One answer...energy independence.

To give, to foreign enemies, or potential enemies, the power to sink the US economically, should be viewed as treason.

Treason for profit is every bit as evil as treason for political gain...Think Bush and prior administrations...

Posted by: duh_swami at October 13, 2008 8:19 AM

It would be far truer to say that the dreamy belief in the benevolence of Muslim oil-producing states, and especially in Saudi Arabia that was said, as it ruthlessly promoted its own economic interests (calculating, at each time X, the ideal price Y that would maximize the value of Saudi reserves and also insure that current Saudi needs could be met), to be our "friend" and "ally" working to "moderate" prices in OPEC, was based on a complete misunderstanding. The Saudis always calculate how to maximize their revenues over time. They must take into account all kinds of things: demand elasticity, and changes in, and the velocity of changes in, other non-oil sources of energy, as well as the possible non-Middle Eastern sources of oil.

Phares appears to believe that there is some kind of mystery in oil pricing. In this, he echoes those who think, on the other side, that the American government needs to do favors in order to be allowed to buy oil at the market price. There is no need, and there never has been, to do any favors whatsoever for the Saudis.

Further, it appears from the article above that Phares thinks a lower price of oil is desirable. That isn't true. The price of oil should be high. But it should be high because we, and other oil-consuming nations, have the sense to tax ourseelves, and thus to recapture some of the oligopolistic rents that otherwise accrue entirely to the sellers of oil, such as Saudi Arabia. The higher the price of oil, the lower the demand. The greater the assurance that the price of oil cannot be jerked up and down to prevent investments in non-oil sources of energy, the more certain and the larger those investments will be, and they are needed. The only way to insure that the price of oil goes steadily up is for oil-consuming nations to put steadily rising taxes on the use of oil. What they do with the money is another matter, but all such tax money should, sensibly and ideally, go to help pay for nuclear plants, for initial subsidies to wind and solar power, to subsidies for a rebuilt national railroad grid, and for urban mass transit systems.

There is not a conspiracy by the oil states to damage the Americans through raising the price of oil. They are keenly aware of the need to insure that the price is not raised so high that the move out of oil goes so swiftly that it will leave them with reserves in the ground with their value much diminished. But the Muslim oil states are not our friends, either. They are malevolent. They are our enemies, or rather, since we are Infidels, they do not wish us well. And they do spend hundreds of billions (Saudi Arabia alone has spent a hundred billion dollars) on building mosques, madrasas, conducting campaigns of Da'wa, and building up a network of Western hirelings to do their bidding in the West.

That is the real problem. And misperceptions of Saudi or other Muslim oil-producers' power to cause damage, get in the way of recognizing that as the real problem -- that the Money Weapon from oil needs to be diminished, and can only be diminished if oil-consumers raise, through taxes, the price of oil.

Posted by: Hugh at October 13, 2008 8:29 AM

A rather more convincing cause of the sub-prime crisis, which started the snowball rolling into the financial avalance, is given in the UK's "Spectator", at http://www.spectator.co.uk/archive/features/2189196/clinton-democrats-are-to-blame-for-the-credit-crunch.thtml?SelectedIssueDate=4%20October%202008

Posted by: Meeker at October 13, 2008 8:32 AM

From post above: The higher the price of oil, the lower the demand.

Yes indeed, now poor and modest income working people can make the choice between food and gas. Walk the kids to school, walk to work, walk to the store...All fine and dandy if you live within walking distance.
Who does the high price of a gallon of gas effect first, and most? You guessed it, the people of low and modest income...or those living on a fixed income.

I would be happy to post instructions on how to build a hydrogen fuel cell for people who want to quit whining and do something about their own energy cost, but for those interested, Youtube has a lot of that....type 'hydrogen' into search and start learning...The energy future is ours, if we are smart enough to grab it...

Posted by: duh_swami at October 13, 2008 9:17 AM

AbuBakerSmith has been calling this a terrorist attack since before the first payoff package was approved. The bailout is just the politicians attempt to cover up their duplicity in facilitating this financial attack. Osams, Hamsa, Zawhiri, Yousef etc have all been saying for years this was going to happen annd they had supports against the US that would surprise us if we knew. The fact that the fed is a privately owned corporation(and it is unconstitutional) owned predominately by foreign bankers is a huge threat. Politicians should be looking into what Andrew Jackson did to retake control over our own currency instead of paying off the crooks to prevent them from immediately using their financial power to destroy our economy.

Posted by: AllahSnackbar at October 13, 2008 9:31 AM

One answer...energy independence.

To give, to foreign enemies, or potential enemies, the power to sink the US economically, should be viewed as treason.

Treason for profit is every bit as evil as treason for political gain...Think Bush and prior administrations...
Posted by: duh_swami

I agree with you completely.
I have made similar statements to my colleagues and friends, who of course think I am a radical and completely off my rocker. Of course all of these problems go back years, like the first time we imported oil from the Islamic countries of the middle east. Energy is the life blood of a free economy and our politicians have in essence given our enemies the ammo they need to destroy us economically. Treasonous? You bet! It just goes to show you that money and power don't make people smart. The OPEC countries have been using oil taqqiya to go after the jugular of infidel countries and what do you know, it worked. Yet many people continue to bury their heads in the Saudi sands. Pathetic.

Posted by: the_antiMo at October 13, 2008 9:37 AM

Although the jihadis may wish us ill, and may even think the current financial crisis is in some way due to Allah's wrath, Walid Phares doesn't make a convincing case for his assertion. While the jihadis among the OPEC nations may certainly have the motive for wanting to inflict harm on us, it's not clear what the mechanism is for providing them with the opportunity. If the financial meltdown had been accompanied by an increase in crude oil prices manufactured by OPEC machinations, then the hypothesis might make sense. Instead, crude oil prices have decreased by almost a factor of 2 over their highs of not too many months ago, much of the decrease occurring over the same time period as the financial collapse. This decrease in oil prices has acted to soften the effects of the financial collapse.

However, the timing of these simultaneous decreases in stock prices and crude oil prices does seem too close to be accidental, so one is still left with the suspicion that they are somehow linked. Phares doesn't state what the market mechanism is that could be manipulated by OPEC to would produce the observed coordinated effects. But something does, indeed, smell fishy. If, when the inevitable stabilization of the markets in the West occurs, the price of oil suddenly shoots upward again in response to OPEC pricing, thereby undermining the stabilization efforts, then this would be a double whammy for the West, subjecting us to a whipsaw effect that could be even more devastating than the market collapse alone. Although OPEC might not have been responsible for triggering the financial collapse, they could certainly be trying to exploit it to their advantage by manipulating oil prices to inflict further damage on otherwise largely self-inflicted destruction.

So, what to do? As far as OPEC is concerned, I'm with duh-swami in advocating energy independence. Let's get the hell as far away from the Saudis as we can, both economically and socially, and put a stop to this "friendship" that exists solely because they happen to sit on oil. They have never been our friends, are not now, and never will be.

Posted by: Eastview at October 13, 2008 9:44 AM

[blockquote]the oil powers are behind the instability that crumbled the will of millions of middle class Americans over the past three years. [/blockquote]

Sounds a bit like "The Crusaders and Zionists are behind this and that problem in this and that Muslim country", nothing that really makes sense. A bit too Islamic for me.
Besides, we shouldn't expect anything but self-interest seeking from these countries.

Posted by: plumberger at October 13, 2008 9:53 AM

I want to add the following thought. I keep hearing about this so called war on terror the west finds itself in. I keep hearing how there is no actual state involved, that we are dealing with what amounts to roving bands of well armed, and well trained bandits. I say hogwash. The war on terror does include nation states. I think that there are many weapons of jihad, not just rifles and IEDs, and oil is one of them. Stealth jihad? Not so stealthy if you know and understand the ideology, its right there for all to see.

Posted by: the_antiMo at October 13, 2008 9:56 AM

BANKS NATIONALIZED IN UK...

FSA encourages growth of Islamic finance in UK banking-business-review.com 29th November 2007

Brown Aims for London to Dominate Islamic Banking and Finance Bloomberg.com 13 June 2006

Islamic banking sought by U.K. International Herald Tribune Published: WEDNESDAY, JUNE 14, 2006

Islamic financial industry to benefit from UK devt ShariaBanking.net Monday, 02 April 2007

New sharia row over Chancellor's plans for 'Islamic bonds' via MailOnline 17 February 2008

UK: New Sharia row over plan for "Islamic bonds"

It will lead to the ownership of Government buildings and other assets currently belonging to British taxpayers being switched wholesale to wealthy Middle-Eastern businessmen and banks.

Exposing the risks of Sharia finance - Sharia Finance Watch

Recall this quote from Spencer's recent interview with Geert Wilders:

Robert Spencer:

Sharia finance is a very grave problem with the wholesale buying up of so much of Western properties, Western capital assets. . .so many things. What would you say to bankers, to financiers, to economists who think that it's a simple necessity to make various concessions and accomodations to deal with the Islamic world and Islamic finance?

Geert Wilders:

I say to them, to bankers as I say to other people that are accomodating . . .It sounds in the short term it might sound attractive to your business but in the long term you will pay the price and the price will be that you will have nothing to say anymore about your investment, about your bank . ..it will be gone entirely. It will be out of your hands. Don't think you are dealing with a Swiss bank or Bank from the Caribbean whatsoever. You are dealing with a bunch of people that at the end of the day want to submit you, to rule you, and want to enforce on you their ideology. You will have nothing to say and you will have helped them making your own grave. This is something that people should be aware of, they should not do.

And from an article, or rather, a book-review and summary by Daniel Pipes of Professor Timur Kuran's indispensable study, "Islam and Mammon":

"Islamic economics increasingly has become force to contend with due to burgeoning portfolios of oil exporters and multiplying Islamic financial instruments (such as interest-free mortgages and sukuk bonds). But what does it all amount to? Can Shari'a-compliant instruments challenge the existing international financial order? Would an Islamic economic regime, as an enthusiast claims, really imply an end to injustice because of "the State's provision for the well-being of all people"?

To understand this system, the ideal place to start is "Islam and Mammon," a brilliant book by Timur Kuran, written when he was (ironically, given heavy Saudi backing for Islamic economics) King Faisal Professor of Islamic Thought and Culture at the University of Southern California.

Now teaching at Duke University, Kuran finds that Islamic economics does not go back to Muhammad but is an "invented tradition" that emerged in the 1940s in India. The notion of an economics discipline "that is distinctly and self-consciously Islamic is very new." Even the most learned Muslims a century ago would have been dumbfounded by the "Islamic economics."

The idea was primarily the brainchild of an Islamist intellectual, Abul-Ala Mawdudi (1903-79), for whom Islamic economics served as a mechanism to achieve many goals: to minimize relations with non-Muslims, strengthen the collective sense of Muslim identity, extend Islam into a new area of human activity, and modernize without Westernizing.

As an academic discipline, Islamic economics took off during the mid-1960s; it acquired institutional heft during the oil boom of the 1970s, when the Saudis and other Muslim oil exporters, for the first time possessing substantial sums of money, provided the project with "vast assistance."

Proponents of Islamic economics make two basic claims: that the prevailing capitalist order has failed and that Islam offers the remedy. To assess the latter assertion, Kuran devotes intense attention to understand the actual functioning of Islamic economics, focusing on its three main claims: that it has abolished interest on money, achieved economic equality, and established a superior business ethic. On all three counts, he finds it a total failure.

1) "Nowhere has interest been purged from economic transactions, and nowhere does economic Islamization enjoy mass support." Exotic and complex profit-loss sharing techniques such as ijara, mudaraba, murabaha, and musharaka all involve thinly disguised payments of interest. Banks claiming to be Islamic in fact "look more like other modern financial institutions than like anything in Islam's heritage." In brief, there is almost nothing Islamic about Islamic banking which goes far to explain how Citibank and other Western majors host far larger Islam-compliant deposits than do the specifically Islamic banks.

2) "Nowhere" has the goal of reducing inequality by imposition of the zakat tax succeeded. Indeed, Kuran finds this tax "does not necessarily transfer resources to the poor; it may transfer resources away from them." Worse, in Malaysia, zakat taxation, supposedly intended to help the poor, instead appears to serve as "a convenient pretext for advancing broad Islamic objectives and for lining the pockets of religious officials."

3) "The renewed emphasis on economic morality has had no appreciable effect on economic behavior." That's because, in common with socialism, "certain elements of the Islamic economic agenda conflict with human nature."

Kuran dismisses the whole concept of Islamic economics. "[T]here is no distinctly Islamic way to build a ship, or defend a territory, or cure an epidemic, or forecast the weather," so why money? He concludes that the significance of Islamic economics lies not in the economy but in identity and religion. The scheme "has promoted the spread of antimodern currents of thought all across the Islamic world. It has also fostered an environment conducive to Islamist militancy."

Indeed, Islamic economics possibly contributes to global economic instability by "hindering institutional social reforms necessary for healthy economic development." In particular, were Muslims truly forbidden not to pay or charge interest, they would be relegated "to the fringes of the international economy."

In short, Islamic economics has trivial economic import but poses a substantial and malign political danger."

Posted by: heroyalwhyness at October 13, 2008 10:00 AM

Isn't that interesting...I did wonder briefly if Saudi money had influenced any of the crisis, and i thought I might be being farfetched ...
well, well...

Why are we propping them up again, instead of cultivating our own homegrown energy talent?

Incidentally, for interested parties who wish to invest or help this guy develop further, check out
www.engineair.com.au.

An Italian Aussie!!

Posted by: carpediadem at October 13, 2008 10:06 AM

Biting the hand that feeds you.

No one ever accused Muslims of being logical.

Posted by: PMK at October 13, 2008 10:42 AM

Do the OPEC states remember the days of $10 per barrel oil?

Posted by: PMK at October 13, 2008 10:43 AM

The financial crisis was our own damn fault.

The cause of this crisis is bad government regulation. An expensive foolish war in Iraq. And most importantly a failure to find an alternative to oil.

Posted by: James Martel at October 13, 2008 1:43 PM

And the market closes 921 points UP.

Posted by: give me doughnuts at October 13, 2008 4:04 PM

Blame OPEC if you want. I am sure some of it will stick and maybe it should.

I will continue to be amazed by a country that is held hostage voluntarily by less then 500 people in Washington D.C. We are a victim that agrees to participate in being a hostage instead of demanding those 500 represent this country and get out of the way of domestic engergy development.

It is an intentional fleecing of America. 500 people standing in the way of 300 million.

Posted by: alaskan1000 at October 13, 2008 4:10 PM

As to me, there is NO strategy.
There is only avidity.

Posted by: Coaltaxopeuh at October 13, 2008 4:56 PM

alaskan1000,
There is an election, three weeks from tomorrow. You'll have a chance to vote out some of the fleecers, that is, unless they bring home too much pork for you to get rid of them.

Posted by: PMK at October 13, 2008 6:08 PM

http://www.jihadwatch.org/archives/023073.php
Quoth duh_swami:

Who does the high price of a gallon of gas effect first, and most? You guessed it, the people of low and modest income...or those living on a fixed income.

This has been the excuse for low taxes since the 1970's oil price shocks.  And those same low taxes gave us Excursions and Durangoes and Escalades and Hummers sucking down petroleum to the tune of a pint every mile even on the highway.

Meanwhile, Europe taxed fuel out the wazoo.  Yet the low and modest income people there get around just fine.  The difference is that lots of people can get around without cars, and lots of the cars they do have consume as little as a half-cup per mile.  Besides, one of the biggest health problems in America's poor people is obesity; do you think that riding a bicycle to work would hurt these folks?  Do you think that marking off bike lanes so it's safe to ride, letting people get around on two wheels and even discard their cars, would hurt their finances?  (I was run off the road twice in five minutes last year by jackasses in cars who decided that passing was more important than not hitting me.)

If you aren't part of the solution, Mr. Swami, you're part of the problem.  And hydrogen is a boondoggle; google "Ulf Bossel" for the straight dope on that (or see my blog, with specifics here and here).  The traitor Bush's cancellation of PNGV in 2001 and its replacement with a hydrogen "Freedom Car" program (plus the gas-guzzler tax deduction) had everything to do with keeping demand for oil high into the indefinite future.

Hugh:  You don't spend enough time on this topic.  You need to keep the drumbeat up.

Posted by: Engineer-Poet at October 13, 2008 7:20 PM

Quoth Eastview:

If the financial meltdown had been accompanied by an increase in crude oil prices manufactured by OPEC machinations, then the hypothesis might make sense. Instead, crude oil prices have decreased by almost a factor of 2 over their highs of not too many months ago

This is to be expected.  High oil prices sucked credit out of the economy, precipitating the explosion of the housing bubble and recession.  The consequent collapse in oil demand caused the price drop; the price elasticity of oil demand is about 5%, so a small surplus in production over demand causes a steep decrease in price (and vice versa).  Oil production is decreasing world-wide, so any upturn in the economy which boosts demand for oil will cause prices to spike again and cut the recovery short.

The Saudis are immune to threats because, curiously enough, they are at the mercy of geology.  All the "supergiant" oil fields in the world are known to be past their peak production, save one:  Ghawar.  The Saudis have kept information about Ghawar as a state secret, because knowing when their production will peak (and when their weapon of abundant oil would disappear) would eliminate much of their power.  And despite the best efforts of independent analysts at places like The Oil Drum, the world still hasn't figured it out yet; huge numbers of seemingly-intelligent people, including world leaders and anti-jihadis, are still in the dark.

Invasion wouldn't help there.  The US military can destroy things, but cannot fix the geology of Ghawar any more than they could fix the geology of Mexico's Cantarell field (now down to half its peak production and falling fast).  The one thing we could do is take away the oil from the Wahhabists and deprive the Chinese, but we'd hurt ourselves and the rest of the world at least as much.

Last but not least, Her Royal Whyness is spot-on.

Posted by: Engineer-Poet at October 13, 2008 7:22 PM

Engineer-Poet, thank you very much for your very informative comments about the relationship between oil prices and the financial markets. It would seem, then, that OPEC might not have had much of anything to do with the financial meltdown, as they were victims, too. And thanks for the link to The Oil Drum. Very interesting site.

Posted by: Eastview at October 14, 2008 1:22 AM

You're very welcome.

I should add a disclaimer that I write for The Oil Drum, though my ambit is mostly physics and thermodynamics; none of the oil-field analysis is mine, and I'm not qualified to argue it.

Posted by: Engineer-Poet at October 14, 2008 8:41 AM

We can fight OPEC and here is how WWW.OFDEC.COM

Posted by: American at October 14, 2008 8:57 AM

We can fight OPEC and here is how www.ofdec.com

Posted by: American at October 14, 2008 8:58 AM

We can fight OPEC and here is how http://www.ofdec.com

Posted by: American at October 14, 2008 8:59 AM