This fine work of art, entitled 'Crude Oil' was brushed by graffiti maestro extraordinaire Bansky and I thought it would add a splash of decorum to this backed-up septic tank of a blog.
Oil is a big subject, probably the biggest on earth these days and I tend to read up on it whenever something filters down. Business, foreign policy, and the environment all have their little heads wrapped around the subject and nothing aside small arms fire to the skull possesses the power to alter human reality as does this non-renewable resource. If you haven't seen the documentary 'Crude Awakening' then I highly recommend it along with 'The End of Suburbia.'
Iran is going ahead with their plan to trade oil in non-U.S. currency - in the above article's case, the yen. Now this is really interesting stuff because nothing is going to earn you twelve hard inches of uncircumcised freedom and democracy in your puckered ass more than fucking with the petrodollar.
I'll just briefly go over this for those who don't know. In order to buy oil you have to have significant reserves of currency in your foreign exchange to cover all transactions. No trader is willing to accept unstable currencies for products like oil because the amounts are so large that any fluctuation can result in millions of dollars in loss. Reserve Currencies are preferred, they being tender that is stable and represents rich countries with minimal chance of fluctuation. There is a transaction cost with every purchase and so in order to save money and stabilize their oil expenditures most countries stockpile large quantities of U.S. dollars.
For decades the U.S. dollar has been the currency of choice and the Americans leveraged this to the fullest extent, usually by running large trade deficits with countries using U.S. dollars to buy oil. It's a sweet arrangement because if decreasing the deficit would result in a decrease in the value of the U.S. dollar then the trade partner would take an equal hit what with all the currency they are holding. No thanks then, you just take your time with that.
Saddam Hussein had the bright idea to start trading Iraq oil in euros back in 2000. This new arrangement, or bourse in oil lingo, didn't get very far off the ground before they were invaded. Coincidence? Of course it is, pay no attention to the man behind the curtain. What's the Number One benchmark for the paralyzed Iraqi government to meet if they are to prove themselves credible in the eyes of the Bush Administration? The creation of the all-important oil sharing laws, the drilling companies need legal protection before they go in and start pumping. "To the Victor Goes the Spoils" and if you're clever you may notice that 'spoils' has the word 'oils' in it, so with that the prosecution rests.
If Iran starts with this monkey-business you can bet that Venezuela won't be far behind, those two are now like BFF's. This might result in a massive devaluation of U.S. currency and a renewed interest in the trade deficits. Its' artificially high value lasts only so long as country's hold on to the money. Big trouble for America? No one can say for sure. Petrodollar warfare is a theory at best, the economy is so big and so complex that no one can say with certainty what even a massive change will do. The market does correct to a degree, governments do step in with massive infusions of liquid to stabilize their country's business concerns, and new opportunities do arise from the ashes of economic collapse.
Still, oil prices has everyone feeling a bit dodgy. OPEC will increase production by half a million barrels a day in hopes of having oil ceiling out at $80.00 a barrel. It's getting so high that countries are liable to collapse on account of not being able to afford it. Doesn't make for as many repeat customers, I guess. This article is worth opening just to see the shit-eating grin on the man in the picture. THAT'S an oil grin my friends, no mistaking it. It has the same flesh-eating creepiness of the pedo-smile but it's far more effusive.
UPDATE: Oh no! The Iraqi oil law negociations have all but collapsed themselves! The Kurds look more than ready to go it alone and the Sunnis may be holding out on agreeing to anything in order to prevent Prime Minister Maliki from looking in any way competent.
AND in very much related news, oil goes up while the U.S. dollar goes down. Man I should have waited a day before writing this one. Black gold and Petraeus are the items of the week.