by J.C. Collins
February 16, 2015
In the interest of analytical balance, we would do well to consider
the possibility of war strategies when it comes to the global
stockpiling of petroleum reserves.
In the years leading up to the German invasion of
Poland, the world witnessed dramatic decreases in the price of oil
as well as massive increases in petroleum inventories, especially as
the Texas fields began to produce.
These shifts in the global oil markets ran parallel to the deflation
which had begun in October, 1929, and as such, we can see the same
pattern repeating today as oil prices collapse, inventories are
growing, and world wide deflation is deepening.
The United States and China are both increasing their Global
Strategic Petroleum Reserves, with stockpiling taking place in
Cushing, Oklahoma, and in provinces throughout China. The promoted
script is that America is seeking energy independence and China is
taking advantage of low oil prices to increase stockpiles, as they
are an energy importer.
But other countries around the world are stockpiling oil and
petroleum products as well, from the construction of massive storage
tanks in Nigeria, to hundreds of oil tanker ships full of crude
floating of coastlines. Crude and petroleum product stockpiles are
increasing to record levels.
Oil Storage at Sea
Here are just a few links to increasing stockpile articles:
There are numerous reasons why petroleum stockpiles
One is the obvious opportunity to capitalize on low oil prices, and
a second would have to do with the global demand decreasing while
the game of production chicken continues between low cost and high
cost oil producers around the world.
A third possibility, and one Iíve been reluctant to discuss, mainly
because it feeds the fear hysteria which is being promoted on many
other alternative sites, is the preparation for war.
For any military to wage war a large and steady supply of oil and
petroleum products are required. Just some of the materials and
products which are rapidly consumed in warfare are the following:
Fuel (including synthetic as the Germans
attempted in WW2)
Lubrication (such as grease and de-greasers)
All forms of plastic
Rubber (used in various applications, such as
tires for vehicles and planes)
Nylon (for use in parachutes, etc...)
Some of the primary purposes, or usageís of oil, are
Some of these products and items may seem painfully
obvious, but defining them does help us formulate a proper approach
when considering the broader implications of war preparations.
Another vital aspect of war preparation is the relationships which
exist between governments and private industry.
The dynamics between Nazi Germany and companies
such as IG Farben, as well as vast
western corporations, were important strategic partnerships which
were focused on realizing the common objectives which had been
determined before the outbreak of hostilities.
We have often drawn attention here to the American industrial
objectives in Ukraine and Syria, in attempts to secure access to
resources, but this could also be the early signs of a shift away
from the proxy war formula which has been used to buffer direct
warfare between Russia and the West, and towards open and direct
Assumptions are made that the flex allowed for in the global
financial system can be managed by the regulations and mandates of
the international banking system, as determined by the
Bank for International Settlements (BIS).
Even though I feel certain that this is the case,
only a fool would completely discount the possibility of the
fragmentation of the control framework.
With that being said, the BIS had the ability to direct the course
of the WW2 while doing business with industrial and governmental
interests on both sides of the conflict. All the while the banking
interests enriched themselves further with gold and other assets
which had been captured and transferred during the war years.
So it is with interest we consider that 33% of all
GPSR, or Global Strategic
Petroleum Reserves, are held by governments, and the remainder
of strategic reserves are held by private industry.
The same private industry that gets its funding from
the international banking system.
Itís interesting to reference that the League of Nations, in the
pre-war years, as Italy and Germany were building up their strategic
reserves, did not include petroleum products on the economic
sanctions list against those countries. And of course, the League of
Nations, the precursor to
the United Nations, was an
extension of the international banking interests as represented in
the Bank for International Settlements.
Whether by design or not, the lack of reduction in crude production
around the world, and the growing stockpiles which isnít slowing
down, will only mean further decreases in the price of oil.
The growing deflation will obviously drive down the demand for
petroleum products even further, while at the same time decreasing
oil prices will continue to feed the deflationary pressure from the
opposite macro position.
The emerging framework of the multilateral financial system will
create large systemic pressure on the current USD based system,
which the growing deflation is a product of.
But could the stockpiling of petroleum products only
be the strategy to account for the systemic instability as the
framework shifts, or is there a broader strategy which involves
preparations for war and the petroleum products which would be
required to wage that war?
collapse of the Baltic Dry Index,
and other economic metrics, could be the first manifestations of a
reallocation of products and resources as they are sucked towards
the front lines of a war that has not yet overtly started.
It is still my contention that the multilateral architecture will
emerge and be implemented without a larger war involving the global
players, such as America, China, and Russia. That is not to say that
there arenít any geopolitical and socioeconomic advantages to be
obtained by the Bank for International Settlements by allowing and
funding another expanded war.
But let us hope that the massive stockpiling of crude
and petroleum products, along with global deflation, and a collapse
of consumer demand, does not mean the approaching rumbles of war and
all the horrors it will pertain.
If a larger war does breakout, whether in Eastern Europe or the
Middle East, perhaps even the South Pacific, expect the opening
months to be savage and intense as powers rush to secure alternative
petroleum sources before their own reserves are depleted.
As it stands right now, all major powers have developed Joint
Strategic Petroleum Reserves in their regions of the world.
This would suggest a balance in availability of
petroleum products in the opening months of the war...