When the US invaded Iraq, many were screaming about war for oil. I was among the very few voices who said that one of the invasion’s goals was increasing, rather than decreasing oil prices. Saddam’s biggest crime was steadily increasing Iraqi oil production. As the increasing production sent the price of oil below $10 in 1998, Iraq’s fate was sealed.

In the years following Desert Storm, Iraq was denied the right to export its oil. When the West could no longer resist Iraq’s natural right and allowed the Oil for Food exports, the  price of oil plummeted. The devaluation from $22 to $10 brought oil corporations close to bankruptcy because labor costs and mammoth overhead cannot readily be scaled down: both workers and bureaucrats had become used to higher wages.

OPEC hysterically cut production by a huge 4.3 million bpd, and oil prices temporary tripled, only to be halved a year later due to the 9/11 recession possibility. The price recovered because of the Middle East tumult in the wake of the American threat to Iraq, and has continued to rise unimpeded since then.

There is no rational reason for the almost tenfold price increase since 2002. Worldwide oil demand and supply are stable. Speculators rock the market mostly on Iraqi news. And those news stories are irrelevant because Iraq doesn’t produce that much oil. For several years after the Gulf War, the world had no problem living without Iraqi oil, except for a trickle on the black market. The ban on Iraqi oil exports was a boon to Saudi Arabia during the time of low oil prices.

The US oil corporations cannot dictate policies, but they are influential enough to swing the political balance toward invading Iraq and staying there. It’s not that Bush took a bribe from the Saudis or US oil producers for launching a war in Iraq (though he did). US oil interests are even more influential with congressmen than with the president through political donations, employee voters, and paying taxes into the local budgets. About taxes, by the way: The American scheme of paying for oil concessions comes with a twist: when oil prices rise too much, the concession payments are stable, thus allowing for super profits. Oil money is extremely concentrated and always available for lobbying.

How plausible is the conspiracy theory that oil interests were behind the Iraq invasion? But how plausible is the opposite idea, that oil companies would sheepishly go into the $10-level bankruptcy after the Gulf War showed just how easy it is to spike the prices? Countries have gone to war for far less than Iraqi Kurdistan’s huge black-market oil exports. Many things seem stupid until we realize they are wise. The falling dollar is great for America as it wipes out US foreign debt and dollar reserves and increases the competitiveness of American exports.

Oil-price increases translate almost entirely into profits, as the production cost changes very little. Therefore the price spike left oil corporations with profits in the range of 700 percent. Creative accounting allowed them to show only reasonably high figures instead.

Saudi Arabia is Israel’s premier enemy. The Saudis spread militant Islam worldwide and subsidize Hamas and the families of killed and jailed Palestinian terrorists, and purchase immense quantities of highly advanced American weapons—much more than Israel buys. At current prices, the Saudis are expected to make $420 billion annually from oil sales; they have no other exports or industry. A semi-nomadic Arab nation soared to producing a  whole 3 percent of the US GDP, and vastly exceeded Israel’s. In terms of expendable income, the Saudis look even better; never mind their constant whining about insufficient funds for social welfare.

Iran scores half that much, and Libya a quarter. Overall, Israel’s Muslim enemies would milk the world for $1.1 trillion in a year. Add half a trillion dollars for Russia. The money is channeled into sensitive investments, buying media, influence, and lobbying. Chinese people like Jews, but the Chinese government supports Arabs, simply to secure the oil resources.

A good thing is that oil income dooms the Muslims, if they weren’t doomed anyway. Just as the oil workers couldn’t switch to lower wages in response to falling prices in the late 1990s, so the Muslims have inelastic consumer expectations. Muslims squander their oil riches, and once those dry up, they will be left unable and unwilling to work productively, but will still hold very high expectations. Bad for survival. Oil resources are estimated to be enough for about a century for various countries, but will probably deplete faster as the economic development of India and China dramatically increases the demand. Oil prices may drop even sooner as ecologists demand cleaner energy and nuclear power stations become increasingly feasible.

In the meantime, for Iran, it is oil for nukes.

politics of oil in Iraq