Jason talks with William Engdahl regarding the myths about oil and how it impacts the world economy. William is the author of Myths, Lies, and Oil Wars.
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Start of Interview with William Engdahl
Jason Hartman: It’s my pleasure to welcome William Engdahl to the show. He is an economist, he talks about geopolitics and he’s coming to us today from Frankfurt, Germany. His latest book is Myths, Lies, and Oil Wars. William welcome. How are you?
William Engdahl: I’m quite fine Jason. Glad to be here.
Jason Hartman: Well good. It’s great to have you on the show. Tell us about the book a little bit and the premise if you would.
William Engdahl: Well, the Myths, Lies and Oil Wars, the main premise is that a handful of giant oil companies, oil and gas companies, today they’re called the four sisters I suppose, or the four horsemen of the apocalypse. They used to be the seven sisters before mergers and acquisitions. And they have gone out of their way to foster a myth of scarcity over the decades going back almost a century, since oil first became a major factor in the economy around World War I. A myth of scarcity in order to justify extremely high prices and enormous profit, and the latest manifestation of that was during the Iraq invasion in ’03 when this whole peak oil thing started flooding the internet and appearing everywhere, and then suddenly governments began to look at it, and be convinced that the world is running out of oil and we have to prepare for the worst and ration our fuels at some point and so forth.
And it turns out that that’s entirely a contrived myth that in fact, rather than running out of oil, we’re running into oil almost every place we turn. The boom and shale gas and shale oil in the states these last few years is just but one example. That’s the least efficient way of getting hydrocarbons out of the ground. But offshore Brazil, in the Mediterranean, offshore Israel even for the first time, Greece, Cypress, it’s just everywhere we look almost we’re finding huge oil gas lines. So the myth is that oil is a scarce commodity. The lie is that we need to invoke austerity in order to get through the next period.
Jason Hartman: Well I would certainly agree with you. I’m glad you’re not a peak oil guy, because I’m not either. But why is it not a scarce commodity? For example, do you believe in the Abiotic theory? Or do you just think that we’ve got massive reserves?
William Engdahl: I’m in touch with some of the leading Russian geoscientists who have worked for decades on the Abiotic theory, the idea that oil is not a fossil fuel. It’s not a belief and it’s not a theory anymore – it’s actually been laboratory proven in repeated experiments. You can simulate the pressure and temperature of the core of the earth and create hydrocarbons in the laboratory. So it’s a proven scientific hypothesis that was developed by a team of Russian and Ukrainian scientists in the Soviet Union during the cold war. They have developed a very sophisticated way of looking for hydrocarbons where western geology says there aren’t any hydrocarbons to be found. And that’s something that the western big oil companies are not at all happy to have generally known.
For example, for China to realize in the earth quake zone in the Sichuan province where all the earthquakes occur, there are probably vast oil resources and gas resources that they’ve never even thought to look for. So things like that would make China energy independent from the Middle East supply lines that are so vulnerable right now with all the uprisings in the Arab world and what not.
Jason Hartman: So we’ve got a good supply ahead of us. How does that affect things though? Where will oil prices go, for example? I had a guest on quite a while back, I can’t remember his name, forgive me, but he wrote a book called The Oil Card. And he said oil should be like three dollars a barrel or something. I don’t know, that seems like a bit of a stretch to me versus 90-100 a barrel type thing. But what are we talking about here? How plentiful is it?
William Engdahl: The gas hydrates locked into the molecules inside the ocean give a supply of several thousand years according to our best estimates. That requires technologies to be developed before that can be exploited. But that’s just one example. We’re nowhere near exhaustion of the hydrocarbons. And that’s good news if the political control of oil is broken. The oil price for some years since the end of the 80s has really been determined by several banks out of Wall St and the city of London. And the oil futures markets, the paper oil markets, which are susceptible to enormous manipulation, the FERC, Federal Energy Regulatory Commission has gone after Deutsche Bank, Barclays, and several of the JP Morgan chains in the last several years precisely for manipulating the oil prices. So if you can break the derivatives market in oil, and take away the exemptions on energy futures from any regulatory supervision, which they enjoy right now since 1999, the prices of oil and gas can come down dramatically worldwide and that can lead to an economic boom. Because oil is the driver of economic growth worldwide since the Second World War.
Jason Hartman: So generally speaking, I’m a believer that we are going to see fairly significant inflation in the US. What does cheap oil and gas do? It creates a boom, and ultimately booms our inflationary, but initially would it be deflationary? What are your thoughts on that?
William Engdahl: I think initially it would spur economic investment, which is something urgently the economy needs.
Jason Hartman: Yeah, well no question about that. In the book, you talk about how we’re repeating a catastrophic blunder. What is that blunder?
William Engdahl: What I refer to is Germany between 1914 and 1945 lost two World Wars, and if you look at it not from a political or a good guy/bad guy perspective but purely from a military logistical standpoint, Germany lost two World Wars primarily on the military side, primarily because they did not secure their oil supply lines.
They, in the First World War, that was toward the end of the war where mobilized warfare through tanks and so forth became decisive, and in the Second World War, the German general staff virtually ignored the fact that you could have cut off the entire oil supply line of the British Royal Navy, eliminated your major threat on your western front, and focused your entire energies toward the soviet union, had you cut off the Middle East supply lines. And they were in a position to do that had they acted early enough. They kind of dilly-dallied around and then sent Ronald down there when it was far too late and they’d already started the campaign in the East, Operation Barbarossa. So it was a catastrophic blunder that the general staff repeated two times in two World Wars. It had horrific consequences.
Jason Hartman: So in what way are we repeating it now? In what way is that happening?
William Engdahl: Well, that was the repeat. The Second World War is what I was referring to.
Jason Hartman: Oh, okay. Got it. When we look at the way power shifts around the world geopolitically with energy production, with plentiful oil is the Middle East still going to be at the center of this, or is that nexus moving? A lot of people are looking at the US, they’re looking at North Dakota, they’re looking at California, and they’re looking at oil shale. What will be the center of this new boom? Or will it be distributed more so than it is today?
William Engdahl: I think it’s going to be much more distributed. We’re finding huge new oil fields in Western Africa, in Kenya and Eastern Africa, throughout the African sub-continent. We’re finding oil in the Mediterranean for the first time, vast amounts of oil and gas. Even offshore Israel. And of course, Iran and Qatar have some of the largest gas fields discovered in the modern period. So I think it will be more distributed. I don’t see the United States emerging as a new Saudi Arabia by any means, the shale oil and gas boom is primarily a Wall St hype and a bubble especially with the gas, which depletes extremely rapidly, and they’re trying to cover that up by drilling new wells and keeping the production going long enough so that they can sell the properties onto unwitting Chinese and other foreign investors. That’s a typical oil patch play when you get into a situation where your oil is beginning to decline and your flows are beginning to decline, you try to sell off your property to foreign investors before the bubble pops.
Jason Hartman: Sure. That’s the game of hot potato. Get rid of it before you lose.
William Engdahl: I see it much more distributed frankly, Jason.
Jason Hartman: Well that’s probably good for world peace I would assume, right?
William Engdahl: Well, I would certainly hope so because one of the themes of the book is how many wars we’ve had since the Second World War that have directly oil as their raison d’etre, the behind the scenes agenda. The Iraq/Iran war, this 8 year long war that was encouraged by the US simply to keep Iranian oil off the market and let the two bleed each other to death almost in order to keep the prices high and to keep a certain control on global oil markets, global oil flows.
Jason Hartman: Well at first people accused the US of the motivation being to steal the Iraqi oil, but that hasn’t happened at all, has it?
William Engdahl: No, that’s a misunderstanding. The aim of it is strategic denial. The companies, the four giant companies that control the Anglo American Oil market, Exxon Mobile, Chevron, BP and Shell, they are part of a cartel which aims to use oil and the access to oil or the denial of access to oil to control entire countries. And right now, the focus of that control operation is China. The giant elephant in the room economically that the west is very, very intent, especially the Obama administration on making sure that China dances to the tune that is played out of Washington and not out of Beijing. Oil is one way they’re doing that.
Jason Hartman: But Russia comes into this in a pretty big way, doesn’t it? A lot of the recent Russian prosperity, although there are a lot of flaws with that too we can certainly go into, but they’ve had an oil boom of their own haven’t they?
William Engdahl: Yes. Well, they indeed have. They’re the second largest, well sometimes the largest oil producer in the world next to Saudi Arabia, and by no means are they giving any signs of depleting or exhausting their oil resources. And so they’re a huge factor in what’s happening now. Traditionally, Russia had oriented after the collapse of the Soviet Union toward the western, the European market for its exports and now they’re increasingly turning toward China and the Asian markets to build pipe lines and make oil agreements with the countries in Asia. So that’s a fascinating new development there. In a sense, it has a natural symbiosis. Russia has these vast raw materials, oil and gas and minerals that China lacks. And China has this huge industrial production that Russia lacks. So China can build railways across Russia to help bring Chinese goods into the European market, and Russia would benefit from that through transit fees and other things. There are all sorts of synergies that can make the Eurasian landspace into a huge economic boom area.
Jason Hartman: And one of the things that’s interesting about this is that it’s all traded in dollars, the reserve currency of the world. And I know there’s been a lot of talk about how the dollar could lose its reserve currency status. I don’t think that’s very likely, at least not any time soon, but what are your thoughts on it? You may well disagree with me.
William Engdahl: No, I agree with you very much because of the very reason. When the Lehman Brothers crisis triggered this global escalation of the financial crisis in 2008, the issuance of debt by the US treasury went beyond all bounds of anything ever conceived in history. Well over one and a half trillion dollars of deficit per year. And that has been ticking along every single year since over one trillion dollars of new debt. And long about the end of 2009, the largest foreign holder of US government bonds, US debt, China made very, very loud noises in the international arena through world press and certainly to Washington that they were more than unhappy with the fiscal profligacy of Washington and the fact that their trillion dollar plus holdings on US treasuries were endangered by the rapid rate of addition of new debt and that they were considering diversifying toward the Euro.
Well, it’s kind of interesting. I’m convinced it was no coincidence, but rather a deliberate attack, coordinated attack by financial warfare if you want to call it that, from the dollar based interest of Wall St and the US treasury of the Federal Reserve, against the Euro. Because the Euro was indeed emerging as an alternative reserve currency, very rapidly in fact over the previous couple of years.
Jason Hartman: So we move from spice wars to oil wars, we’ve have land wars. There have been so many reasons for war over the millennia. But is the next thing really a currency war where we will find proxy reasons, fake reasons to go to war to protect the dollar’s reserve currency status?
William Engdahl: Well we’re in kind of currency wars today with the dollar, the Euro and so forth. It takes different forms at different times, but the idea ever since August of 1971 when Nixon tore up the Bretton Woods treaty and said that we no longer peg the dollar to gold, we let it float, the dollar has been backed by different things over time. Back in the 70s with the oil price shocks, with the rise in price of oil 400% in ‘73-4, then you could talk about the dollar being backed by oil, by petro dollar flows. Now today, the oil has become proportionately a far less significant factor in support of the dollar, but what you have is the dollar de facto being supported by Abrahams tanks and f16 jets, by the military, US armed forces and what they’re doing around the world.
Jason Hartman: The currency war turns into a real war, in other words. When most people think of currency wars they think of countries artificially suppressing their currency to increase exports and things like that, but what is your overall outlook on things? Globally, and then since the US is the big player at least for the time being, but we’re what, 5-6 times larger than China’s economy. Of course there are debates on how you measure that and everything. Will the US be able to just sort of inflate its way out of its debt, especially to China and then Japan?
William Engdahl: Oh, no. I don’t think so. Those days are gone, Jason. I think what we see is a crisis akin to that of the British Empire between 1973 when what the British call The Great Depression began in the British economy, and then 1914. And I think the US has gotten itself, or the Wall St, the gods of money as I call them in one of my books, they have literally gone down a dead end street and the hollowing out of the real economy of the United States over the last 30 years, the outsourcing of vital industries to Asia, to Eastern Europe, to Latin America, Mexico, whatever, that’s hollowed out what used to be the greatest industrial creative machine in the world, after 1945 and is a hollow shell of what it used to be. The indebtedness of the US economy is simply, unless you’re going to write off that debt as unpayable and do a moratorium on that…
Jason Hartman: Well, you know it’s payable with pennies on the dollar, if you will, maybe not pennies but maybe it’s payable for 50% if we inflate away 50% of it, and then we still have the obligation to pay 50% back.
William Engdahl: Yeah, but where will that inflation come from? Where will it go? It will go into the US economy. It will create a horrendous…
Jason Hartman: Oh, I agree. It will be global.
William Engdahl: But the problem is that this debt structure is what has to be cracked, and until you crack that you’re not going to inflate your way out of anything I don’t think.
Jason Hartman: So in other words, you’re saying that the creditor nations, and here we’re talking mainly China and Japan, will not allow us to do this?
William Engdahl: Well, the Chinese certainly have signaled by the motion of their feet and the lack of interest in continuing the rate of treasury purchases that they had 3-4 years ago. The Japanese, it’s more of an occupied country, the current government of the LDP is beholden for its position to Washington and they’re pretty much doing what Washington tells them. How long they’ll do that is another question.
Jason Hartman: Well, Japan and China both have their own major sets of problems. Japan being that people are starting to talk about shorting its debt so significantly. Japan has just got huge problems. But after that, you just look 10, maybe 15 years into the future and China has got giant demographic problems, there’s a lot of dissent in China. I don’t know if that government can stay the way it is in China.
William Engdahl: I think they realized that and that’s why the new presidency and the new government is making a huge effort to crack down on corruption on the party level and no the level of state and industry and so forth. They’ve got to regain the confidence of the population. The golden years, the last 30 years have been virtually golden years in China. I’ve been there now about 9 different times over the past 6 years, and I’m quite widely traveled across China, so you can see not just the coastal prosperity that you can see on the internet. But one thing they do have, which is absolutely amazing to see, is they have a passion for building up the country that America used to have…
Jason Hartman: With infrastructure you mean?
William Engdahl: With infrastructure. They have an optimism that’s been lost, understandably, but it’s been lost largely in the United States over the last 20-30 years.
Jason Hartman: Well, it’s so ridiculous in the US now that everything has become a political football. If you look at this completely idiotic train that they’re building, I guess, in California that goes from LA to San Francisco that’s not even going to be high speed now, from what I hear, that’s the latest thing. This is just a disaster. These projects, they just don’t work here.
I grew up in Los Angeles. You’ve got this light rail system in LA that isn’t very used and coveted at all. It’s basically a failure in my opinion. And it stops about one mile short of LAX, Los Angeles International Airport. It’s just idiotic, and no doubt that that was the taxi unions that fought it, and it’s like in China it’s so efficient because communism and a dictatorship, they can just build stuff. It’s much more efficient in many ways. And I just want to say, I’m not arguing in favor of that type of government. I’m just saying it does have a few benefits.
William Engdahl: I think you have to have a strong role of the state at the phase of getting through certain crisis periods. And how you do that, whether you do it under a communist dictatorship… the party realizes in China, it’s kind of interesting to watch, they realize that they have to keep a very close ear to the pulse of the people. So they have the Peoples’ Congress which is the largest legislative body in the world. It has no power virtually, but they do represent all of these tiny districts and so forth, and they have debates and discussions about the real problems of the country.
And that kind of has been lost under the loosening of the pack laws and the lobbying laws of the political contribution laws and the Supreme Court decisions that virtually have sold congressional seats to the highest bidder nowadays, instead of making it more transparent. It’s made it less easy to get elected unless you are willing to sell your soul for Wall St and whatever lobbyist, the military industry or big oil.
Jason Hartman: No question about it. Or Monsanto. It’s just on and on. We’ve just got to lessen the impact of money in our political system in the US. And the Obama administration, arguably the least transparent administration that oddly promised to be the most transparent. It’s just ridiculous.
William Engdahl: Promises are plenty in politics, but you look at the motion of the feet.
Jason Hartman: Yeah, that’s for sure. Well, this has been a very interesting discussion. Again, your latest book, Myths, Lies and Oil Wars, it’s on Amazon with 4 ½ stars. Do you have a website you’d like to give out William?
William Engdahl: Sure. It’s very easy. It’s www.WilliamEngdahl.com and otherwise just Google my name. The books are under F. William Engdahl, so that makes it a little bit easier to remember. But if you go on WilliamEngdahl.com you’ll get links to all of the books, and then a further link, there’s quite a nice song there that a fan of my books on oil did after he read the book. He composed a song, and I was so impressed that I put it on the start page of my website. But you can also link to a subdomain where many of my articles and many of the YouTube interviews I’ve given internationally are available so if people want to dig more deeply, it’s there.
Jason Hartman: Excellent. Well, William Engdahl thanks for joining us today. We appreciate it.
William Engdahl: I enjoyed it as well Jason.
Narrator: Thank you for joining us today for the Holistic Survival Show. Protecting the people, places and profits you care about in uncertain times. Be sure to listen to our Creating Wealth Show, which focuses on exploiting the financial and wealth creation opportunities in today’s economy. Learn more at www.JasonHartman.com or search “Jason Hartman” on iTunes. This show is produced by the Hartman Media Company, offering very general guidelines and information. Opinions of guests are their own, and none of the content should be considered individual advice. If you require personalized advice, please consult an appropriate professional. Information deemed reliable, but not guaranteed.
Transcribed by Ralph
Guest: William Engdahl
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