Tuesday, October 11, 2011

oil - 1928 - Two Agreements, Gulbenkian & Another


  • July 31: Red Line Agreement The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company (TPC) on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from independently seeking oil interests in the ex-Ottoman territory. It marked the creation of an oil monopoly, or cartel, of immense influence, spanning a vast territory. The cartel preceded easily by three decades the birth of another cartel, the Organization Petroleum Exporting Countries (OPEC), which was formed in 1960.  
  • Achnacarry served as the meeting place for global petroleum producers in an effort to set production quotas.
  • September 17: The Achnacarry Agreement or "As-Is Agreement" was an early attempt to restrict petroleum production  
[Mrt: More here - The Time Line]

Here is more reading:
(Note that those are unknown sources to me.)

A) Draft Achnacarry Agreement, 18 August 1928

[Mrt - Note: "...The U.S. Gulf prices shall be the basis until further notice by the Association)..."]

B) Keeping Iraq's Oil In the Ground

Calouste Gulbenkian
Source: http://en.wikipedia.org/wiki/Calouste_Gulbenkian

[Mrt: Lets look at what Another said about this particular piece of puzzle:]




From Q Ball: I would like to ask Another his opinion on this. What are his thoughts on what some people are predicting to be a dominance of OPEC nations in terms of oil production. Specifically forcasted in the following page says that OPEC production will surpass NON-OPEC in about the year 2006.

ANOTHER: QBall, This is true. The Middle East nations, in particular, have shown their reserves to be much greater than ever thought possible. These "new/ larger" reserves have come to be known about, only in the last eight years. It was the "possible existence" of this oil that created much fear in the American Capitol, prior to the 1970s. In that time, it was known that the Western economy was growing on low priced energy. This growth would soon consume all "local / domestic" reserves that, in turn, would bring much dependence on low cost Middle East oil. The reserves in this region were, and now even more so, are the lowest cost to produce in the world. As all oil was sold in dollars, and US$s were then, still somewhat attached to gold, the ME producers had "no need" to raise prices! The political forces in the West needed much higher oil prices to "stimulate exploration" to avoid the "strategic problem" of "all oil supply from one region". Make no mistake, there is enough oil reserves in the ME to supply "all world" for "many grandchildren"! It was in this time that the events created by the "politics of dollar currency", allowed the decision to remove the gold backing from the US$. This move, broke the "gold bond to oil", and created a need for more dollars per barrel of ME oil. The oil producers, as expected, did create "Beirut Resolution titled XXI. 122"!

Partial reprint from report by others:

"Shortly after the gold window was closed in August 1971, OPEC called an emergency meeting with U.S. and other nations' finance ministers in Beirut. The result of the meeting was the Beirut Resolution titled XXI. 122. It called for adjustments to OPEC's crude oil pricing whenever the dollar had been devalued. The resolution called for OPEC's price adjustments to be triggered whether or not dollar devaluation was caused by government action or by market forces. If the dollar lost purchasing power, OPEC could raise its prices."

QBall, this was the beginning of a move by dollar advocates to raise this commodity price by inflating the "world reserve currency". As an "also", the ME was shown to be and caused to be "unstable" for dependence for oil production. Not all nations agreed with this move. The French and Germans did not, and by 1980, Europe was working with the BIS to implement a new "reserve currency". They did long for a "money" that would resolve "Beirut XXI" and allow for the purchase of low cost reserves, not the high US$ cost "world oil supply" , of perceived strategic importance to America alone.

The "new Euro" did take much longer to create, and the Gulf War did create a crisis of payment for oil. In this time, early 1990s, the currency of gold was brought "into use" as a "temporary" partial payment until the Euro could be presented. A paper gold market, of sufficient size, was created, that as such, it could hide discount payments to a few producers for oil. Today, if these claims on paper were converted into bids for physical, it would take all of the "tradable gold" in existence! It was this "leverage" that forced the Euro makers into gold. Gold backing for the Euro would not be enough! Only "exchange reserves of gold" would allow oil priced in Euros. We move to this end today. Tomorrow will see ME oil in good supply for a new trading block of nations.
Thank You

Date: Sat Apr 04 1998 19:55

I do try and go back to complete where we left off. This question was offered for thought:

" Date: Wed Mar 25 1998 23:31

All: I ask you, why did the world go off the gold standard in the early 70s? You have an answer, yes? For all the problems this created, could the countries not just revalue gold upward, to say $300 ( back then ) ? What was the real reason the world entered a period of "freely traded" "managed gold"? "
This question has more impact on the gold market of today than it did then! In days past, it was held as good knowledge that the US stopped gold backing to protect the dollar and keep gold from leaving to other shores.
But, in the same time frame, all central banks did sell gold to all persons, even the US. All treasuries held gold and dollars as reserves. To what end did the world financial system gain with the dollar off gold backing, and then allowed to "dirty float" against all currencies? Would the world not have been better off to find gold revalued to, say $300 and then begin a "dirty float"? Noone would have lost, and the inflation would have , at best, not have been worse!
Truly, I tell the reason for this action. The US oil companies knew that the cheap reserves were found. The governments knew this also. The only low cost oil reserves in the world at this time were in the Middle East, and their cost to find and produce was very low. It was known, that, in time, ALL oil would come from this land. As much higher US dollar prices were needed to allow exploration and production of other reserves, worldwide. But, how to get crude prices, up, when the Gulf States were OK to pump and produce in exchange for "gold backed dollars"? I will not name the gentlemen that brought this thinking to the surface in that era, but it was discussed. It was known that oil liked gold. It was known that "local oil" would be used up without higher prices. What if, the US dollar was taken off the gold standard, and gold was managed "upward" to say, $208 per ounce? The dynamics of the market would force oil to rise and allow for much needed capital to search for the higher priced oil that was known to exist! The producers would find shelter in gold even as the price of oil was increased in terms of a now "non gold dollar"! Price inflation would rise, but gold and oil would also increase. The dollar would continue to be used as the only payment for oil, and in doing so replace gold as the backing for this "reserve currency". All would be fair.
The war in 1973 and the Iran problem did make markets "overshoot", but all did work to the correct end. The result was "a needed higher price for a commodity that was, as reserves, in much over supply by the wrong countries"! It was known that the public would never have accepted this "proposition" as fair. To this end, we have come.
And it is from this end, that the gold markets are managed for today! I do now take you to my post to Junior:

Date: Wed Mar 25 1998 23:58
" You state: "The USA/IMF and its'Hegemoney currency could not withstand cheap oil prices." ?

" Mr. Junior,
Be very sure to understand this: They can "stand cheap oil prices". But, it is the loss of having the US$ removed as the "world reserve currency" that makes them "fight" a lower oil price, and the new "world oil currency" that it would bring. Bring this thought into focus and you will understand why Iran and Iraq did fight so long. And why Iraq invaded. The warships are an attempt to keep prices from "falling"! You think long and hard on this! "
Look now and see if the US dollar does not "fight" for a high oil price! In every way, the question of supply disruptions is shown as the need for other suppliers. But, other suppliers cannot produce at a lower price? If the gulf states are allowed to bring oil "down" to it's true "fair" production price, in terms of a "correctly higher revalued" gold price, the US dollar would no longer be priced and backed by oil. Any paper trading currency would do. I would say, "if the Euro is strong in gold, and crude oil is allowed to be devalued by gold at $10,000 to $30,000, then all other paper currency reserves held against the EURO would be , "for show?"

"The world is going off the dollar standard as the dollar is going off the oil standard ", find this event "in your time"! We watch this new gold market, together, yes?

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