WWIII may already have started
By John Toth / Editor and Publisher
Gas prices at the pump are much lower than a year ago or two years ago. Why? Because it’s World War III.
We have started WW III. Nobody dies. It’s similar to the Cold War, but we have an actual battleground and a weapon.
I’ve read numerous times that the next war will be fought in cyberspace. Maybe the one after this. This one is being fought on the battlefield of the world economy, and the only weapon is -- oil.
Let me lay the groundwork. What’s visible on the surface started in 2014, about a couple of weeks after the Sochi Winter Olympics concluded in Russia. There may have been some movement before then, but that’s when some of the first battles of WWIII began, and we could read about them in the business pages.
Right after the Olympics ended, Russia invaded Ukraine and started occupying Crimea. Putin started making speeches including the phrase “New Russia,” which basically meant that he wanted back the territory occupied by the former Soviet Union.
We could scream all we wanted about how Putin needs to get out of Ukraine, but the bottom line is that we were not going to engage in a traditional military conflict against him over this invasion. Ukraine is not part of NATO. If it were, Putin would not have attacked it.
There were also other important events taking place around the world. Venezuela was causing problems in South America, and Iran was negotiating with a coalition of countries to try to get their sanctions pulled. The sanctions slowed the Iranian economy, but they found ways around it, like selling oil on the black market cheaper than the going rate. Turkey and China were their main customers.
So, sanctions imposed in Russia for invading Ukraine would perhaps not be much more effective than the sanctions imposed on Iran. Putin could always sell off the books to prop up his economy.
At the same time, the Saudis were getting worried that smaller oil producers would take too much of their market share, including U.S. shale oil producers, who were popping up all over the country because oil prices were high.
Oil companies were rolling in money, independents were doing better than ever, and they all generated a lot of jobs. It was good times for the oil industry.
Remember how some people blamed president Obama for the $3-plus-per-gallon gas? Remember when his supporters countered that a president does not control free market prices? Even Fox News agreed. Well, they were off a little.
A president cannot directly set oil prices because our oil companies are not nationalized like in Mexico or Venezuela. But a president can set in place motions that in the long-run influence the marketplace.
There are other, indirect ways to achieving a goal without giving away the next move. It’s like playing chess. You move a prince here, a dictator there, a king somewhere else, and much later you hope to win the game.
Last year, President Obama went to visit King Salman of Saudi Arabia to pay his condolences, following the death of Salman’s half-brother, King Abdullah. They perhaps discussed the world situation and what could be done about it.
This is what I think they agreed on: Flood the world with oil.
Why: The Saudis would knock out a lot of their competition and take back their share of the world market. The USA would take a hit, but in turn would experience lower gas prices, since the price per barrel would drop significantly.
So far, lower gas prices have injected an additional $24 billion into the country’s economy, while job losses and reduced profits have taken out $9 billion. While there are winners and losers in a war of any kind, the U.S. overall has gained in this one, although the oil sector has taken quite a hit.
Oil and gas comprise more than 60 percent of Russia’s exports and make up over 30 percent of the country’s gross domestic product (GDP). While sanctions may have limited effect, driving oil prices drastically down worldwide can destroy an undiversified economy.
Reports are now filtering out of Russia, where every printed and spoken word is controlled by the government, about demonstrations against the government. The people are experiencing high inflation and shortages. The Ruble, their currency, is now trash. Russia’s financial resources are being depleted. Check.
During war, there are casualties. The Russian people are the big casualties in this one. And it looks like things are getting worse.
In Venezuela, another country that has an oil-based economy, the opposition to the current ruler has taken over a supermajority in the parliament. Socialist President Nicolás Maduro Moros, who also served in the Hugo Chávez administration, now can be checked and balanced, and he may even be forced to resign. Check.
Venezuela was the most powerful country in South America that had an anti-U.S. government. But it also has an oil-based economy. It looks like plunging oil prices did more to turn that country around internally than any shooting war could have.
Where could the Venezuelan radical socialists turn for help? Cuba, like always? Not so fast. We have begun to normalize diplomatic relations with Cuba, and reopened our embassy in Havana. Cuba may be more interested in bringing up the standard of living for its own people than helping a failed socialist government. Check.
Iran is now back in the world oil market legitimately, and is pushing even more oil into the reserve fields that are already full. They are assuring that the oil war, this time on terms set out by the U.S., continues for a long time to come. Check
Meanwhile, the U.S. has produced more oil than it has consumed. Check.
But we cannot declare checkmate. Perhaps we never will. WWIII is a little more complicated than a shooting war.