Iraq

And another huge hit to future oil supply. After Goldman released a report on Friday, backtracking on its April recommendation that clients sell crude, instead warning that "critically tight supply-demand fundamentals" will likely cause oil prices to "return to or
surpass the recent highs by next year", "should Libyan oil supplies remain off the market", which it now appears they will considering Gadaffi is winning the Libyan civil war against the West-backed rebellion, here comes a stunner out of Iraq which has just slashed its 2017 oil production estimate from 12 million barrels to just 6.5-7 million bbpd. Oddly enough, Iraq is being rational: "Baghdad believes it would not be in its interests to try to achieve the
12 million target by 2017 because boosting global supply would depress
prices." Who would have though a cartel would think of itself first... Surely, this is great news for Saudi Arabia which will promise to hike oil production and replace the missing output only for it to be discovered a few months later that not only did it not to do that (as we just discovered now following the whole Libya fiasco), but that it just does not have the excess capacity. And, of course, "speculators" will be blamed once they take WTI from $97 to $140 daring to discount the future price of oil in a (inflationary) world in which demand increases by 50% over a decade, even as supply continues to trickle down with each passing year. In other words, the CME margin hike crew is actively studying how many margin hikes it will take to break the back of the recently record number of non-commercial net specs... for at least a week or two, especially once the Chairman goes to town with the printer Turbo button. And elsewhere, the upcoming scarcity of lubricating petroleum byproducts is about to be felt through the entire supply (and demand) chain.

Rummy sticks his foot in it again ...

The Pentagon says King might have supported the current wars. This is not entirely true ...

This is not some voice from the peanut gallery...

Wikileaks has lifted the embargo on what it dubs the biggest leak of American documents in history. The Guardian, which is the primary nexus of data collection, notes that almost "400,000 secret US army field reports have been passed to the
Guardian and a number of other international media organisations via the
whistleblowing website WikiLeaks. The electronic archive is believed to emanate from the same dissident US
army intelligence analyst who earlier this year is alleged to have
leaked a smaller tranche of 90,000 logs chronicling bloody encounters
and civilian killings in the Afghan war." The reports will likely do little to raise the US' standing in the eyes of the international community: "The numerous reports of detainee abuse, often supported by medical
evidence, describe prisoners shackled, blindfolded and hung by wrists or
ankles, and subjected to whipping, punching, kicking or electric
shocks. Six reports end with a detainee's apparent death."Additionally, the reports detail how friendly fire from US troops became routine: Americans have shot at their own troops or allies so often that in at least one case a strafed British vehicle didn't even stop. Since this will apparnetly now be the main story this weekend, might as well get a head start.

Looks like Iraq has had enough of fiat experimentation. Press TV reports that explosions and gunfire at the Iraqi Central Bank have left 15 dead and more than 40 injured. No reports yet if any copies of Hayek's Road to Serfdom (incidentally, #1 at Amazon.com) have been found at the scene. More from the report: "Those behind the attacks on Sunday triggered eight explosions and took hostages, prompting a siege at the bank's whereabouts, AFP reported. Bank workers comprised most of the casualties, said one defense official. It is yet to unclear whether the assailants had meant to empty the vault, destroy the building or target the employees. Late last month, 15 people died during a deadly rampage of a series of jewelry shops in the southwest of the Iraqi capital." Is it time yet for an alligator infested moat to be built as a precaution around the offices at 33 Liberty?

On the other hand ...

Iraq will soon become the world’s largest oil exporter. The success of the recent oil auctions in Iraq is creating a windfall for American oil services companies. It will bring the most significant change to world trade patterns this century. Who knew it would take so long? There are major implications for the rest of us. (SLB), (BHI), (WFT), (HAL)

The US Military issues its official retort to the Wikileaks video. Here are the official US Army recommendations based on that episode:

I ratify the appointment of the investigating officer, MAJ [Blanked out]

The recommendation that:

-(10a) Members of the press be encouraged or required to wear identifying vests or distinctive body armor within the MND-B AOR is (approved) (disapproved) (remanded to the BCT Cdr).

-(10b) Coalition Forces be notified when members of the press are operating in their AORs is (approved) (disapproved) (remanded to the BCT Cdr).

-(10c) Condolence payments be made to families of the two children wounded in this engagement is (approved) (disapproved) (remanded to the BCT Cdr).

I remand the matter to the 2/2ID Cdr for appropriate action.

A week ago Ron Paul asked Ben Bernanke a series of questions, which the Chairman and pundits immediately dismissed as "bizarre" and an indication that the potential presidential candidate has finally lost it (among these was a very nuanced question whether or not the Fed is buying sovereign debt, something which Bernanke disclosed in 2002 is a distinct possibility and an action the Fed is permitted to do). Chief among these were queries arising from the work of U of T professor Robert Auerbach, and specifically his book "Deception and Abuse at the
Fed", which seek information on whether the Fed was involved in the Watergate scandal and, subsequently, in Iraqi weapons purchases. Well, Paul may not be as kooky as people are trying to make him out to be. None other than "consumer protection advocate" Barney Frank has demanded that Bernanke do a full probe based on these allegations.

"In a 13 month period from May 2003 to June 2004, the Federal Reserve sent nearly $12 billion in cash, mainly in $100 bills from the United States to Iraq. To do that, the Federal Reserve Bank in New York had to pack 281 million individual bills ... onto wooden pallets to be shipped to Iraq. The cash weighed more than 363 tons and was loaded onto C-130 cargo planes to be flown into Baghdad"

What was once considered a pipe-dream could become reality: after decades of dictatorship, war and international sanctions, Iraq's massive oil reserves are set to be tapped proper and the country once known for two overflowing rivers could be crowned oil king.

As multinational military forces have left Iraq, international petroleum companies have eagerly descended - seduced by the long-term potential of vast oil reserves off-limits to foreigners for decades. Yet lingering violence, legal questions and political uncertainty make doing business in this country a gamble.

In the first international oil auction held last June, widely seen as a failure, the Iraqi government awarded a firm contract to only a consortium of British Petroleum and the China National Petroleum Co. to further develop the Rumaila field over 20 years. Iraq recently forged an initial agreement with a group comprising Exxon Mobil and Royal Dutch Shell to develop the West Qurna field, and one with an ENI-led consortium of Occidental Petroleum and Korea Gas for the Zubair oil field.

Bottom line: The wars are unnecessary, and they are draining resources which could be used to reduce unemployment and help the economy.