L AT I M E S . C O M / O P I N I O N
T U E S DAY , N OV E M B E R 11, 2 014
A11
OP-ED
Cheap oil’s winners and losers
Lower prices are likely to
put pressure on Russia,
Cuba, Venezuela and Iran.
By Robert A. Manning
T
he recent drop in
world oil prices —
from more than $100 a
barrel in June to about
$80 a barrel now — will
benefit the global economy,
American consumers and a beleaguered U.S. foreign policy. And
there are reasons to think oil
could remain in the $75-to-$95
range for the next two years.
But it’s important to understand why oil is suddenly cheaper, and to consider what international ramifications the price
drop will have.
One reason for the plunge is
the global economic slowdown,
and another factor is the surge in
U.S. production from the “shale
revolution.” But the biggest force
driving it is that OPEC’s largest
producer, Saudi Arabia, which
pumps 9.7 million barrels a day,
has made it clear that it can live
with lower prices.
What are the Saudis up to?
The International Energy
Agency recently lowered its
estimate of world oil demand for
2014 by 250,000 barrels per day.
Lower demand means that if the
Saudis and other gulf oil produc-
ers want to maintain or increase
their market share, they will have
to provide incentives, which is
why they started discounting
oil, first to their European and
Asian customers, and now to the
U.S.
Another Saudi aim appears to
be to slow the North American
shale boom — even at the cost of
undermining OPEC. Shale extraction has helped boost U.S. oil
production to about 9 million
barrels a day, which some analysts say puts the country on
track to surpass the Saudis by
2016. But getting oil from shale is
expensive, and the Saudis know
that a big drop in oil prices could
de-incentivize investment in U.S.
shale projects. When prices fall to
$80 or below, shale is a less attractive oil source.
The picture gets even more
complicated when you consider
the effect of lower oil prices elsewhere in the world, especially
how they will affect troublesome
petrostates and their clients.
Russia and Iran compete with
Saudi Arabia in the international
oil market, and both need oil
prices to be at roughly $110 a barrel in order to balance their budgets. If oil prices remain at $80 a
barrel, the strategic ambitions of
Tehran and Moscow could be severely undermined.
Not that Saudi Arabia would
mind that. Russia and Iran have
backed Syrian President Bashar
Assad’s regime in the Shiite-
Sunni proxy war now roiling the
Middle East, while Saudi Arabia
is backing the rebels.
But the lower prices are also
likely to cause internal disruptions, particularly in Russia,
which is having to deal with a
range of problems, including
Western sanctions, the flight of
capital from the country (an estimated $100 billion this year alone)
and a steady brain drain. Russia’s
expected growth for 2014 is an
anemic 0.5%, and similar growth
has been projected at least
through 2016. With sharply diminished oil revenue, Russian President Vladimir Putin would be
hard-pressed to find money to
spend on boosting pensions and
government salaries or to fund
other measures to keep Russians
happy.
It’s unclear what effect $80-abarrel oil will have on Russian expansionist behavior in Ukraine
and elsewhere. Some analysts believe that Putin is so animated by
a desire to restore what pieces he
can of the former Soviet Union
that he won’t let cost stand in his
way.
Elsewhere in the world, low oil
prices are likely to put additional
pressure on the communist regime in Cuba. The island nation
has been kept afloat in recent
years by oil subsidies from Venezuela, which sends 115,000 barrels
a day worth some $3 billion.
Cuba has been toying with
limited market reforms as its
economy has faltered. But it’s unclear what a cutoff in cheap oil
from Caracas would mean. The
Castro regime might decide to
live with serious economic stagnation, which would impose even
more hardship on its citizens. But
it might also move toward more
Chinese-type market-oriented
reforms.
As for Venezuela’s horrendously mismanaged socialist regime: It must be very nervous
about facing the Venezuelan public without the cushion of $110 oil,
and it may also have to rethink its
gift to Havana.
Here at home the news, other
than for shale investors, is mostly
good. Americans will see an immediate benefit, with gasoline at
$3 a gallon or less, a boon not just
for drivers but also for the businesses that serve them. Lower
prices are likely to spur both consumer spending and the overall
U.S. economy.
The oil crisis of the 1970s
brought long lines at U.S. gas stations and high prices. Today we
have a new oil crisis, but its negative effects are primarily being
felt in other parts of the world.
This time, the U.S. is largely a winner, both at home and abroad.
Robert A. Manning, a former
State Department official, is
a senior fellow at the Brent
Scowcroft Center for
International Security at
the Atlantic Council.
Associated Press
IN NOVEMBER 1918, U.S. infantry soldiers celebrate in Remoiville, France, as terms of the armistice are read.
The rhymes of history
A
By Robert Freeman
t the 11th hour of
the 11th day of the 11th
month in 1918, the
Great War was over.
But the “War to End
All Wars” famously didn’t live up
to its billing. Still, it had greater
impact on the world than any
event of the last thousand years.
The question is whether another
such war might be looming today.
It was in World War I that humanity first practiced the industrialization of human slaughter
— 16 million people were killed,
more than 17 million were wounded.
Nobody could seem to stop it.
During the height of the carnage,
at the battle of the Somme, about
60,000 died the first day. Four
great empires expired in the war,
more than in any other event in
history. The German, Austrian,
Russian and Ottoman empires
were destroyed and dismembered. Out of their carcasses were
born 11 new countries.
Five of those countries — Iraq,
Jordan, Palestine (now Israel),
Syria and Lebanon — are in the
Middle East. They are still the
source of some of the most intractable conflicts on the planet.
Communism came into being
as a state-based system as a result of World War I. The war
played a major role in bringing
down the government of the Russian czar in 1917. Into the breach
leapt the Bolsheviks, led by Vladimir Lenin. Their seizure of power
set the stage for one of the most
enduring conflicts of the 20th
century, the Cold War.
And World War I was the moment in history when the center
of global power shifted, from Europe to the United States, where
it has resided ever since.
In other words, industrialized
war, communism, the U.S. as the
dominant world power and the
modern Middle East had their
origins in World War I. No event of
the last 1,000 years has so decisively rearranged the architecture of global power.
But could such a tectonic upheaval happen again? Three patterns of conflict in the world today remind us of patterns that
presaged World War I.
The first is the fact of a declining imperial power being confronted by a rapidly growing upstart. In World War I, Britain was
the declining power while Germany was the galloping upstart.
In 1850, Britain controlled almost
60% of the entire world’s wealth,
compared with 3% for Germany.
By 1913, Britain’s share had
shrunk to 14%, and Germany’s
had risen to 21%.
Today, the dominant global
power is the United States. It is
being challenged, at least eco-
nomically, by China. In October,
China became the largest economy in the world in purchasing
power parity terms. It could
shortly surpass the U.S. in raw
terms. Economic power inevitably translates into political power
— an echo of early 1900s.
Patterns of
conflict today
remind us of
patterns that
presaged WWI.
The second parallel is the
forming of global states into
blocs, or alliances. In the lead-up
to World War I, the Triple Alliance
faced off against the Triple Entente — Germany, Austria-Hungary and Italy against England,
France and Russia.
Today, world powers are again
forming alliances. They are the
U.S. and Europe, as the dominant
powers, against Russia and
China, the challengers. The current conflict in Ukraine has driven Russia and China closer together. They may be joined in
their alliance by Brazil, India and
South Africa. Think of it as the
“haves” versus the “want-tohaves.”
The final parallel is conflict in
the Middle East. World War I was
fundamentally about who would
control the collapsing Ottoman
Empire, with its oil riches in the
Persian Gulf. Germany had made
friends with the Ottomans. If
they seized the gulf it would have
posed an existential threat to
Britain, which ran its globally deployed navy on gulf oil. The war
had to happen.
The conflict in the Middle
East today is about oil as well. Oil
is the lifeblood of industrial civilization, but it is running out. The
U.S. invasion of Iraq in 2003 is now
notorious for having been carried
out under false pretenses, the real
story being oil. Still, today, we
fight for who will control the Persian Gulf, and, therefore, the
world.
It’s been said that “history
never repeats itself, but it does
rhyme.” There won’t be a second
World War I, but we can hear the
rhymes of history echoing from
that tectonic upheaval of 96 years
ago.
Robert Freeman is the author
of “The Best One-Hour History”
series, which includes “World
War I,” “The Protestant
Reformation” and “The
Cold War.”
Clinton
spins the
midterms
JONAH GOLDBERG
I
n the old Soviet Union,
Kremlinologists would read
the state party newspaper
Pravda not so much for the
news it contained, but to
glean what the commissars
wanted readers to believe the
commissars were thinking. The
closest we have to that in America
is the New York Times. Obviously,
it’s not a state organ and there are
many fine journalists there, but it
does play a similar role for the
Democratic Party, often reporting
less on what Democrats actually
think and more on what Democrats want readers to believe is the
current state of Democratic thinking.
Two days after the midterm
Democratic Gotterdammerung,
Team Clinton let it be known that
it thinks the election was good
news for it. “Midterms, for Clinton
Team, Aren’t All Gloom,”
proclaimed the understated headline in the Times. “A number of
advisers saw only upside for Mrs.
Clinton in the party’s midterm
defeats,” reports Amy Chozick.
There’s no mention of any advisors
seeing a downside. Indeed, a few
sentences later, Chozick tells
us there is a “consensus … among
those close to Mrs. Clinton that
it is time to accelerate her schedule.”
“In many ways,” Chozick continues, “Tuesday’s election results
clear a path for Mrs. Clinton. The
lopsided outcome and conservative tilt makes it less likely she
would face an insurgent challenger
from the left.”
Maybe it’s true that that there
is a silver lining for Hillary Rodham Clinton in the shellacking her
party took last week. Maybe her
ineffective stumping for Democrats means nothing. Maybe a
17-percentage-point loss for putative Clinton Democrat Mark Pryor
in Clinton’s home base of Arkansas
is a blessing in deep, deep, deep
disguise. Maybe the staggering
indifference of the Democratic
coalition of young people and
minorities on display last week is
proof that they are really just
husbanding their voting energies
for 2016. And maybe the fact that
the “war on women” shtick proved
as stale as a 1980s sitcom catchphrase is irrelevant for a candidate
so invested in her gender.
But the notion that this monumental rebuke of Clinton’s party,
and the administration she served
in, amounts to an unambiguous
Clinton win invites many to ask,
“What you talkin’ ’bout, Hillary?”
You can always tell you’re being
spun if the opposite facts would
yield the same result. Does anyone
doubt that if the Democrats Clinton vigorously campaigned for had
held on to the Senate that the
same people would be telling the
New York Times that the election
results were a boon for Clinton? If
the midterm results are scaring
away potential left-wing insurgents, why is Clinton Inc. expediting its schedule? Shouldn’t the
lack of a challenger make it easier
for Clinton to lay low for a while
longer?
Not according to this alleged
consensus among her brain trust.
Chozick quotes from a “Ready
for Hillary” fundraising email:
“Now more than ever we need to
show Hillary that we’re ready for
her to get in this race.” “America
needs Hillary’s leadership.”
Ah, so at a time when an unpopular president — in profound
denial about what the voters were
saying on election day — is tarnishing the whole Democratic
brand, it makes irrefutably good
sense for Clinton to further merge
her own brand with her party’s?
How will President Obama
respond to the notion that Clinton
must now assume the mantle of
leader of her party, never mind the
nation? What, exactly, can an
out-of-work politician do that will
actually provide tangible proof of
her “leadership”? How will it help
Clinton to distance herself from an
incumbent president still popular
among the base voters she will
inevitably need in 2016? Frankly, I
have no idea.
Although Obama and much of
the media establishment are
convinced that the midterms were
a revolt against, variously, Washington, incumbents, gridlock,
obstructionism and/or a deepseated desire among Americans
for Washington to “get stuff done,”
the actual election returns were
almost uniformly about throwing
out incumbent Democrats, reelecting “obstructionist” Republicans or electing a new generation
of Republicans who vowed to
stand up to Obama.
I think it’s obvious Democrats
could use a fresh face or at least a
politician more adept navigating
such problems. The consensus
thinks differently — or at least
wants you to think it does.
jgoldberg@latimes
columnists.com