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Monday, August 20, 2007

Oil History Moment

The star of this installment in the How to Boil a Frog Oil Trilogy is that swinging ladies man with the low sexy voice...Barry White!

I'm Gonna Love You Just A Little More, Baby

Just kidding. It's Henry Kissinger. But he was hot. He dated Marlo Thomas, Jill St. John, Barbara mean that lady from The View? OK, we're talking ancient history here, far beyond the lifespan of any living frog, but just for a moment, cast your mind back to 1973. Saudi Arabia was so miffed over the Yom Kippur War (which had followed closely on the heels of the Kwanzaa Police Action and the Arbor Day Guerilla Spitwad Entanglement) that it decided to punish the United States and its allies by sending them to bed without supper, and also cutting off their oil supply.

This act, motivated purely by dedication to the moral ideals of the prophet Muhammad, had the pleasant side effect of driving up oil prices 400% in a single year, creating a new sort of profit. President Richard "Checkers" Nixon had a dilemma on his hands: he couldn't afford to fork over the entire contents of Fort Knox to the Saudis to keeps America's highways humming, but on the other hand all those voters waiting in line for gas were listening to the Watergate hearings on their car radios, and that didn't seem too good either. So he sent in Henry. And also Jill St. John.

Amazingly, the Saudi royal family spent their time talking to Henry, because he had come with a proposal. The Saudis would agree not to be naughty anymore, and keep oil supplies and prices at levels that wouldn't get Nixon impeached (small flaw in that plan), and in fact if other OPEC members tried to pull a fast one, the Saudis would ramp up production to keep the goo flowing. In exchange, the US would provide permanent support to the House of Saud, even in the event that they required cyborg bodies, allowed their citizens to blow up the World Trade Center, or other unlikely occurences.

But there was one other teensy weensy condition: from then on the Saudis would only take US dollars for their oil, and would then have to invest those dollars back into US government securities! That was, of course, a terrific time-saver -- this was before ATM's, so waiting for a bank teller to count out billions of dollars to buy oil had always been a problem -- now America could basically just pay the money to itself, and get the oil practically for free! Of course, it did generate a little debt...

US National Debt (not actual size)

...but what were the chances of that getting out of control? Pretty soon all the other OPEC countries piled on, and the petrodollar was born. Now every country in the world had to buy US dollars before it could buy oil, and while they were holding those dollars, naturally they wanted to earn some interest...which meant they had to buy US government securities too. It was like owning the chip concession at a Texas Hold'em tournament! But there's always somebody who wants to poop in the punchbowl, and it turned out to be this guy:

Cameron Diaz also looks better with makeup.

In November of 2000, he had the bad manners to start selling oil for euros, a new fancy currency made entirely of French brie. At this point, the US was about 735 bazillion dollars in the hole, and if all the countries of the world had started dumping their US dollars, well, let's just say it was time for a little tough love. 3 years later, Saddam was out and the US dollar was back in, with a very visible warning to other OPEC members not to try that sort of nonsense. And goodness knows, countries like Iran always respond well to a smack on the nose. So I think we're all safe again.

But just in case, I'm keeping my money under the lily pad.


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