Book Review
AMERICAN
THEOCRACY
The
Peril and Politics of Radical Religion, Oil
and Borrowed Money in the
21st Century
by Joseph Dancy
LSGI Advisors, Inc.
June 4, 2006
AMERICAN
THEOCRACY:
The Peril and Politics of Radical Religion, Oil and Borrowed Money in
the 21st Century
by Kevin Phillips
480 pages, Viking Adult (march 21, 2006)
List: $26.95; $16.17 at Amazon.com
One
of the most difficult questions I've been asked recently as an Adjunct
Professor of Energy Law at Southern Methodist University is whether the
Iraq war was initiated over oil. Not wanting to give a politically
charged opinion, or mislead many of our foreign students who might give
more weight to my answer than would be appropriate, my answer is that
while politicians deny that oil reserves had any influence over the
decision to go to war in my mind that issue had to be one of many
considerations � maybe not the deciding factor, but a major
consideration. Access to oil has impacted political decisions for
decades.
If the question arises next year I can refer the students to Kevin Phillips� new book entitled �American Theocracy : The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century.� Phillips does a masterful job at tracing the history of politics and the global petroleum industry over the last century and the major issues the U.S. will face as crude oil becomes more difficult to produce in the quantities needed to feed the global economy.
Phillips connects the events leading to the Iraq war, and makes a good case the war was initiated with no small consideration for the oil resources which underlie Iraq. Reviewing the last oil crisis which arose in the 1970's with the Arab oil embargo, Phillips discusses the �Kissinger plan� which suggested that the U.S. invade Saudi Arabia and Kuwait and several other countries to secure these Middle Eastern oil fields.
Today many U.S. major oil companies have difficulty in growing their reserves due to the fact that many countries have nationalized their oil assets. The need for increasing production to feed Western economies that are incredibly dependant on oil creates a real possibility that military force might be needed to insure steady and reliable sources of crude oil. Iraq has an ability to ramp up production according to geological experts, if the fields were further developed and explored in a stable political environment.
Phillips documents how detailed maps were prepared of the Iraqi oil infrastructure well ahead of the disputes that ultimately lead to the invasion. During and after the invasion oil production and assets were given special consideration, and installations are being built by the U.S. which indicate the presence will be an extended one � which you would expect due to the valuable nature of Iraq�s oil reserves and the need to insure supplies to the global economy.
�The failure of the U.S. invasion of Iraq with respect to oil supplies become one of the great underreported stories of the decade� Phillips writes. �Far from . . . flooding the world with cheap Iraqi production . . . the outcome was disastrous� - with shrinking Iraqi production and skyrocketing global oil prices.
Written in three parts, another section of the book details the financial stresses the U.S. faces due to mounting debt levels and trade imbalance issues. Phillips points out the fact that manufacturing, once a major source of corporate profits in the U.S., has been supplanted by the financial sector.
Historically the loss of the manufacturing base has been detrimental to world economic powers, and as other economies have shifted to the financial sector the distribution of wealth has become much more unequal. The economy as a whole, and the political system, in an environment when manufacturing declines and becomes replaced by financial enterprises becomes more unstable according to the author.
Phillips points out an interesting connection between the oil sector and the financial sector. For the last half-century crude oil has been priced in U.S. dollars. This has increased the demand and value of the U.S. dollar, or �petrodollar�, since all economies run to a greater or lesser degree on oil. Should new oil bourses price the product in Euros or other currencies, some predict the dominance of the U.S. dollar will be challenged.
If oil exporting countries do away with the petrodollar, the argument is the U.S. will be forced to increase interest rates which will harm the real estate sector, increase the cost of imports, and create an inflationary economy which ultimately will need to be controlled with a recession brought on by higher interest rates.
With this background in mind it is interesting that Russia's President Putin proposed a new oil bourse on May 10th which will sell Russian oil priced in rubles � and it will begin operations in early June. This is not an insignificant event � right now it is page 16 material. But Russian oil exports make up 15.2% of the world's export trade in oil, and increases in Russian production exports have been the main source for global oil production gains over the last five years. The impact � or lack thereof � of the oil bourse will be evident quite soon if President Putin proceeds as promised.
The third segment of is book deals with the interplay between politics, the �religious right�, economics, and the increasing use of �faith based� initiatives to meet political objectives. We find the topic the least interesting of the three. The most interesting note in this section is Phillips� claim that the Administration is using the concept of Armageddon � we are in the end times, battling evil non-Christian foes, in lands with biblical significance � for political advantage.
Overall, the book is a very interesting and well written analysis of trends in the U.S. and global economy. The critical issues the U.S. and global economies face with regard to reliable energy supplies will be a theme that resonates with our children, and our children�s children.
Unfortunately there is no easy solution.
© 2006 Joseph Dancy
Bio
& Archive
Contact Information
Joseph Dancy, Adjunct Professor
Oil & Gas Law,
SMU School of Law
Advisor,
LSGI Market Letter
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