The Trouble With Understanding Geopolitics

Oil is still spilling into the Gulf of Mexico at an unknown rate.

“Plug the damn hole,” says the nation’s chief executive to his aides. Why does he bother? His aides don’t know anything about plugging oil leaks under the ocean. And those people who do know something about it have been unable to fix the leak.

Mr. Obama is not only America’s president. He also presides over the biggest single user of oil in the world – the US military. The pentagon uses twice as much oil as the entire nation of Ireland. It sends soldiers in oil-burning airplanes to places of no apparent importance where they drive around in oil-burning machines for no apparent reason.

Naturally, oil becomes not just another commodity, but a strategic commodity…worth fighting for. Then, foreign wars use up the oil they were expected to protect.

But geopolitics is far beyond our understanding…and even farther out of our range of interest. We will just observe that the law of diminishing returns applies to just about everything. The farther offshore the roughnecks go…the deeper the sea and the higher the waves…the more the costs, the greater the risks and the lower the marginal returns. The return from Deepwater Horizon must be starkly negative…

The farther afield US armies go, too, the greater the costs, the higher the risks, and the lower the marginal returns.

“Why not just buy oil on the open market?”

Well, it’s clear you don’t know anything about geopolitics either, dear reader…don’t you know that our enemies might try to cut us off from vital oil supplies? That’s why Germany and Japan lost WWII! We were able to cut of their fuel…

“But weren’t Germany and Japan fighting for access to oil? Didn’t their politicians say they had to invade Poland…and the Philippines…to protect their vital supplies?”

No…they were aggressors. They were bad people…

“But if they hadn’t been the aggressors they wouldn’t have been bad people, right?”

That’s right…

“Then, we wouldn’t have cut off their access to oil!”

Oh, never mind. You’ll never understand geopolitics, will you?

Bill Bonner
for The Daily Reckoning

The Daily Reckoning