Ah, oil.
Oil seems to low-key run the world behind the scenes. I remember watching “The Beverly Hillbillies” growing up and wondering how “oil” somehow could make a family so rich.
Oil was something my dad changed in our cars, yelling at me to get “the thing” and then getting mad when I didn’t get the right “thing”. Or telling me I didn’t hold the flashlight right.
As I grew older and got interested in history, it was amazing how many powerful people came from the oil industry. J. Paul Getty, Richard King Mellon, the Rockefellers, the Carnagies…all of the biggest names in the golden age seem to have had their hands in oil.
It’s still that way today. Countries invade each other for oil. Poor kids in the Midwest move out to North Dakota to strike it rich working the pipelines. Families in oil states find themselves millionaires overnight when they find oil on their property.
The world revolves around oil. Black Gold. Texas Tea.
The US is no slouch when it comes to invading for oil. In today’s post, I’ll examine the recent history of the US invading countries for oil and absolutely shitting our pants on the issue of the Straight of Hormuz.
The US’ Not-So-Secret Oil Addiction
For fun, let’s look at Venezuela.
We attacked Venezuela because of “drugs”, I guess. Conveniently, when we showed up, we also sent a bunch of oil tankers. Just in case, I guess?
Our stated goal of stopping drugs is hilarious. When has destroying a country’s government, infrastructure and economy EVER led to LESS drugs? Drugs are a guaranteed market for a country. Drugs are a public health crisis, not a military crisis.
The U.S. took an estimated 80m barrels of oil out of Venezuela, according to Al Jazeera. From the Council of Foreign Relations, “In the short run, the U.S. Navy will reportedly determine which tankers can leave and where they can land, with the U.S. government managing the proceeds. In the long run, Trump says he wants to rebuild Venezuela’s production capacity with U.S.’ capital and manage it with U.S. interests in mind“.
Venezuela is a sovereign nation that made no threat to the US. We invaded, stole their drilled oil and put ourselves as a stakeholder in the future oil operations. This is not okay on like 100 different principles of war and foreign relations, but…you know.
Backing up a bit, let’s look at Iraq. During the Gulf War, the US took over management of Iraq’s oil sector, resulting in essentially total control of the country. From Reuters, “Oil is Iraq’s most important revenue source, accounting for some 90% of the state budget. This gives Washington significant sway over the country’s economic and political stability. When the Iraqi government asked U.S. troops to leave the country in 2020, Washington reportedly threatened to cut Iraq’s access to the New York Federal Reserve funds, with Baghdad ultimately backing down. While the Iraqi government has gained more control over its financial affairs since the early years of the U.S. occupation, the ongoing relationship highlights the enduring influence of the U.S. on Iraq’s economic landscape, even as the country seeks to assert its sovereignty and independence”.
So, not only do we invade to get oil, we use oil to control other countries as well. Neat tactic!
Before we discuss the Strait of Hormuz, I wanted to figure out where major countries are getting their oil so we all understand the impact the Strait of Hormuz has on the world. Here is a chart of where the US has imported it’s oil from over time from AFDC.
Here’s where China gets theirs, from Visual Capitalist:
Israel, via Bloomberg:
Note here, Kazakhstan supplies their oil via Russia and Azerbaijan via Turkey.
The UK:
Seeing where some of the World Powers gets their oil, we can now move on to talk about the Strait of Hormuz.
The Gateway to the World’s Oil
From the IEA: “The Strait of Hormuz is a narrow sea passage, separating the Arabian Peninsula and Iran, and connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, the Strait is only 29 nautical miles wide (54 km) and it consists of 2-mile-wide navigable channels (3.7 km) for inbound and outbound shipping as well as a 2-mile-wide buffer zone”.
Here’s a map from Reuters showing the Strait of Hormuz (Which I helpfully circled with a Snipping tool’s default red pen), as well as Us/Israel attacks (blue) and Iran attacks (red).
You don’t have to be Sun Tzu or have even read the Art of War to understand how strategic a point the Strait of Hormuz is to this “excursion”.
“Control” of the Strait was previously under the United Nations Convention Law of the Sea (UNCLOS). International forces have historically ensured safe passage for oil tankers and other trade ships. When the US and Israel attacked Iran, Iran took control of the Strait and have essentially blocked it. This was seen as not just a possibility, but a guarantee by previous administrations and has likely been part of the reason Iran is pretty much left alone.
Trump didn’t care, though. He also didn’t seem to have enacted any strategic forethought on how to keep the Strait open, either. He called on other world leaders in NATO to help secure the Strait, a plea which fell upon deaf ears. From Time Magazine, “In mid-March, Trump warned NATO allies of a “very bad” future should they not help secure the Strait of Hormuz. European countries responded to Trump with caution and resistance, declining to send warships to the vital trade waterway”. Since then, Trump has toyed with the idea of removing us from NATO if other countries don’t help.
Does NATO have any obligation to help?
No.
From Alice Rufus, a NATO representative speaking to The Jerusalem Post: “Let me remind you what NATO is. It is a military alliance concerned with the security of the Euro-Atlantic region. It is not designed to carry out operations in the Strait of Hormuz, which would be a breach of international law,” Alice Rufo said at the War & Peace conference in Paris”.
Next question, who is impacted by the Strait closing?
Again, from IEA, 20 million barrels a day transit the Strait. This represents about 25% of Seabourne oil, and 80% of the oil from the Strait is bound for Asia. Remember where China gets their oil? They’re not the only beneficiaries of oil from the Strait, though:
America is eating a sweet, sweet slice of that blackstrap oil pie. Trump, however, feels no need to acknowledge this and no need to help secure the Strait. From CBC, “There’s ‘no reason for us to do this,’ Trump said in the Oval Office. ‘That’s not for us. That’ll be for France. That’ll be for whoever’s using the strait’”.
He echoed this sentiment in a Truth social past on 3/31:
I suppose gas prices would rise a little even if the US isn’t relying on any oil from the Strait due to a supply and demand situation. Just how much have gas prices risen? For me in the metro, the prices have looked like this since the start of the “not war”:
Using the fuel prices map from AAA, I can see the average cost in Dakota County is $3.603/gallon. The overall MN average at this time is $3.519. One month ago? MN averaged at $2.789.
Just for context, I drive about 15,000 miles/yr. in my Subaru Outback (bet you could’ve guessed I was a Subaru driver!). I average around 27mpg. Mathing that out, I use about 46 gallons of fuel per month. At $2.70/gallon, I spent around $128/mo. on fuel or $1,540/yr. At $3.603/gallon, I will spend around $165/mo. or $1989/yr. $450 more a year doesn’t seem like much, but for some families that will tighten their monthly budget all the more. That’s one less family outing, family dinner out, pizza night, or whatever else per month.
As of today, there has been no significant action by anyone to take the Strait back from Iran. Trump waffles between saying we are near a cease-fire, in diplomatic talks, or he is threatening to widen the war. Wars are a complex topic, but I seriously doubt we could be in diplomatic talks while also threatening to widen the war. Usually both parties have to act in good faith during negotiations..at least historically.
Conclusion
Well, I can say I know one single thing about Middle East geography now! The Strait of Hormuz is essentially a gateway to a significant portion of the world’s oil, and naturally it would be captured if Iran was ever attacked.
Despite not “using the Strait”, we are feeling this war every time we fill up our cars, pay our gas bill, or filling our propane/fuel oil tanks. If only we could find a source of energy that is immutable and can’t be captured for a single country? Like, the sun? Or the wind?
I hear tales of solar and wind power as someone who works in the Energy sector. These are pipedreams, I’m sure.
😉
Thanks for reading!
Couple of thoughts:
1. Gas was over $3.60 a gallon for the majority of Obama’s second term. In 2022 we had $4.84 gas prices, so by comparison to today’s price you are saving you about $700/yr.
2. Not to muddy the waters, but the Venezuela/U.S. oil history
is pretty complex. In a nutshell, years ago, U.S. petroleum companies agreed to
give them about 17% of the oil revenues if they would let them drill and refine.
After everything got set up, Venezuela demanded 50% instead of 17% and the petroleum
companies had no choice but to agree or lose all the money they had invested in
the project. A few years later Venezuela just took over the operations and
kicked the U.S. petroleum out of the country. Thet did pay them, but it was less
than pennies on the dollar for what they had invested. I just wanted to point
out that their hands weren’t entirely clean.
3. Trump is a pathological liar. As such, when he says he isn’t going to do anything about the Strait of Hormuz, he is not to be believed. I’m confident he is saying that to set the stage for the NATO allies to ponder what it would look like if we did indeed walk away. I also think you are missing the first move in all of this: With Venezuelan oil now on the table, the importance of the Strait of Hormuz on us is greatly diminished. The war with Iran began in Venezuela.
And it’s great that we’re not there, but that gas price wasn’t Obama’s choice. This gas price is Trump’s. Is Obama to Blame for $4 Gasoline? – FactCheck.org
Very true! We do have a long and complex history. Perhaps we are owed our dues, but a military invasion doesn’t seem like the logical solution to me. Military action rarely helps the economy support paying off their full debt, as it typically crashes their economy.
Absolutely correct. This was a deliberate move by Trump to ramp up to Iran, it’s as clear as my sheet glass front door that people regularly walk into lol. As a World Power, I see it as part of our obligation to ensure we don’t disrupt EVERYONE ELSE in our war of choice.
I’m not giving credit or blame. I’m simply stating that your claim that the surge in gas is costing you $450/yr is dependent on your definition of the base price. When I referenced the gas price during the Obama era, I did so to level-set that base. If you are okay with gas at $3.60 a gallon in 2014 you should be okay with it in 2026. No doubt, the war in Iran has impacted the price of gas the past few weeks. Blame Trump if you must, but if it drops to under $2.50/gal by the end of the year, you have to give him credit. To blame him only when it goes up would be peak TDS.
OK, a bit of time here before dawn.
“We invaded, stole their drilled oil and put ourselves as a stakeholder in the future oil operations.” Too young for history? We simply “stole it back.” The dictator prior to Maduro expropriated the American oil industry (as socialists do), and proved that governments can’t run anything, making the whole nation much poorer. We are now returning that business to a proper free-enterprise, free-trade partnership.
“Usually both parties have to act in good faith during negotiations..at least historically.” Exactly, so if one side is completely unreasonable and intransigent, is it rational to blame the other for continued hostilities against an existential threat? Just asking for a friend.
The price of gasoline goes up because of speculators and because oil is a global commodity. The same would happen if China suddenly started driving more cars (or OPEC cut production). The cost of driving your car should not be the major factor in deciding foreign policy, at least not in this case. Besides, the costs of drilling for oil will slowly (some say 18 months) increase the cost anyway. It is a finite resource at any given price point, and someday it will be just too pricey to burn.
And I am encouraged but somewhat puzzled by your final paragraph. Are you not, as I might have expected, deeply concerned about “manmade climate change” caused by burning fossil fuels?
I have a hard time processing how we ever could have “owned” Venezuela’s oil in the first place. It’s their land, their oil. Their government fumbled it, absolutely. The US, without a doubt, would have a strong position to supplement and assist with rebuilding their oil production capabilities without stealing their leader. These regimes crash themselves. How has the US been doing stabilizing their country in the fallout of our actions? Not great.
Define existential threat.
Absolutely. I work in steam turbines, but also in wind farms and solar production. My company is committed to clean energy and as far as I can see working toward it. We are currently working projects to secure wind farms and solar fields, which I’m a part of. There is absolutely no reason that we shouldn’t be using the sun and the wind for all they are worth. I’ve been looking at buying a few fields in the middle of nowhere and leasing them out for solar. My own home doesn’t have solar panels yet, as the farm I inherited from my dad needs a new foundation and my own home needed sewer work this year. Priorities and all!
We did what us capitalists always do, invest in the resources of other countries and share profits with them, a win-win. Cutting out one of the partners in these profitable ventures by expropriating them is a lose-lose.
Existential threat, as opposed to “imminent threat,” the verbiage I hear from Democrat defenders of the terrorists in Tehran, claiming no imminent threat, sounds like this: Your village is taking care of itself, a bunch of peaceful farmers. You look across the river and the other tribe is feverishly sharpening sticks and piling up rocks. You’ve tried talking to them, they demand you give up your food and your women. You can still live in peace, your death and destruction is not imminent, so what do you do?
“using the sun and the wind for all they are worth.” Oh, absolutely, and they are worth about 1% of our energy needs, places where the “grid” doesn’t go. My uncle used to make electric windmills, back when there was one on every farm, back before the REA, and they are still useful, within their limitations, in the same kind of remote environment. They are better than solar, certainly in Minnesota. But I always ask WHY we are building these things, because “saving the planet” is NOT a good reason. It is a non-solution to a non-problem. And expensive to boot. My home was built to use passive solar and add electric solar if it ever became economically practical. Still waiting.
Is your company building wind and solar because it lets them raise rates, or because they are required by (Nextdoor-banned word) stupid MN law? Both is a valid answer. Because it reduces costs to the consumer is NOT.