Right now, on the planet Earth, oil can be drilled anywhere it is available. Oil can also be refined anywhere that the necessary facilities exist. Lastly, oil can be sold anywhere that people need it.

But oil can only be officially bought in two places. The first is via New York City’s NYMEX (New York Mercantile Exchange), while the second is through London’s IPE (International Petroleum Exchange). Both of these exchanges are owned by U.S. consortiums (i.e. Goldman Sachs, Morgan Stanley, etc) whereas IPE was recently purchased by the Atlanta-based InterContinental Exchange, Inc.

So, when one purchases oil, it’s done like any other commodity except that there are only two stock exchanges for it – NYMEX and IPE. The same applies to the purchase of oil “futures.” Look at it like this. If a large industrialist in India wants to buy oil from British Petroleum (BP), they have to go through either NYMEX or IPE. And even though the oil never goes to NYC or London, the money invariably jettisons through one of those two financial centers. Furthermore, the only currency that is allowed to be used is the American dollar.

In addition, there are currently three oil markers used to make these transactions:

               1) West Texas Intermediate Crude (WTI)
               2) Norway Brent Crude
               3) UAE Dubai Crude

All three of these markers, similar to the two exchanges, are also dollar-based. A logical conclusion, then, would be that a petrodollar monopoly exists which revolves around the NYC-London axis. Coincidentally, who are the two primary forces that were instrumental in our invasion of Iraq? The U.S. and England. And who, pray tell, are the two driving entities behind a potential attack on Iran? Strangely enough – the U.S. and England.

A monkey-wrench was thrown into this cozy arrangement, though, in June 2004 when Iran announced that it would create a euro-based oil bourse (“stock exchange for trading securities”). They also declared that a fourth crude oil marker would be added which removed any obstacle for the use of a petro-euro system in international oil trading.

From what we’ve now gathered, it’s not too hard to determine that a major threat is being leveled against the dollar-U.S.-London exchange. Not only would Iran’s bourse compete head-on with NYMEX and IPE, but they’d make it possible to buy oil in euros, not the U.S. dollar. On top of that, the trade volumes at NYMEX and IPE would be reduced due to the Iranian bourse, thus profits would naturally drop. The reason why is obvious, and very far-reaching. Since NYMEX and IPE get a cut off of every oil transaction, their profits are enormous. Therefore, the surplus that results from these exchanges subsidizes a U.S. economy which would otherwise go belly-up without this revenue flow. Iran’s decision to create a euro-based bourse is thus an unmitigated assault on America’s economic dynasty (and quite possibly its very survival).

The writing is on the wall. At this point in time, all oil money flows directly into NYC or London, but the bourse’s introduction is akin to a bombshell being dropped on the status quo, for energy payments would bypass America and the UK and go straight into Iran. The middlemen at NYMEX and IPE would be cut-out of the equation as all commerce would flow uninterrupted into the Middle East.

Naturally, the petro power cabal which has become so accustomed to this easy money is now backed into a corner. And, growling like an angry dog, they have already started laying threats on the table. “Some industry experts have warned the Iranians and other OPEC producers that western exchanges are controlled by big financial and oil corporations, which have a vested interest in market volatility.” (Source: Terry Macalister, The Guardian, June 16, 2004, Iran Takes on West’s Control of Oil Trading)

Similarly, “Iranian officials believe crude trading on NYMEX and IPE is controlled by the oil majors and big financial companies who benefit from market volatility.” (ibid)

Market volatility seems to be the key word here, and as we all know, this statement is undoubtedly true. To prove it, all we need to do is go back in time to Hurricane Katrina. As New Orleans lay in waste, oil prices soared to over $3.00/gallon; and in some locales over $5.00/gallon. As a result, every major oil company announced record-breaking profits for the quarter following this disaster; and just last week ExxonMobil posted the largest single quarter profit in the history of this country.

Needless to say, cutting into this type of windfall revenue is the reason why wars are started, and Iran is no exception.

Monday: Part Six - U.S. Dollar Hegemony