[Column] OIL and 710

Posted on : 2008-03-08 10:11 KST Modified on : 2008-03-08 10:11 KST
Kim Hyeong-geun, Senior researcher, The Millennium Project (South Korea chapter of the World Future Society)

World prices of oil and gold have hit fresh highs. Why are oil prices on the rise? Is there too little supply compared to demand? If this theory were right, any student in middle or high school could understand the phenomenon. Is political instability in the Middle East a factor? Partially right, but any university student could answer that. Nor would it be right to answer that global oil consumption jumped after the Chinese and Indian economies picked up steam.

Let me tell a comic story. It’s fiction. U.S. President George W. Bush invaded Iraq after the war in Afghanistan. As the Bush administration toppled the regime of Saddam Hussein in Iraq, a number of criticisms arose both at home and abroad. So Bush decided to justify the government’s decision on the Iraq invasion via live television broadcasts. After writing a rough draft of his remarks, Bush ordered his secretary to get the draft in shape for the live broadcast. In the midst of editing it, the secretary asked Bush about an odd sentence. “Were there really as many as 710 reasons for us to have invaded Iraq? That’s too many. Shouldn't we cut that number down?” Bush was in a huff. “What? Did you say 710? No. You know me. Basically, I am a person who hates complexity. There was only one reason for me to have ordered the invasion of Iraq.”

The secretary asked again, saying, “But, the draft says 710.” After confirming this, Bush said, “Ah! The word ‘OIL’ got transposed into the number ‘710.’ How did OIL get transposed into 710? That’s strange. Please change the word to OIL right away.”

For readers who might be having difficulty understanding this story, please turn the capital letters “OIL” upside down and read them again. When you do this, OIL appears as 710.
The story of Bush’s desire for oil was created by a cartoonist, and a futures studies scholar who was visiting South Korea in October told the story to me.

Some say that the United States is raising oil prices intentionally. In other words, they say that Washington is manipulating oil prices, disturbing oil markets on purpose. Considering that President Bush is being supported by his nation’s major oil companies, and he himself is deeply involved in the oil industry, the claim is gaining considerable momentum.

With regard to oil price hikes, Edmund Daukoru, who was the president of the Organization of the Petroleum Exporting Countries when he visited Seoul in 2006, said at the time that OPEC was supplying a sufficient amount of oil to the world. It was not right for the international community to blame the unstable political situation in the Middle East for oil price hikes, he said, and expressed displeasure with the way that the world was shifting the responsibility for skyrocketing oil prices onto oil-producing countries.

When a reporter asked him to explain the reason for the oil price hike, Daukoru cited what he saw as an unreasonable market structure. What does that mean? According to one report, four major U.S. firms gained profits amounting to more than 30 trillion won from the oil price hike in 2006 alone.

In fact, oil prices have skyrocketed since 2001 when President Bush came to power. Oil prices have risen four times over the past seven years. Why would major U.S. oil companies say they dislike higher oil prices when they only stand to gain? Just one short news story about Islamic militants arrested for attempting to blow up Saudi oil facilities can cause the market to fluctuate. There is no need to explain the U.S. oil companies’ spin on the issue.

Daukoru claims there have been no news reports saying that OPEC has reduced oil production. However, it is regrettable that there are no particular measures to quell increasing oil prices, regardless of whether this was intentional on the part of the United States or not. I hope there will be.

The views presented in this column are the writer’s own, and do not necessarily reflect those of The Hankyoreh.