Cartoon 788: Why Now?

There was a time when a Western company could go in and easily acquire the resources in the second and third world. If the incumbent rulers did not go along, insurrection could be fermented, such as Sudan. Globalization has changed much of this. First, media has truly become global and little escapes notice. Second, global money markets make it easier for these countries to package deals to attract the best bidders.

American energy conglomerates lamented the Iraqi oil contracts a few years ago put forth by the Iraqi government. American energy conglomerates stated they cost too much and largely sat out the bidding. They figured Iraq would have to acquiesce to their desires. But America is no longer the only 200 pound gorilla with deep pockets, there is China. There is also a scramble for these resources by other Western countries.

I think the shift in American energy companies strategy to exploit domestic resources is fueled by a major let down. The energy meetings Dick Cheney held is still secret. If the truth were known, Cheney probably promised an oil bonanza with an anticipated take over of Iraq. It was to be just the first step, next would be Iran. The take over of Iraq did not go as planned. In fact the whole Middle East has become a quagmire in terms of American desires.

There is also the problem of other major energy reserves in hands that can not be pried loose, such as Venezuela, Brazil, Mexico and Canada in the Americas. Finally you have Argentina and Bolivia willing to execute their sovereignty and nationalize foreign interests. A real eye opener is Brazil, willing and able to take energy companies to court under its legal system. In the past such local law suits were ignored by the conglomerates. They had American power behind them and foreign entities made no progress in American courts. Anoter game changer is China’s willingness to craft energy deals in places known for their dysfunction, such as parts of Africa. Our old reliable, Saudi Arabia, has announced they will in the future export significanly less to focus on its own domestic use. The energy game has significantly changed.

My chagrin is all the tax incentives, breaks and licenses given to the oil industry over the decades as encouragement to exploit domestic reserves. It seems they just took the money and are constantly at the troff. It reminds me of a famous line in Charles Dickson’s novel Oliver Twist, “… Please sir, I want some more”.