For America, Oil Is Not a Commodity, but a Strategic Tool

The oil markets are very complicated. They cover multiple regions and are multidirectional; there are specific exchanges dedicated to oil prices such as Brent Crude, West Texas Intermediate and crude oil indexes. The heavier oil that falls under WTI is not shipped, but travels long distances over pipelines, so it differs in terms of pricing if exchanged.

And there is shale oil, which the U.S. extracts differently by pumping hot water into the ground to push the oil out of the wells.

Do oil conflicts have an impact on global conflicts?

Are oil prices real, where declared exchanges take place on the table and out in the open?

There are many players at that table, including OPEC, OPEC+, Russia, Russia+, America and America+. These generate a great many conflicts of interest. Talk about complex issues, this is more like creative chaos, a situation which is grounded in history because the U.S. has refrained from letting oil be the subject of international agreements.

There is speculation surrounding oil stocks, which is a separate subject than oil trading, but it affects prices. When there is great demand and prosperity, stocks go up, or vice versa. It goes without saying that oil prices are governed by political decisions more so than by supply and demand.

The oil exchanges were built on a foundation of pressure. When oil prices fell to their lowest levels, the U.S. filled its reserve tanks, despite American abundance. Instead of one reason, the U.S. came up with a thousand reasons for oil prices to drop, the goal being for the U.S. to fill its treasury. This complex issue grows increasingly more complicated by the day, and the solution would be to set up a global system to govern pricing and exchanges. Without this, the oil sector will remain a roulette table where players call in their bets without any sense of responsibility. This jeopardizes those countries without the political or economic power to defend their oil prices. How can we wrap our heads around oil prices changing more than $50 from one day to the next?

It’s a crisis. And it will only be resolved by an agreement governing oil trading, just like any commodity, and doing so pursuant to market trends. As for speculators, they play a central role that affects prices and oil producing countries. In the end, few countries are winners. Unfortunately for the U.S., China is one of the countries that will benefit from the drop in oil prices, since it is neither a speculator nor a producer, but a net consumer. Those who stand to benefit the most are Americans, because the price of oil at gas stations is not determined by a government decision, but by the price that is constantly changing.

Finally, the oil crisis is both old and new.

And here I speak as a member of the Expert Review Group of the World Trade Organization. The U.S. has insisted that the oil trade has its own peculiar characteristics that makes it unlike any other trade. The WTO has drafted agreements for the global trade of goods with the exception of oil, which it does not consider a commodity, but a strategic resource.. Therefore, it is not possible to establish a framework to regulate the oil trade, and therein lies the problem. There is no system governing oil exchanges. Yet.