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Monday Wake Up Call – October 27, 2014

Welcome to the working week. This week brings Halloween and the end of daylight savings time. Next Sunday, time “falls back”, and sadly, so will Democrats on the 4th of November.

But right now, it is time to get up and get going. Remember Disco? Get down with “Stomp” by the Brothers Johnson from their 1980 Platinum album, “Light up the Night”:

Quincy Jones worked with the Brothers Johnson on several of their albums for A&M. Michael Jackson does background vocals on another song on this album, “This Had to Be”. “Stomp” went to #1 on the R&B charts, #1 on the Dance singles chart and #7 on Billboard in 1980.

Here are a few hot links for your Monday breakfast buffet:

The Federal government’s 2014 fiscal year ended on September 30th. Here are 10 facts you may not know about the federal budget.

The Sunshine Act, a provision of the Affordable Care Act, requires doctors, hospitals, pharmaceutical companies, and medical device manufacturers to disclose their financial relationships. The Centers for Medicare and Medicaid Services (CMS) has released the first set of data. It includes $3.5 billion paid by Big Pharma to over half a million doctors and teaching hospitals in the last five months of 2013.

For 18 years, thousands of students at the University of North Carolina – Chapel Hill had “no show” classes with no assigned readings, and no responsible faculty member. These classes had just one requirement: a final paper that no one ever read. In the most crucial finding, no player was paid for an autograph, so it’s just a minor scandal.

More about the Dallas Ebola screening fail and likely cover up. It appears that the hospital and the software firm retrofitted the data to the story. Once again, we may never know the truth about what happened in Dallas.

My Terrifying Night with Afghanistan’s Only Female Warlord. Commander Pigeon is a woman who kills men, and is known to everyone in Kabul, but we are just hearing about her.

Al-Qaeda has a new English magazine called “Resurgence.” It is 117 pages of glossy graphics and articles about jihad and the war against America, all in understandable English.

The Social Security office that hears appeals for disability benefits is 990,399 cases behind. This Washington backlog is bigger even than the backups at Veterans Affairs, where 526,000 people are waiting in line, and the patent office, where 606,000 applications are pending.

Politics never change. Here is a 1796 editorial by Alexander Hamilton that accuses Thomas Jefferson of an affair with a slave.

Bonus Monday Music: You probably have heard that Jack Bruce died on the 25th. As Bob Lefsetz says:

Clapton might be God, but there was no Cream without Jack Bruce. He was the one who sang most of the songs.

He wrote the riff that we all know from “Sunshine of Your Love”. Here is Cream doing “I Feel Free”. That’s Jack Bruce on the left, Ginger Baker on drums and Eric Clapton on the right:

Feel free all week, my friends.

Sunday Cartoon Blogging – October 26, 2014

It’s that time of year, scary monsters in your email and on your TV. That means it’s the mad combo of the election season and Halloween. Be very afraid.

Some celebrate Halloween all year:

Fear is in the air around Halloween:

Really, Fox? Ben Bradlee must be turning over in his grave:

The reason Democrats will lose the Senate, Part I:

The reason Democrats will lose the Senate, Part II:

The House of Fear is open 24 hours a day:

Friday Music Break – October 24, 2014

Have you ever wondered if listening to certain music weakens your mind? No problem, Virgil Griffith, a Ph.D. candidate at Cal Tech has an answer for you. He asked a series of questions:

Could one’s musical tastes say something about intelligence? How about SAT scores? Well, like any good scientist, I decided to see how well my personal experience matches reality.

How did he do it? He downloaded the ten most frequent “favorite music” mentions at every college via that college’s Network Statistics page on Facebook. He then downloaded the average SAT/ACT score (from the College Board) for students attending every college.

This yielded 1352 schools that had data on both Facebook and the College Board. Below is a chart showing music by SAT scores. At Mr. Griffith’s site, you can find your school and its top 10 songs. Or, your favorite artists ranked by the average SAT of the schools that rated them. And yes, Mr. Griffith realizes that correlation ≠ causality, so no need to send an email saying that. Not all of the data are complete for each school, but check your where your favorite group/music genre on the chart, and weep:

Georgetown lists U2, Jack Johnson, Coldplay, The Beatles and The Killers as its top 5. We focus on The Killers for your Friday Music Break. Here is“Mister Brightside” Live from Royal Albert Hall in 2009:

The Killers @ Royal Albert Hall is a fabulous concert. The crowd knows the music, the band is energized throughout. See the entire concert if you have time. Here is one more song from it, “When You Were Young”:

They picked the venue specifically for the DVD, then made tickets available through various chapters of their fan clubs. Everybody in that crowd is a die-hard fan.

It shows.

Should a Controversial Opera Be Seen?

On Monday night, hundreds of people protested outside New York’s Metropolitan Opera that the presentation of “The Death of Klinghoffer” is anti-Semitic, and should not have been offered by the Met.

A summary: In 1985, Leon Klinghoffer, a 69-year-old Jewish-American disabled man, and his wife, Marilyn, were passengers on an Italian cruise ship, the Achille Lauro. The ship was hijacked by Palestinian terrorists, who shot Klinghoffer in the head and threw him overboard in his wheelchair.

First produced in 1991, “Klinghoffer” contains a running debate between the killers—who voice a number of anti-Semitic slurs in the course of justifying their conduct—and Klinghoffer as their victim.

John Adams also wrote “Nixon in China”, another “docu-opera. With “Klinghoffer”, he has a much more provocative topic and aims to show both sides of the Israeli-Palestinian conflict. But former NY Mayor Rudy Giuliani, who was among the protestors, wrote a not completely unreasonable op-ed in his opposition to the Met’s staging of the John Adams opera. He says while the Met had a First Amendment right to present the opera:

Equally, all of us have as strong a First Amendment right to…warn people that this work is both a distortion of history and helped, in some ways, to foster a three decade long feckless policy of creating a moral equivalency between the Palestinian Authority and the state of Israel…this opera didn’t create but certainly contributed to a romanticized version of the Palestinian cause which led to the American administration giving them hundreds of millions of dollars meant for the Palestinian people but mostly taken by Arafat and his band of terrorist crooks.

So, Giuliani complains that Adams’s 23-year-old opera has contributed directly to the collapse of the Middle East peace process and to hundreds of millions of dollars being funneled to terrorists. What’s in that NYC water?

What has happened is that the protestors have brought the Israeli/Palestinian differences to New York. They are busy recapitulating the division, spin, shouting and reiteration of the talking points of both sides, this time through the medium of the Metropolitan Opera. Protesters are demanding that the opera be canceled; defenders of the opera couch their position in terms of artistic freedom or, as a two-sides presentation, giving a voice to the grievances of the Palestinians.

Some people say works like “Klinghoffer” encourage people to emulate the bad behaviors they see on stage. It is doubtful that anyone has engaged in sibling incest after watching “Die Walküre”. Let’s remember that “The Marriage of Figaro” is about a libidinous noble’s invocation of the historical “droit de seigneur.” That “Macbeth” is about regicide. That Broadway’s “Sweeney Todd” about a maniacal serial killer. That the opera “The Rake’s Progress” about someone selling his soul to the devil.

Let’s also remember Mr. Giuliani in 1999, as Mayor of all the people of New York, tried to shut down the Brooklyn Museum because he viewed an exhibition as “sick,” “disgusting” and sacrilegious. At the time, Giuliani argued that the Brooklyn Museum had no First Amendment right to show a British exhibition that featured a portrait of the Virgin Mary stained with elephant dung. He then threatened to terminate the Museum’s lease with the city and possibly even seize control of the Museum. The exhibit went forward.

The issue is what to do about provocative art that offends the sensibilities of some fraction of the population. The opera and the protests taken together, confront us with something we see all too often: Conflicts between, and often within populations, who have been traumatized by history.

You cannot reason with people when hyper-vigilance and condemnation are what drives any discussion with them.

Let the protestors protest. Let the show go on. Let the debate about the opera go forward. One can argue passionately about the Middle East, Israel or Palestinians. None of that makes the Klinghoffer murder morally acceptable. Or “Klinghoffer” great art.

If we want to bridge our differences, we have to start small, take a few risks, confess some offenses, forgive them and move to reconciliation. Then build on that.

It is the only solution. It does not begin in crowds.

Retail Store Closings Reflect Middle Class Income

Today, we take a business trip!

The retail sector of the US economy is not doing so well. The Census Bureau tracks retail sales in the US, and sales decreased 0.30% in September, compared to the previous month. Retail Sales month over month in the US gained an average of 0.37% from 1992 until 2014, reaching an all-time high of 6.71% in October of 2001.

This week, NCR, the maker of point-of-sale devices for the retail industry who call themselves “the global leader in consumer transaction technologies”, announced disappointing third quarter results. NCR blamed particularly the “challenging retail market” for its debacle. CEO Bill Nuti explained it this way:

Market conditions within the retail industry worsened in the third quarter, as evidenced by weak same store sales comparisons and financial results. This resulted in our retail customers spending more cautiously than anticipated and further delaying solution roll-outs…Additionally, ongoing retail consolidation continues to be a factor impacting our performance.

NCR has noticed that brick-and-mortar retailers are cutting back. “Ongoing retail consolidation,” Nuti called it. And some, like Radio Shack, are likely to use bankruptcy courts to do it. The structural problems in the brick-and-mortar retail industry include Sears, which is closing 300 Sears stores and 80 Kmart stores.

Some of us wonder why anyone still buys there. Retail chains, large and small, have announced an epidemic of store closings in 2014. Here are the “Top 20? announcements of store closings. For these 20 chains, the total number of stores to be closed exceeds 4,200. The number of closed stores is the first column:

Store closings add up: Jobs are lost, consumer spending weakens, and fewer tax revenues are paid to states and the federal government. This process has been going on for years. As a side note: when all this washes out, who is going to fill the vacant retail space in our malls? That’s one of the many secondary effects of the troubles in the American retail industry.

Hopefully, you haven’t invested in those Shopping Center Trusts.

Source: Wolf Richter

Yet, some box store retail continues to grow. Starbucks is opening another 1400 stores in the US by 2017, a 13% growth rate. They prove there is a market for things that can’t be ordered and delivered hot over the Internet. But, the openings of new retail locations for 2014 will not offset the closures. Much of domestic retail expansion in 2014 is about discount stores. Between Dollar General, Family Dollar and Dollar Tree, more than 1400 new discount stores will be opening, using the original Walmart expansion strategy. At the same time, Walmart is abandoning its own strategy. The New York Times reports that: (brackets by the Wrongologist)

Walmart’s woes [are causing] a change in corporate strategy. Walmart will slow store openings in the United States next year, opening 60 to 70 supercenters, compared with 120 this year…The Company is shifting its focus toward smaller Neighborhood Market grocery stores, and it said it would open 180 to 200 of them next year. It is also accelerating its online offerings…

Auto sales (mostly at retail box stores) have been booming, Reuters reports that: (brackets by the Wrongologist)

The annualized sales rate slowed to 16.4 million [units]…above last year’s 15.4 million, but well below the 17.5 million [annualized] pace in August.

This performance was partly due to cheap money, long financing terms, and a focus on subprime customers. Jim Lentz, US chief executive at Toyota Motor Corp:

We are seeing more ‘subprime,’ which is good.

In one report, a 71 year old Queens NY woman on food stamps got a $16,000 loan on a used car:

After two test drives and about two hours, the dealership found her a loan: $16,000 financing for a used 2014 Ford Fiesta. There would be a bank fee of about $4,000, and she would have an interest rate of 20.23%

Subprime, indeed. As for the role of consumer spending in our economy, American consumers are stressed. Many have had to curtail their spending, or make up the difference with borrowed money. Closing retail stores may be the canary in a coal mine for our consumer economy. For some business owners, considering some retail store analytics might provide insight into how to keep their stores open.

The best measure of economic security is ownership of wealth. Yet, using Median Wealth as a yardstick, the middle class in the US ranks only 27th in the world. Here is how we rank against two of our allies:

#27 USA: $44,911 ? hardly enough to pay for an operation in a US hospital
#1 Australia: $219205
#6 United Kingdom: $111,524

Global wealth has reached a new all-time high of $241 trillion, up 4.9% since last year and 68% since 2003, with the USA accounting for 72% of the latest increase.

Perhaps the solution in the US is to not to tax based only on income, but to tax based on income and assets. If you own or control 80 to 90% of the assets of this country, and the country’s resources are securing, maintaining, and protecting your assets, it stands to reason that you should also be bearing the majority of the tax burden of the country.

Monday Wake-Up Call – October 20, 2014

Happy Monday! Here is your thought for the week:

“People react to fear, not love. They don’t teach that in Sunday school, but it’s true” − Richard M. Nixon

Not a complete surprise that Nixon was wrong. They DO teach fear in Sunday school:

In Liberia, only 43% of the adult population are literate, so radio, not the written word, is the best way to inform people about the disease. There are 16 local languages in Liberia, in addition to English. People rarely have access to the Internet or television.

Songs about Ebola are popular in West Africa. One of the most popular is “Ebola in Town” by Samuel “Shadow” Morgan and Edwin “D-12” Tweh, along with Kuzzy, of 2Kings. The song sounds like American hip-hop, but the style is called “Hip Co”, a form of colloquial English that appeals to young Liberians (about 50% of the population is under 18).

Here is an audio file of the song. There are YouTube videos out there, but they have extremely graphic depictions of Ebola victims, and may not be suitable for viewing at work or at home, if kids are in the room:

https://soundcloud.com/shadowmrgn/ebola-in-town-d-12-shadow-kuzzy-of-2kings

A sample of the lyrics:
Something happen
Something in town 
Oh yeah the news 
I said something in town
Ebola
Ebola in town

[Snip]

If you like the monkey 
Don’t eat the meat
If you like the baboon
I said don’t eat the meat
If you like the bat-o
Don’t eat the meat
Ebola in town.

Songs can’t do all that much in a nation with the second-fewest doctors per person in the world.

Here are today’s hot links for your breakfast buffet:

Ebola got you stressed? Try textual healing. A new breed of online-therapy services offers flat-rate plans that allow you to text-chat with a licensed, accredited therapist as much as you like (need).

At least 30 states are still providing less funding per student for the 2014-15 school year than they did before the recession hit.

Researchers have created what they call Alzheimer’s in a Dish — a petri dish with human brain cells that develop the telltale structures of Alzheimer’s disease.

And we were doing so well in Pakistan: Six senior members of the Pakistani Taliban vowed allegiance to the Islamic State.

Go ahead, take your time getting to the party: Study shows that the median arrival time of 803 guests was 58 minutes after the party’s start time.

Of course we love our allies: Saudis to behead, then crucify a cleric who spoke out against the King. Did you know that Saudi Arabia doesn’t have a constitution?

We will never learn: John Allen, the general in charge of the US-led coalition’s response to ISIS says the US will create “a home-grown, moderate counterweight to the Islamic State”. Didn’t work in Vietnam, Afghanistan, or Iraq. Why would it work this time?

Sunday Cartoon Blogging – October 19, 2014

Your thought for the weekend is from the movie, The Birdcage:

Senator Kevin Keeley: Louise, people in this country aren’t interested in details. They don’t even trust details. The only thing they trust is headlines.

Well, CNN headline writing is as bad as their broadcast. Is that Helvetica?

Since it is Nobel Prize time, here is an anecdote by Walter Gilbert (1980 winner in Chemistry) about what happens when you travel with your medal:

When I won this, my grandma, who lives in Fargo, North Dakota, wanted to see it. I…decided I’d bring my Nobel Prize. It was uneventful, until I tried to leave Fargo, and went through the X-ray machine. I could see they were puzzled. It was in my laptop bag. It’s made of gold, so it absorbs all the X-rays—it’s completely black. And they had never seen anything completely black.

“They’re like, ‘Sir, there’s something in your bag.’
I said, ‘Yes, I think it’s this box.’
They said, ‘What’s in the box?’
I said, ‘a large gold medal,’ as one does.
So they opened it up and they said, ‘What’s it made out of?’
I said, ‘gold.’
And they’re like, ‘Who gave this to you?’
‘The King of Sweden.’
‘Why did he give this to you?’
‘Because I helped discover the expansion rate that the universe was accelerating at.’
At which point, they were beginning to lose their sense of humor. I explained to them it was a Nobel Prize, and then their question was: ‘Why were you in Fargo?’”

How corporatists fight Ebola in Texas:

The truth is, everyone is infected by the headlines:

And the headlines gripped Wall Street:

Friday Music Break – October 17, 2014

Friday! Here at the Mansion of Wrong, Friday is when we are supposed to shut out the world’s cacophony and take a musical break. Let’s throw the switch:

We start with “Love has no Pride”, performed by Bonnie Raitt at the 25th Rock ’n Roll Hall of Fame Concert at Madison Square Garden in 2009. She is backed by Crosby, Stills and Nash. The song was written by Eric Katz and Libby Titus. Ms. Titus was Levon Helm’s partner for many years. She married Donald Fagen in 1993.

Despite Linda Ronstadt having the hit, this live performance by Ms. Raitt is the definitive version of this song:

We close with Jackson Browne’s “These Days”. Here is a little snippet of the lyric:

Now if I seem to be afraid
To live the life I have made in song
Well it’s just that I’ve been losing so long…

Don’t confront me with my failures
I had not forgotten them

This live version was performed at the 28th Annual Claremont Folk Music Festival on May 3rd 2008:

“These Days” was first recorded by Nico, the Velvet Underground singer and Andy Warhol muse, for her 1967 solo album, Chelsea Girl. But Browne had written an early version of the song several years earlier, when he was 16, in 1964. Davis Inman, writing in the American Songwriter, says that Browne actually first cut “These Days” under the title “I’ve Been Out Walking,” for a 1967 demo tape for Elektra’s Nina Music publishing arm, while working for them as a young staff writer in New York.

Browne plays guitar on Nico’s version. He was prompted by Warhol to play an electric instead of an acoustic guitar to “sound more modern”.

Gregg Allman used the song on his 1973 solo album, Laid Back, which was released in October 1973, the same time as Browne’s own version of the song appeared on his album, For Everyman. Browne actually based his own arrangement of “These Days” on Allman’s, crediting him on the original For Everyman album sleeve.

The Nico recording was included in a scene in the 2001 Wes Anderson film, The Royal Tenenbaums. On Browne’s Solo Acoustic I album, Browne says that he had forgotten that he had licensed the song to Anderson:

You’re sitting in the movie theater and there’s this great moment when Gwyneth Paltrow is coming out of a bus or something like that. I’m thinking to myself, I used to play the guitar just like that. And then the voice comes on and it’s Nico singing ‘These Days’, which I played on.

As Katherine Henson has said: “Having a soft heart in a cruel world is courage, not weakness.”

See you on Sunday.

Ebola: Oh My God, We’re All Gonna Die!

Why is it that so many pundits feel the need to tweet/talk/bloviate in a way that sounds like they’re proven right when there is a new case of Ebola? Why did Bill O’Reilly feel the need to say that he knows better than the head of the Centers for Disease Control and Prevention about how to keep Americans safe from the Ebola virus? The greatest cost of our rampant corporatism may be the continued chipping away at our trust in public institutions.

Even though spreading panic is great politics, if we need to reevaluate our protocols for healthcare workers caring for patients with Ebola, fine, but if you live in another state from the person infected in Dallas, you’re gonna be ok.

Let’s remember that Thomas Duncan, the sole Ebola fatality in the US, spent 3 days at home with a fever of 103. He was infectious for the 3 days he was at home with the illness, and he could have infected someone else in the household, but he did not. Apparently, his family took great care not to be exposed, and they seem to be on the verge of succeeding, since the incubation period is up to 21 days. Duncan showed symptoms on Sept. 24th. If we count from then, the family still have a day or two before they are out of the woods. If we count from Sept. 28th, when he was vomiting and went to the hospital for the 2nd time, they would be safe on Saturday.

Most of the Americans flown to the US with Ebola were healthcare workers. The person who died from the disease in Spain was a healthcare worker. Many who get it in Africa are caregivers or healthcare workers. So, again, this indicates an ongoing risk for those who care for patients with Ebola, but the average American’s risk for catching the disease is still near zero.

That said, this report in Scientific American by Judy Stone, MD and infectious disease specialist, speaks to the problems with both process and culture in hospitals:

One hospital I am familiar with has Powered Air Purifying respirators (PAPRs), purchased with bioterrorism preparedness grants, but neither stethoscopes nor other dedicated equipment for isolation rooms. So nurses and docs gown up to go in the room of a patient with a “superbug” but take their stethoscopes into the room and then on to other patients, perhaps remembering to wipe it down first.

This New York Times blog post & graphic on the procedures for healthcare workers caring for people with Ebola echoes Dr. Stone’s discussion and shows how hard it is to be careful.

Here is a chart by Dr. Stone on of our expense for Public Health Preparedness spending since 2001:

This shows that funding for preparedness efforts have fallen by a cumulative total of $2.4 billion since the high point in 2006. The chart shows that the deepest cuts came in GW Bush’s second term. Since then, substantially more has been cut from the programs. Starve a program designed to educate and isolate a deadly outbreak among public health professionals and then blame the government when something goes wrong. Thanks Mr. O’Reilly.

Politics, as usual, is the fly in our soup. Unfortunately, next month Americans again go to the polls and at least half of them will vote for the very people who are doing everything in their power to eliminate public health care.

Isn’t it strange that public health policy is being decided based on economic beliefs about free trade and travel rather than mathematics and science? We in the West offered no assistance to immediately help control the initial Ebola outbreak in Africa. We said, let it burn itself out, like it has done before.

But, the New York Times reports that the new head of the World Bank, Dr. Jim Yong Kim, was among the first to see the need to move quickly against the Ebola threat. He committed $400 million to fight Ebola, and $105 million has already been disbursed. In September, he said to Dr. Margaret Chan, the head of the World Health Organization:

You have the authority to act in this emergency…so why aren’t you doing it?

Now, in October, she seems to be finally on the case.

Here at home, Republicans are vying with each other to shame the Obama administration into implementing a travel ban against Ebola-affected countries. That wouldn’t be an unreasonable suggestion if it could stop the spread of the disease. But it won’t. Here’s why:
• There is a de facto private ban already in place, since US-based airlines stopped flying to Ebola-afflicted countries two months ago (to protect their crew and passengers from exposure — and themselves from lawsuits).
• Delta and United offer direct, nonstop service between the US and West Africa—Delta to Lagos, Accra, and Dakar, and United only to Lagos.
• No travel ban or quarantine will seal a country completely. Models predict that even if travel could be reduced by 80%, new transmissions would be delayed only by a few weeks.

And health-care workers who become ill would not be able to get out for treatment, and the international health personnel needed to quell the outbreak would no longer be able to get in.

Despite the fear-mongering, we know what needs to be done. We have organized the deployment of 3,000 troops and have begun marshaling a wider international response that is tragically slow. With the announcement of the Dallas case, hospitals across the country are now scrambling to get their procedures up to snuff.

We need to have the boots in Africa to help manage the probable local panic as well. It is a linear investment by the US that could have an exponential payback.

Oil: Our Latest Middle East Bombing Run?

Oil has now become another front in the competition between America’s friends and enemies in the Middle East. On October 1st Saudi Arabia, the OPEC cartel’s dominant producer, pumping around a third of OPEC’s oil, or about 9.7 million barrels a day, unilaterally cut its official prices. The Economist reports on the surprising price of oil:

Since June the price of a barrel of Brent crude oil—the global benchmark—has slumped from $115 to $92, a decline of 20%, and the lowest for more than two years.

Here is the Economist’s graph of Brent crude prices:

They report that the drop is partly due to economic weakness. Growth is slowing, particularly in China and the Euro zone, bringing with it a reduction of oil consumption. The WaPo reports that prices have fallen in the US as well: (brackets by the Wrongologist)

Crude oil prices are…down to the lowest level in 17 months in the US. Gasoline prices have [also] been sliding.

Reuters reports that Saudi Arabia told the oil market it would be comfortable with prices as low as $80/barrel for a period of up to two years. Reuters says the following about the Saudi strategy: (emphasis by the Wrongologist)

The Saudis appear to be betting lower prices – which could strain the finances of some members of OPEC – will be necessary to pave the way for higher revenue in the medium term, by curbing new investment and further increases in supply from places like the US shale patch…

This drop in prices will give a short-term boost to the US economy and US consumers, who will view cheaper gas prices like an increase in take-home pay. But it could put a dent in revenues in countries such as Russia, and Iran, where oil exports play an enormously important role in supporting economic growth and government finances. Russia’s Finance Minister has already announced that lower oil revenues could force the curtailment of its military spending:

Between 2004 and 2014, Russia doubled its military spending and according to the newly adopted budget, it will further increase it from 17.6 percent of all budget spending this year to 20.8 percent, or 3.36 trillion rubles ($84.19 billion), in 2017.

But the new Russian budget, which envisages a deficit of 0.6% of GDP over the next three years, is based on oil prices of $100+ per barrel, not the high-$80’s seen this week. On Monday, President Putin signed a law that would allow the government to tap one of the country’s oil windfall revenue funds, the Reserve Fund, for the first time since the aftermath of the 2007-8 global financial crisis. The Fund contains $90 billion. While it is doubtful that this will change Russia’s stance on Ukraine, it might influence Russia’s position on Syria.

The Wall Street Journal reports that Iran has a higher per barrel break-even price than other Middle East oil producers. Here is the oil per barrel price required to balance each country’s budget:

Iran, faced with lower oil revenues and the highest break-even price, could be forced to limit its nuclear program, or even its support for Iraq’s battle against ISIS.

But before we have a party and celebrate, lower prices also affect oil production in the US. The Economist quotes David Vaucher, an analyst at IHS, who says that to achieve a realistic internal rate of return on investment of 10%, a typical new shale-oil project in America requires an oil price of $57 a barrel, but some still require between $75 and $110.

The Obama administration held detailed discussions in September with the Kingdom of Saudi Arabia. While it was clear that one outcome was an agreement by the Saudis to participate in air attacks on ISIS, it is clearly possible that the plan to use oil prices as a tool in the fight was also on the table. It wouldn’t be the first time that oil price (or availability) has been used as a weapon. Oil was first used as a weapon by the US to stop Israel, Britain, and France from retaking the Suez Canal in 1956.

And as Michael Klare says at Oilprice.com, the “oil weapon” was used in 1973 against the US. We hated OPEC’s war on our economy back then. Skip ahead four decades, and it’s smart, it’s effective, and it’s the American way. We of course, used that very same old oil weapon when we embargoed oil sales by Saddam Hussein’s Iraq.

Oil is again the centerpiece of our Middle East strategy.

The Wrongologist

Geopolitics, Power and Political Economy

Author: wrongologist