Oil is the world's biggest business. The money made by the oil supermajors in a day is more than the entire gross domestic product of all the Sub-Saharan African countries combined.
History has shown that control of the oil business has been dominated by the West since the day "Colonel" Edwin Drake struck oil in the fields of Pennsylvania. The entire value chain from exploration right down to the price at the pump is controlled by the West.
Today, the price of oil sold to the consumers around the world is determined by two petroleum exchanges - namely the New York Mercantile Exchange and the International Petroleum Exchange in London. This is a bit ironic because the price of oil is determined not by the oil producers but by the exchanges in the West.
However, the monopoly enjoyed by these two exchanges will soon come to an end. Come March 2006, the Iranian oil bourse will commence operations and will use euro in its daily activities.
The macroeconomics implications of a successful euro based Iranian oil bourse are noteworthy. A successful Iranian bourse would solidify the petro-euro as an alternative oil transaction currency, and thereby end the petro-dollar's hegemonic status as the monopoly oil currency.
Europe, Japan, China and India are major importers of oil. They import around 60 million barrels of oil per day, almost double than what US does. Because oil trading is conducted in US dollars, they have to keep a large amount of US dollars in their reserves in order finance their oil imports. This is done by buying bonds issued by the US government.
If trading in oil is conducted in euro, the central banks of Europe, Japan, China and India will have to switch its reserves from US dollars to euro, hence ending US dollar hegemony in the oil business. This is what worries the US most.
Its deficit is estimated at 10 trillion dollars. It has been financing its deficit by selling bonds to the rest of the world.
With its need to import and consume more petroleum and more of everything, there is no way for the US to pay its debts, even though it may earn some money from lending out the funds deposited with it by the countries of the world. There simply is too much US dollars within the world's financial system. And so the deficit of the US will continue to grow, for such is the size of its debt that it cannot pay even the interest from earnings. In reality, the US is bankrupt.
That is why Iran must be destroyed at any cost. The Iranian oil bourse poses a clear and present danger to the survival of the United States.
