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FOCUS: The Joke of US Justice and "Accountability" When They Bomb a Hospital |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=29455"><span class="small">Glenn Greenwald, The Intercept</span></a>
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Friday, 29 April 2016 10:56 |
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Greenwald writes: "Ever since the U.S. last October bombed a hospital run by Doctors Without Borders in Kunduz, Afghanistan, the U.S. vehemently denied guilt while acting exactly like a guilty party would."
Syrians evacuate an injured man amid the rubble of destroyed buildings following an airstrike on a rebel-held area of Aleppo, April 29, 2016. (photo: AFP/Getty)
The Joke of US Justice and "Accountability" When They Bomb a Hospital
By Glenn Greenwald, The Intercept
29 April 16
 ver since the U.S. last October bombed a hospital run by Doctors Without Borders (MSF) in Kunduz, Afghanistan, the U.S. vehemently denied guilt while acting exactly like a guilty party would. First, it changed its story repeatedly. Then, it blocked every effort – including repeated demands from MSF – to have an independent investigation determine what really happened. As May Jeong documented in a richly reported story for The Intercept yesterday, the Afghan government consistently admitted that the hospital was targeted, claiming that doing so was justified, and they wanted to publicly endorse calls for an independent investigation, which the U.S. refused to let them do; what is beyond dispute, as Jeong wrote, is that the “211 shells that were fired . . . were felt by the 42 men, women, and children who were killed.” MSF insisted the bombing was “deliberate,” and ample evidence supports that charge.
Despite all this, the U.S. military is about to release a report that, so predictably, exonerates itself from all guilt; it was, of course, all just a terribly tragic mistake. Worse, reports The Los Angeles Times‘ W.J. Hennigan, “no one will face criminal charges.” Instead, this is the “justice” being meted out to those responsible:
One officer was suspended from command and ordered out of Afghanistan. The others were given lesser punishments: Six were sent to counseling, seven were issued letters of reprimand, and two were ordered to retraining courses.
MSF continues to insist that the attack was a “war crime” and must be investigated by an independent tribunal under the Geneva Conventions. In a statement this week, Amnesty International said that it has “serious concerns about the Department of Defense’s questionable track record of policing itself.” The LA Times story notes that Physicians for Human Rights said in a letter to the White House that “the gravity of harm caused by the reported failures to follow protocol in Kunduz appears to constitute gross negligence that warrants active pursuit of criminal liability.”
But none of that matters. The only law to which the U.S. government is subject is its own interests. U.S. officials scoffed at global demands for a real investigation into what took place here, and then doled out “punishments” of counseling, training classes, and letters of reprimand for those responsible for this carnage. That’s almost a worse insult, a more extreme expression of self-exoneration and indifference, than no sanctions at all. But that’s par for the course in a country that has granted full-scale legal immunity for those who perpetrated the most egregious crimes: from the systemic fraud that caused the 2008 financial crisis to the worldwide regime of torture the U.S. government officially implemented.
Yesterday in Syria, an MSF-run hospital was targeted with an airstrike, almost certainly deliberately, by what was very likely the Syrian government or the Russians, killing at least 50 patients and doctors, including one of the last pediatricians in Aleppo. On behalf of the U.S. government, Secretary of State John Kerry pronounced: “We are outraged by yesterday’s airstrikes in Aleppo on the al Quds hospital supported by both Doctors Without Borders and the International Committee of the Red Cross, which killed dozens of people, including children, patients and medical personnel.” On the list of those with even minimal credibility to denounce that horrific airstrike, Kerry and his fellow American officials do not appear.
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The Line That May Have Won Hillary Clinton the Nomination |
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Friday, 29 April 2016 08:26 |
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Taibbi writes: "Maybe it's too early for post-mortems. But the results the other night seemingly all but settled the Democratic primary race, which may have turned on a single moment."
Hillary Clinton. (photo: Reuters)
The Line That May Have Won Hillary Clinton the Nomination
By Matt Taibbi, Rolling Stone
29 April 16
Clinton left a rhetorical door open for Sanders to connect Wall Street and race, but he didn’t do it
 aybe it’s too early for post-mortems. But the results the other night seemingly all but settled the Democratic primary race, which may have turned on a single moment.
Earlier this year, at a union rally in Henderson, Nevada, Hillary Clinton introduced a new theme in her stump speeches.
"If we broke up the big banks tomorrow," Clinton asked, "would that end racism?"
Logically, it was an odd thing to say. After all, lots of things worth doing, even political things, won't "end racism."
But from a practical point of view, Clinton's gambit was brilliant politics. It effectively caricaturized Sanders as a one-note candidate too steeped in attacking billionaires to see the problems of people down on Main Street. And the line fit in a tweet, making it perfect for rocketing around the Internet.
Clinton probably also understood that most people don't draw a connection between Wall Street corruption and race. Although the first victims of the financial crisis tended to be poor, nonwhite and elderly, tales of iniquity in the billionaire class tend instead to resonate with a different audience — specifically, the white liberals and college students who flocked to the Sanders campaign.
There was a political cliché behind this disconnect. When most people hear the words "Wall Street," they think of the stock market. And since African-American voters have traditionally distrusted and avoided the stock market, at least in comparison to white investors, there is a perception that "Wall Street" is an issue that doesn't really concern black people.
In the subprime era, though, banks actually used this cliché to their advantage. They profited immensely from a real-estate operation that specifically targeted people who stayed away from the financial markets, and carefully guarded their money by putting it in their homes.
According to one study, about two-thirds of all subprime loans between 2000 and 2007 were made to people who already owned their homes. The targets were often elderly, in particular men and women of color. Visiting loan officers convinced these borrowers to use the homes they'd poured their savings into their whole lives as ATM machines.
The pitch was: refinance your home, and get a little extra spending money each month! Lots of people went for it. But there was mischief hidden in the fine print of many of these "refi" deals, which often quickly exploded. Before long, the now-departed agent's promises would evaporate into a toxic quicksand of debt, unforeseen penalties and foreclosure.
Like a lot of reporters who covered the crash era, I initially misunderstood the profound racial element in the subprime drama. This wasn't the S&L crisis or the Enron-era accounting scandals or even the Internet bubble, a speculative craze that devoured the savings of white Middle America.
Subprime was different. It was fueled by a particular kind of predatory lending that targeted a very specific group of people.
In the 2000s, armies of smooth-talking real-estate hustlers from companies like Countrywide and New Century poured into residential areas across the country, but particularly into black neighborhoods. They made wild promises, in many cases offering huge loans in exchange for little or no money down.
Once the agents got signatures on these loans, they quickly sold them up the financial river to Wall Street, where the great banks repackaged them for resale at huge profit to pension funds and other investors. The scheme depended on getting huge numbers of names on new loans.
Thanks to a number of settlements, we now know that some companies got many of those new signatures via intentional strategies targeting black and Hispanic customers. The most infamous example was Wells Fargo, which paid a $175 million settlement for systematically overcharging black and Hispanic borrowers.
It came out that a Maryland office of the bank referred to subprime loans as "ghetto loans," and pushed its loan officers to unload as many as possible on the "mud people" of Baltimore and the surrounding suburbs. A crucial element involved pushing expensive and dangerous subprime loans on people who qualified for the safer, lower-interest prime loans.
The New York Times did a study of New York-area home lending and found that African-Americans who made more than $68,000 were five times as likely as white people in the same income category to be marketed risky subprime loans. The ratio was even worse at Wells Fargo, where it was more like eight to one.
Some of the pitches made by real-estate hustlers during this time bore a striking resemblance to crude predatory schemes that had targeted black homeowners in generations past.
The wide-scale falsification of employment data in mortgage applications that subprime companies used to get as many borrowers into loans as possible? That same scam happened decades ago in cities all over America, most memorably in Brooklyn in the Sixties and Seventies.
In one particular case involving a firm called Eastern Services (a kind of crude precursor to Countrywide), FHA officials were bribed en masse in a scheme that led to tens of millions of dollars in losses and thousands of vacated homes.
It was the same hot-potato game as subprime. Then as now, the idea was to create lots of loans and quickly sell them off to unsuspecting institutional suckers down the line, like savings banks and pension funds.
In conjunction with better-known offenses like blockbusting (i.e., clearing neighborhoods of white residents through scare tactics), the misdeeds of companies like Eastern Services helped destroy black neighborhoods practically overnight. They did so in much the same way the modern foreclosure crisis has now left deserts of blighted homes in cities all over the country, from Trenton to Fort Wayne to Fayetteville to Rochester to Port St. Lucie and beyond.
Likewise, the "interest-only" or "negative amortization" loan of the subprime era, which allowed people to jump into new houses with little or no money down, was little more than an homage to the "contract mortgage." The latter was an infamous type of zero-equity real estate loan-sharking that targeted black homeowners throughout the pre-Civil Rights era.
Wall Street in the crisis era experienced an ideological shift. The ideas of people like Ayn Rand, once considered extremist, became mainstream. The heads of powerful companies became seduced by a vision of an America made up of "producers and parasites."
Under this reasoning, it was only natural that the wealth-creating "producers" should take all of the financial power, because the parasites down below would otherwise just brainlessly consume it.
We saw this in comments like Mitt Romney's crack about "the 47 percent" or his incredible admonition to the NAACP chiding people who want "free stuff," or in billionaire Charlie Munger's angry response to people who wanted mortgage relief after the crash.
"There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be,'" said Munger, who himself had benefitted massively from federal bailouts. "At a certain place you've got to say, 'Suck it in and cope, buddy.'"
These lunatic resentments drove the effort to blame minority homeowners for the crisis. That effort peaked in a Tea Party movement triggered by a rant by CNBC goof Rick Santelli against the "losers" of the housing crisis. He described them as the "people who drink the water" at the expense of those who "carry the water." As coded language went, it was remarkably un-subtle.
Race was always at the very center of the crash story. It was just never explained that way in the press.
When Hillary Clinton used that line about breaking up the banks not ending racism, she opened a door for Bernie Sanders to talk about all of this. He could have talked about Wall Street not just as a symbol of international greed and corruption, but in terms of a more peculiarly American kind of ugliness.
He could have begun with subprime and plausibly traced all the way back to 40 acres and a mule, explaining the modern problem of wealth inequality as (among other things) a still-extant failure of the Civil Rights movement, an ancient wrong still not corrected.
But he didn't. Sanders I believe fundamentally sees the Wall Street corruption issue as a matter of class, i.e., rich vs. poor. He never found a way to talk about the special edge the financial sector brought/brings to the exploitation of nonwhite America.
I don't know and wouldn't presume to know if any of this explains why Clinton performed so extremely well with black voters compared with Sanders. Surely there are hundreds of factors. The idea of a monolithic "black vote" is always one of the more insidious clichés of campaign journalism anyway, as Collier Meyerson explained so well in The New Yorker last week.
But this is less about whether or not Sanders failed to reach "the black vote" than it is about a greater overall failure of many of us who followed these issues, myself included, to eloquently connect Wall Street corruption to the pain at the Main Street level. Nobody was ever able to truly popularize that reality, make it felt.
Sanders came the closest. But if he recedes now in favor of a candidate with ties to the very banks that caused the crisis, it will mean another opportunity lost. For a little while longer at least, "Wall Street corruption" will be thought of as a niche issue. But it should be one that consumes the attention of all, rich and poor, white and black, and sometimes especially the latter.
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Cruz Hopes to Tap Into Immense Popularity of Carly Fiorina |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=9160"><span class="small">Andy Borowitz, The New Yorker</span></a>
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Thursday, 28 April 2016 13:48 |
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Borowitz writes: "In choosing the former Hewlett-Packard C.E.O. Carly Fiorina as his running mate, Senator Ted Cruz hopes to tap into the immense popularity of one of the most beloved public figures in America."
Carly Fiorina and Ted Cruz. (photo: Mark Kauzlarich/Reuters)
Cruz Hopes to Tap Into Immense Popularity of Carly Fiorina
By Andy Borowitz, The New Yorker
28 April 16
 The article below is satire. Andy Borowitz is an American comedian and New York Times-bestselling author who satirizes the news for his column, "The Borowitz Report." 
 n choosing the former Hewlett-Packard C.E.O. Carly Fiorina as his running mate, Senator Ted Cruz hopes to tap into the immense popularity of one of the most beloved public figures in America.
Minutes after the news of Cruz’s selection leaked, political insiders called the choice of the wildly adored Fiorina a game-changer for the Cruz campaign.
“It’s no secret that Ted Cruz has some trouble with likeability,” the Republican strategist Harland Dorrinson said. “What better way to fix that than by choosing Carly Fiorina, a person everyone is absolutely crazy about?”
Fiorina’s reputation for winning the hearts of everyone she comes in contact with dates back to her days as the incredibly well-liked C.E.O. of Hewlett-Packard and, before that, Lucent Technologies.
“At Lucent, she could light up any room with her smile,” former Lucent employee Tracy Klugian said. “If you had to say what people loved about working at Lucent Technologies, it all came down to two words: Carly Fiorina.”
“Carly was more than our boss: she was our hero,” Kent Bantwell, a former Hewlett-Packard employee, said. “There wasn’t a person in the company who wasn’t touched in some way by her kindness and humanity.”
Dorrinson, the Republican strategist, said Cruz’s campaign will see a huge boost from what is widely known in political circles as “the Fiorina magic.”
“Picking Fiorina was a masterstroke,” he said. “Now all Ted has to do is sit back and watch Carly do what she does best: make people fall in love her.”
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The Coming World of "Peak Oil Demand," Not "Peak Oil" |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=20415"><span class="small">Michael Klare, TomDispatch</span></a>
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Thursday, 28 April 2016 13:46 |
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Klare writes: "The petroleum-fueled world we've known these last decades - with oil demand always thrusting ahead of supply, ensuring steady profits for all major producers - is no more. Replacing it is an anemic, possibly even declining, demand for oil that is likely to force suppliers to fight one another for ever-diminishing market shares."
Oil pump jack at sunset. (photo: Bloomberg)
The Coming World of "Peak Oil Demand," Not "Peak Oil"
By Michael Klare, TomDispatch
28 April 16
In a Greater Middle East in which one country after another has been plunged into chaos and possible failed statehood, two rival nations, Iran and Saudi Arabia, have been bedrock exceptions to the rule. Iran, at the moment, remains so, but the Saudi royals, increasingly unnerved, have been steering their country erratically into the region’s chaos. The kingdom is now led by a decrepit 80-year-old monarch who, in commonplace meetings, has to be fed his lines by teleprompter. Meanwhile, his 30-year-old son, Deputy Crown Prince Mohammed bin Salman, who has gained significant control over both the kingdom’s economic and military decision-making, launched a rash anti-Iranian war in Yemen, heavily dependent on air power. It is not only Washington-backed but distinctly in the American mode of these last years: brutal yet ineffective, never-ending, a boon to the spread of terror groups, and seeded with potential blowback.
Meanwhile, in a cheap-oil, belt-tightening moment, in an increasingly edgy country, the royals are reining in budgets and undermining the good life they were previously financing for many of their citizens. The one thing they continue to do is pump oil -- their only form of wealth -- as if there were no tomorrow, while threatening further price-depressing rises in oil production in the near future. And that’s hardly been the end of their threats. While taking on the Iranians (and the Russians), they have also been lashing out at the local opposition, executing a prominent dissident Shiite cleric among others and even baring their teeth at Washington. They have reportedly threatened the Obama administration with the sell-off of hundreds of billions of dollars in American assets if a bill, now in Congress and aimed at opening the Saudis to American lawsuits over their supposed culpability for the 9/11 attacks, were to pass. (It would, however, be a sell-off that could hurt the Saudis more than anyone.) Even at the pettiest of levels, on Barack Obama's recent arrival in Saudi Arabia for a visit with King Salman, they essentially snubbed him, a first for a White House occupant. All in all, a previously sure-footed (if extreme) Sunni regime seems increasingly unsettled; in fact, it has something of the look these days of a person holding a gun to his own head and threatening to pull the trigger. In other words, in a region already aflame, the Saudis seem to be tossing... well, oil onto any fire in sight.
And in a way, it's little wonder. The very basis for the existence of the Saudi royals, their staggering oil reserves, is under attack -- and not by the Iranians, the Russians, or the Americans, but as TomDispatch energy specialist Michael Klare explains, by something so much larger: the potential ending of the petroleum way of life.
-Tom Engelhardt, TomDispatch
Debacle at Doha
The Collapse of the Old Oil Order
 unday, April 17th was the designated moment. The world’s leading oil producers were expected to bring fresh discipline to the chaotic petroleum market and spark a return to high prices. Meeting in Doha, the glittering capital of petroleum-rich Qatar, the oil ministers of the Organization of the Petroleum Exporting Countries (OPEC), along with such key non-OPEC producers as Russia and Mexico, were scheduled to ratify a draft agreement obliging them to freeze their oil output at current levels. In anticipation of such a deal, oil prices had begun to creep inexorably upward, from $30 per barrel in mid-January to $43 on the eve of the gathering. But far from restoring the old oil order, the meeting ended in discord, driving prices down again and revealing deep cracks in the ranks of global energy producers.
It is hard to overstate the significance of the Doha debacle. At the very least, it will perpetuate the low oil prices that have plagued the industry for the past two years, forcing smaller firms into bankruptcy and erasing hundreds of billions of dollars of investments in new production capacity. It may also have obliterated any future prospects for cooperation between OPEC and non-OPEC producers in regulating the market. Most of all, however, it demonstrated that the petroleum-fueled world we’ve known these last decades -- with oil demand always thrusting ahead of supply, ensuring steady profits for all major producers -- is no more. Replacing it is an anemic, possibly even declining, demand for oil that is likely to force suppliers to fight one another for ever-diminishing market shares.
The Road to Doha
Before the Doha gathering, the leaders of the major producing countries expressed confidence that a production freeze would finally halt the devastating slump in oil prices that began in mid-2014. Most of them are heavily dependent on petroleum exports to finance their governments and keep restiveness among their populaces at bay. Both Russia and Venezuela, for instance, rely on energy exports for approximately 50% of government income, while for Nigeria it’s more like 75%. So the plunge in prices had already cut deep into government spending around the world, causing civil unrest and even in some cases political turmoil.
No one expected the April 17th meeting to result in an immediate, dramatic price upturn, but everyone hoped that it would lay the foundation for a steady rise in the coming months. The leaders of these countries were well aware of one thing: to achieve such progress, unity was crucial. Otherwise they were not likely to overcome the various factors that had caused the price collapse in the first place. Some of these were structural and embedded deep in the way the industry had been organized; some were the product of their own feckless responses to the crisis.
On the structural side, global demand for energy had, in recent years, ceased to rise quickly enough to soak up all the crude oil pouring onto the market, thanks in part to new supplies from Iraq and especially from the expanding shale fields of the United States. This oversupply triggered the initial 2014 price drop when Brent crude -- the international benchmark blend -- went from a high of $115 on June 19th to $77 on November 26th, the day before a fateful OPEC meeting in Vienna. The next day, OPEC members, led by Saudi Arabia, failed to agree on either production cuts or a freeze, and the price of oil went into freefall.
The failure of that November meeting has been widely attributed to the Saudis’ desire to kill off new output elsewhere -- especially shale production in the United States -- and to restore their historic dominance of the global oil market. Many analysts were also convinced that Riyadh was seeking to punish regional rivals Iran and Russia for their support of the Assad regime in Syria (which the Saudis seek to topple).
The rejection, in other words, was meant to fulfill two tasks at the same time: blunt or wipe out the challenge posed by North American shale producers and undermine two economically shaky energy powers that opposed Saudi goals in the Middle East by depriving them of much needed oil revenues. Because Saudi Arabia could produce oil so much more cheaply than other countries -- for as little as $3 per barrel -- and because it could draw upon hundreds of billions of dollars in sovereign wealth funds to meet any budget shortfalls of its own, its leaders believed it more capable of weathering any price downturn than its rivals. Today, however, that rosy prediction is looking grimmer as the Saudi royals begin to feel the pinch of low oil prices, and find themselves cutting back on the benefits they had been passing on to an ever-growing, potentially restive population while still financing a costly, inconclusive, and increasingly disastrous war in Yemen.
Many energy analysts became convinced that Doha would prove the decisive moment when Riyadh would finally be amenable to a production freeze. Just days before the conference, participants expressed growing confidence that such a plan would indeed be adopted. After all, preliminary negotiations between Russia, Venezuela, Qatar, and Saudi Arabia had produced a draft document that most participants assumed was essentially ready for signature. The only sticking point: the nature of Iran’s participation.
The Iranians were, in fact, agreeable to such a freeze, but only after they were allowed to raise their relatively modest daily output to levels achieved in 2012 before the West imposed sanctions in an effort to force Tehran to agree to dismantle its nuclear enrichment program. Now that those sanctions were, in fact, being lifted as a result of the recently concluded nuclear deal, Tehran was determined to restore the status quo ante. On this, the Saudis balked, having no wish to see their arch-rival obtain added oil revenues. Still, most observers assumed that, in the end, Riyadh would agree to a formula allowing Iran some increase before a freeze. “There are positive indications an agreement will be reached during this meeting... an initial agreement on freezing production,” said Nawal Al-Fuzaia, Kuwait’s OPEC representative, echoing the views of other Doha participants.
But then something happened. According to people familiar with the sequence of events, Saudi Arabia’s Deputy Crown Prince and key oil strategist, Mohammed bin Salman, called the Saudi delegation in Doha at 3:00 a.m. on April 17th and instructed them to spurn a deal that provided leeway of any sort for Iran. When the Iranians -- who chose not to attend the meeting -- signaled that they had no intention of freezing their output to satisfy their rivals, the Saudis rejected the draft agreement it had helped negotiate and the assembly ended in disarray.
Geopolitics to the Fore
Most analysts have since suggested that the Saudi royals simply considered punishing Iran more important than raising oil prices. No matter the cost to them, in other words, they could not bring themselves to help Iran pursue its geopolitical objectives, including giving yet more support to Shiite forces in Iraq, Syria, Yemen, and Lebanon. Already feeling pressured by Tehran and ever less confident of Washington’s support, they were ready to use any means available to weaken the Iranians, whatever the danger to themselves.
“The failure to reach an agreement in Doha is a reminder that Saudi Arabia is in no mood to do Iran any favors right now and that their ongoing geopolitical conflict cannot be discounted as an element of the current Saudi oil policy,” said Jason Bordoff of the Center on Global Energy Policy at Columbia University.
Many analysts also pointed to the rising influence of Deputy Crown Prince Mohammed bin Salman, entrusted with near-total control of the economy and the military by his aging father, King Salman. As Minister of Defense, the prince has spearheaded the Saudi drive to counter the Iranians in a regional struggle for dominance. Most significantly, he is the main force behind Saudi Arabia’s ongoing intervention in Yemen, aimed at defeating the Houthi rebels, a largely Shia group with loose ties to Iran, and restoring deposed former president Abd Rabbuh Mansur Hadi. After a year of relentless U.S.-backed airstrikes (including the use of cluster bombs), the Saudi intervention has, in fact, failed to achieve its intended objectives, though it has produced thousands of civilian casualties, provoking fierce condemnation from U.N. officials, and created space for the rise of al-Qaeda in the Arabian Peninsula. Nevertheless, the prince seems determined to keep the conflict going and to counter Iranian influence across the region.
For Prince Mohammed, the oil market has evidently become just another arena for this ongoing struggle. “Under his guidance,” the Financial Times noted in April, “Saudi Arabia’s oil policy appears to be less driven by the price of crude than global politics, particularly Riyadh’s bitter rivalry with post-sanctions Tehran.” This seems to have been the backstory for Riyadh’s last-minute decision to scuttle the talks in Doha. On April 16th, for instance, Prince Mohammed couldn’t have been blunter to Bloomberg, even if he didn’t mention the Iranians by name: “If all major producers don’t freeze production, we will not freeze production.”
With the proposed agreement in tatters, Saudi Arabia is now expected to boost its own output, ensuring that prices will remain bargain-basement low and so deprive Iran of any windfall from its expected increase in exports. The kingdom, Prince Mohammed told Bloomberg, was prepared to immediately raise production from its current 10.2 million barrels per day to 11.5 million barrels and could add another million barrels “if we wanted to” in the next six to nine months. With Iranian and Iraqi oil heading for market in larger quantities, that’s the definition of oversupply. It would certainly ensure Saudi Arabia’s continued dominance of the market, but it might also wound the kingdom in a major way, if not fatally.
A New Global Reality
No doubt geopolitics played a significant role in the Saudi decision, but that’s hardly the whole story. Overshadowing discussions about a possible production freeze was a new fact of life for the oil industry: the past would be no predictor of the future when it came to global oil demand. Whatever the Saudis think of the Iranians or vice versa, their industry is being fundamentally transformed, altering relationships among the major producers and eroding their inclination to cooperate.
Until very recently, it was assumed that the demand for oil would continue to expand indefinitely, creating space for multiple producers to enter the market, and for ones already in it to increase their output. Even when supply outran demand and drove prices down, as has periodically occurred, producers could always take solace in the knowledge that, as in the past, demand would eventually rebound, jacking prices up again. Under such circumstances and at such a moment, it was just good sense for individual producers to cooperate in lowering output, knowing that everyone would benefit sooner or later from the inevitable price increase.
But what happens if confidence in the eventual resurgence of demand begins to wither? Then the incentives to cooperate begin to evaporate, too, and it’s every producer for itself in a mad scramble to protect market share. This new reality -- a world in which “peak oil demand,” rather than “peak oil,” will shape the consciousness of major players -- is what the Doha catastrophe foreshadowed.
At the beginning of this century, many energy analysts were convinced that we were at the edge of the arrival of “peak oil”; a peak, that is, in the output of petroleum in which planetary reserves would be exhausted long before the demand for oil disappeared, triggering a global economic crisis. As a result of advances in drilling technology, however, the supply of oil has continued to grow, while demand has unexpectedly begun to stall. This can be traced both to slowing economic growth globally and to an accelerating “green revolution” in which the planet will be transitioning to non-carbon fuel sources. With most nations now committed to measures aimed at reducing emissions of greenhouse gases under the just-signed Paris climate accord, the demand for oil is likely to experience significant declines in the years ahead. In other words, global oil demand will peak long before supplies begin to run low, creating a monumental challenge for the oil-producing countries.
This is no theoretical construct. It’s reality itself. Net consumption of oil in the advanced industrialized nations has already dropped from 50 million barrels per day in 2005 to 45 million barrels in 2014. Further declines are in store as strict fuel efficiency standards for the production of new vehicles and other climate-related measures take effect, the price of solar and wind power continues to fall, and other alternative energy sources come on line. While the demand for oil does continue to rise in the developing world, even there it’s not climbing at rates previously taken for granted. With such countries also beginning to impose tougher constraints on carbon emissions, global consumption is expected to reach a peak and begin an inexorable decline. According to experts Thijs Van de Graaf and Aviel Verbruggen, overall world peak demand could be reached as early as 2020.
In such a world, high-cost oil producers will be driven out of the market and the advantage -- such as it is -- will lie with the lowest-cost ones. Countries that depend on petroleum exports for a large share of their revenues will come under increasing pressure to move away from excessive reliance on oil. This may have been another consideration in the Saudi decision at Doha. In the months leading up to the April meeting, senior Saudi officials dropped hints that they were beginning to plan for a post-petroleum era and that Deputy Crown Prince bin Salman would play a key role in overseeing the transition.
On April 1st, the prince himself indicated that steps were underway to begin this process. As part of the effort, he announced, he was planning an initial public offering of shares in state-owned Saudi Aramco, the world’s number one oil producer, and would transfer the proceeds, an estimated $2 trillion, to its Public Investment Fund (PIF). “IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” the prince pointed out. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”
For a country that more than any other has rested its claim to wealth and power on the production and sale of petroleum, this is a revolutionary statement. If Saudi Arabia says it is ready to begin a move away from reliance on petroleum, we are indeed entering a new world in which, among other things, the titans of oil production will no longer hold sway over our lives as they have in the past.
This, in fact, appears to be the outlook adopted by Prince Mohammed in the wake of the Doha debacle. In announcing the kingdom’s new economic blueprint on April 25th, he vowed to liberate the country from its “addiction” to oil.” This will not, of course, be easy to achieve, given the kingdom’s heavy reliance on oil revenues and lack of plausible alternatives. The 30-year-old prince could also face opposition from within the royal family to his audacious moves (as well as his blundering ones in Yemen and possibly elsewhere). Whatever the fate of the Saudi royals, however, if predictions of a future peak in world oil demand prove accurate, the debacle in Doha will be seen as marking the beginning of the end of the old oil order.
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he Paris Agreeement
