than the pump 
price), just the first to dominate (just like I wouldn't say M$ is a leader 
due to quality). As is the case in any power structure, those at the top 
want to stay there, and aren't interested in alternative fuels (competition).

You also hit upon another factor of production that is tilted in favor of 
the US, the fact that it is capital and tech sensitive. As long as it is 
western $ financing production, the producing country is out of the profit 
loop.


>
> > The importance of oil was apparently not lost on Roosevelt
> > during WWII either (I've recently learned of this, so I won't
> > try to pretend I know too much, and don't yet have complete
> > substantiating documentation.). In any war, maintaining supply
> > lines is critical. Once the allies were able to stop the flow of
> > oil to the axis, it sealed their fate.
>
>This exactly proves my point.  Oil is cheap and fairly easy to get
>when the markets are working "as usual".  War time is exactly the
>opposite of this.  If nobody will sell you oil, and you can't
>produce it yourself, and you have no alternative fuels, then you are
>truly screwed if your supply line is cut.  This happens *precisely*
>because the usual thing can't happen: nobody can sell you oil or
>deliver it to you.  But exactly the same situation is true if you
>replace "oil" with "food" or any other necessary commodity.
>Wartime scenarios are, of course, incredibly important if you're at
>war (or planning to be) and the war is against a superpower or is a
>global war.  If you are not at war, then almost everything is
>different.

We are in a permanent "war-time" economy now.


> > After the war, Roosevelt sought to control/influence the world's
> > oil supply to allow the US to maintain its security.
>
>Um, Roosevelt is dead before the war is over.  But you are correct
>that control and influence over the world's oil supply is very handy
>indeed if you are a superpower either planning wars, threatening
>wars, or seeking to prevent wars.  Now the reason why the full-time
>pressure on oil supplies is less necessary these days than it used
>to be is that other technology has changed as well.  It is much,
>much easier for a superpower to disrupt supply lines at will these
>days (when we have truly frightening air and naval superiority over
>everybody in sight) than it ever was in the 1940s.

Woo Hoo! Stuck my foot in my mouth there! (kinda hard to forget the 
contribution Truman made to the war) I should've said, that Roosevelt 
sought to make this US policy in a post-war world.



> > This became a policy focus of the post-war era. The Conference
> > at Bretton Woods established the IMF, to promote peace through
> > fair trade among nations. Now whether one chooses to believe
> > that the intent was as stated, or as I've theorized, is
> > irrelevant, because we can see the outcome. The IMF has done
> > nothing but made cheap raw materials to multi-national corps,
> > while the country receiving the 'aid' goes into decline.
> >
> > http://www.ibiblio.org/pha/policy/1944/440722a.html
>
>Just one problem here.  Commodities are cheap by nature, which is
>why they are called commodities.  There are certainly problems with
>the IMF and with multinational corporations, but blaming them for
>the cruel economic truth that world sugar prices are always going to
>suck is really missing the point.


Once again, you are confusing raw material producers with the 
processors/middlemen who attempt to maximize their profit, maintain market 
share, and outsmart the competition through careful planning. You could 
call this free market dynamics, or an attempt to control commodity markets. 
Just because there is no ability to differentiate price, doesn't mean that 
something isn't valuable. As soon as someone gains leverage over the 
market, they go from a price taker to a price maker.

Given all the rambling I've done now, it has become obvious to me that 
commodities are much more valuable than their price dictates. Since they 
operate on a simpler supply/demand curve than non-commodities, it is easier 
to predict/influence revenue (supply).

The only way to influence supply, is through control. Oil production BTW, 
peaked in the US in the early 70's, world production is predicted to peak 
within the next 3-7 yrs. At that point in time, supply and demand curves 
will forever move away from one another, and prices will rise without end.

http://www.princeton.edu/hubbert/the-peak.html

I have this book and would be glad to loan it to anyone.

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