Israel Lobby Over American Oil Industry

There is another edge to the sword of Iran's threat to withhold its oil and gas from Western country consumption--all its hydrocarbon resources are of no use to Iran if they stay in the ground. Sure China would happily make a deal with them to buy their oil but by Iran limiting their market only to specific customers they automatically decrease their ability to set price and the Chinese would be foolish not to use this economic lever to lower their acquisition price but the Chinese are not fools.

There are two other considerations that Iran must ponder:
First, present sanctions (both direct and indirect--fear of investing in Iran has decreased FDI-Foreign Direct Investment also), have prevented Iran from updating its oil producing infrastructure. Without this updated technology the updated Iranian "reserves" are a pipe dream. In fact its production facilities are in dire need of regular maintenance just to maintain current output.

Second, Iran in its myopic fundamentalist "God will prevail" view, forgets the lesson that OPEC learned after its oil embargo of the 1970's: the market adjusted to the shortage of oil. First, end consumers demanded more fuel efficient machines and got them. Second, high prices allowed for the increased exploration for more oil and increased the viability of oil fields that required more expensive technology to pull it out of the ground. In this case God worked more in an economical way and less strangely. To this day OPEC sees its primary responsibility as the maintenance of a price structure that maintains the status quo and especially prevents the former of the above. Unfortunately the recent increases in oil prices are not the responsibility of OPEC but this is a can of worms to be opened for another discussion. For now it should suffice to know that OPEC's ability to set price has been severely eroded.

As for:

Exxon Mobil Corp., the world's largest publicly traded oil company, said yesterday that second-quarter profit rose 32 percent, to $7.64 billion, as Asia and North America used more crude oil and gasoline.

By Joe Carroll
Bloomberg News
Friday, July 29, 2005; Page D02

…Exxon, the world's most valuable company based on market value, reported a quarterly profit of $10.4 billion, 36% more than a year earlier. The massive profit is just shy of the record $10.7 million Exxon earned in the fourth quarter of 2005…

By Matt Krantz, USA TODAY
Updated 7/28/2006 2:42 AM ET

A rising tide floats all boats so cry for Argentina if you must but "Big Oil" needs no such lacrimentation. As for a suffering American economy: the biggest debate presently is whether or not the FED should raise its prime rate (charged to banks for overnite loans) to fight inflation or to let the present rate float because signs point to a possible slowing of the economy. The danger here is not a imminate recession but possible overheated growth--hardly economic losses

JM