HS 161 - Myths, Lies, and Oil Wars with William Engdahl

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It's my pleasure to welcome William Angdahl 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. And William, welcome. How are you?

I'm quite fine, Jason. Glad to be here.

Well, good. It's great to have you on the show. Tell us about the book a little bit and the premise of it, if you would.

Well, the myth lies in 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, but 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 profits. And the latest manifestation of that was during The Iraq invasion in 03, when this whole peak oil theme started flooding the Internet and appearing everywhere. And then suddenly governments began to look at it and, 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 in shale gas and shale oil in the States these days, 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, Cyprus, it's just everywhere we look almost, we're finding huge oil and gas mines. So the myth is that oil is a scarce commodity. The lie is, you know, that we need to invoke austerity in order to get through the next, next period.

Yeah, well, I would certainly agree with you. I'm glad that you're not a peak oil guy, because I'm not either. But why is it not a scarce commodity? I mean, for example, do you believe in the abiotic theory or do you just think we've got massive reserves?

I'm in touch with some of the leading Russian geo scientists who worked for decades on the abiotic theory. The idea 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 that you can simulate the pressure and temperature of the core of the Earth and create hydrocarbons in the laboratory. So it's a proven hypothesis, 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 at for hydrocarbons where Western geology says there ain't no 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, were China to realize that in the earthquake zone in.

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 whatnot.

So we've got a good supply ahead of us. How does that affect things though? I mean, you know, 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 $3 a barrel or something. I mean, I don't know, that seem like a bit of a stretch to me versus 90, $100 a barrel type thing. But what are we talking about here? I mean, how plentiful is it?

The gas hydrates locked into.

The molecules inside the ocean give a supply of several thousand years according to best estimates. That requires technologies to be developed before that can be exploited. But that's just one example. I mean, 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 street 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 JPMorgan Chase in the last several years precisely for manipulating the oil price. So if you can break this oil futures market, 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.

So generally speaking, I'm a believer that we are going to see fairly significant inflation in the US and what does cheap oil and gas do? It creates a boom. And ultimately booms are inflationary. But initially would it be deflationary? I mean, what are your thoughts on that?

I think initially it would spur economic investment, which is something urgently the US economy needs.

Yeah, well, no question about that. In the book you talk about how we're repeating a catastrophic blunder. What is that blunder?

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 in The First World War, that was toward the end of the war where.

Mobilized warfare through tax 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 Rommel 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, and it had horrific consequences.

And so in what way are we repeating it now? How is that happening now?

Well, that was the repeat. The Second World War is what I referred to.

Oh, okay, okay, okay, got it. And when we look at the way power shifts around the world geopolitically with energy production, with plentiful oil, I mean, is the Middle east still going to be at the center of this, or is that nexus moving? I mean, a lot of people, you know, are looking at the US they're looking at North Dakota, they're looking at California, 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?

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 subcontinent. 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 huge, largest gas fields discovered in the modern period. So I think it'll be more distributed. I don't see the United States emerging as a new Saudi Arabia by any means. The shale, shale, oil and gas boom is a primarily a Wall street hype and a bubble, especially 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.

Sure, yeah. That's the game of hot potato, you know, get rid of it before you lose something.

So, no, I see it much more distributed, frankly. Jason.

Well, that's probably good for world peace, I would assume, right?

Well, I would certainly hope so. One of the themes of the book is how many wars we've had since the end of the Second World War that have directly oil as their raison d'. Etre. The behind the scenes agenda, the Iraq, Iran war, this eight 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.

Oil flows well, you know, people have at first people accused the US of the motivation being to steal the Iraqi oil. I mean, but that hasn't happened at all, has it?

No, no, no, no, it's not. That's a misunderstanding. The aim of it is strategic denial. The companies, the four giant companies that control the Anglo American oil market, ExxonMobil, 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 elephant in the room, 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's played out of Washington and not out of Beijing. Oil is one way they're doing that.

But Russia comes into this in a pretty big way, doesn't it? I mean, a lot of the, 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?

Yes, well, they indeed have. They're the second largest, 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. 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 Asian markets to build pipelines 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 various other things. There are all sorts of synergies that can make the Eurasian land space into a huge economic boom area.

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. 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 anytime soon. But what are your thoughts on it? You may well disagree with me.

No, I agree with you very much because. Well, 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 1 1/2 trillion dollars of deficit per year and that has been clicking along every single year since. Over $1 trillion 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 to 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 of 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 am 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 interests of Wall street and the US treasury, 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.

So we move from spice wars to oil wars. I mean we've had land wars. There have been so many reasons for war over the millennia. But is the next thing really a currency war where proxy reasons, fake reasons to go to war to protect the dollar's reserve currency status?

Well, we're in kind of currency wars today with the yen, 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 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 and the rise in the price of oil 400% in 73,4 then you could talk about the dollar being backed by oil by petrodollar flows. Now today the oil has become proportionally a far less significant factor in support of the dollar. But what you have is the dollar de facto being supported by Abrams tanks and F16 jets, by the military, awesome might of the US Armed Forces and what they're doing around the world.

The currency war turns into a real war, in other words. Yeah, most people, when they 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? I mean, globally and then since the US is the big player, at least for the time being, but you know, we're, I mean we're what, five, six 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? You know, especially to China?

Those days are gone. Jason, tell me more. I think what, what, what we see is a crisis akin to that of the British Empire between 1873, when what the British called the Great Depression began in the British economy and 1914. And I think the US.

Has gotten itself or the people who call the shots, Wall street, the gods of money, as I call them in one of my books, they have literally gone down a dead end street. And the rooting out, the hollowing out of the real economy in the United States over the past 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.

Well, you know, it's payable at pennies on the dollar, if you will. I mean, 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.

Yeah, but where will that inflation come from? Where will it go? It'll go into the US economy. It'll create a horrendous.

I agree, it'll be global.

But the problem is 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 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.

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 three, four years ago. The Japanese, it's more an occupied country. The Japanese, 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.

Yeah, yeah. 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's just got huge problems. But after that, you know, you just look 10, maybe 15 years into the future, and China's got giant demographic problems and.

Oh, I agree.

I mean, there's a lot of dissension in China. I mean, I don't know if that government can stay the way it is in China.

Well, I think they realize that, and that's why the new presidency and the new government is making a huge effort to crack down on corruption on the municipal, on the party level and on the level of state and industry and so forth. They've got to. They've got to regain the confidence of the population. They've had, you know, the golden years. The last 30 years have been virtually golden years in China. I've been there now about nine different times over the past six years and quite widely traveled across China. So you can see the, you know, not just the coastal prosperity, but 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 in my. With infrastructure, you mean, with infrastructure and whatnot. They have an optimism that's been lost, understandably, but it's been lost largely in the United States over the past 20, 30 years.

Well, 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. It's just going to be. This is just a disaster. I mean, these, these projects, they just don't work here. I grew up in Los Angeles. You know, 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. I mean, it's just, 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.

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, I mean, they have. 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 People's Congress, which is the largest legislative body in the world. It has no power virtually, but they do represent all 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 PAC laws and the lobbying laws and the political contributions laws and 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 street and whatever lobbies, the military industry or big oil.

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, but you know, it's just ridiculous.

Promises aplenty in politics. But look at the motion of the feet.

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 four and a half stars. Do you have a website you'd like to give out, William?

Sure, it's very easy. It's William Angdahl. One word. E, n g d a h l williamangdahl.com www of course. And otherwise just Google my my name. The books are under F. William Engdahl. So that makes it a little bit easier to remember. But if you go on williamangdahl.com you get links to all of the books and then further link. There's quite a nice song there that a fan of the Century of War. One of my books on oil did. After he read the book, he composed the song and I was so impressed 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.

Excellent. Well, William Mengdol, thanks for joining us today. Appreciate it.

I enjoyed it as well. Jason.

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