Follow the Oil Slick Road

Jenson Hagen

Do people realize the importance that the UAE has on the American economy? Do people understand why Bill Clinton and Jimmy Carter have somewhat supported the port deal? Do people know why there was such secrecy surrounding its approval?

Petrodollars! Right now, the stock exchanges price oil according to an index of Texas Crude, Norwegian Crude, and you guessed it, UAE Dubai Crude. So why should America give a windfall port deal to a terrorist nation?

Petroeuros! Right now, oil is sold using dollars. If the UAE switches to euros, our economy would be in a world of hurt. So let the UAE secure our ports so that there’s no more mention of using euros to buy oil. Guess which nation wanted to switch to euros before?

Iraq! The Oil for Food Program that the neo-cons so vehemently despised because of corruption allowed Saddam Hussein to sell oil in exchange for euros. Trust me, it wasn’t the corruption that scared the neo-cons. If Saddam Hussein had his way, petroeuros would be right around the corner. Guess which nation wants to switch to euros now?

Iran! Right now, oil is sold on two American controlled exchanges. One is in the U.S. One is in Great Britain. Hmm, why did Great Britain have a beef with Saddam? Iran, however, wanted to establish the Iranian Oil Bourse to compete with this exchange and sell oil using euros or yen. So why would the U.S. spend $75 million to harass and bribe Iran into backing away from the exchange?

Foreign Reserves! If the world began selling oil with euros or yen, the U.S. economy would collapse. For years, central banks have been accumulating dollars as a result of oil purchases. About 70% of foreign reserves are held in U.S. dollars. If countries all of a sudden needed euros to buy oil, they would start to sell our dollars in exchange for euros. But where are the dollars actually held?

Treasury Bonds! Central banks don’t just have our dollars sitting there. They have lent them back to us in exchange for Treasury bonds. We pay foreign countries interest each year, they help maintain our currency and fund our negligent spending habits, and everyone’s happy. If these countries needed euros to buy oil, they would potentially sell out of $2 trillion worth of U.S. Treasuries.

The euro would go up. The dollar would go down. We would have to raise interest rates significantly to attract people to buy our bonds. And the $700 billion worth of trade deficit would come crashing down upon us.

Well, that is unless you give a sweet port deal to UAE Dubai to ensure they continue trading in dollars. And you start a war with Iraq to ensure that Iraqi oil is sold for dollars. And surround Iran with U.S. troops on both sides to ensure that the Iranian Oil Bourse fails. And continue our deficit spending to ensure foreign countries have a will be able to put their dollars into U.S. Treasuries and earn interest.