2010 February 11 Thursday
Obama Lends Brazil For Offshore Oil Drilling

While the Democrats block offshore oil drilling off most US coastlines the Obama Administration is going to lend money to Petrobras to drill deep offshore.

The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

Does this mean that Barack has become a Peak Oiler? Why would Petrobras need to borrow money from the US to develop Tupi? In a recession with 10% unemployment oil is going for $75 per barrel. Prices will go higher even if US growth does not resume as rising Asian demand hits up against flat production. US government loans for drilling make no sense to me.

Share |      By Randall Parker at 2010 February 11 07:10 PM  Economics Energy


Comments
no said at February 12, 2010 9:50 AM:

Probably a bribe to allow some kind of access to US companies somewhere along the chain?

averros said at February 13, 2010 5:14 PM:

It's called "corruption", baby. I think in a few years we'll learn that some top guys in the Obama's administrations were on the receiving end of some of these funds. For a long time, this was the ONLY plausible rationale for any large government project in existence.

Big Bill said at February 14, 2010 3:50 PM:

In 2008, George Soros invested big in Petrobras:

http://www.bloomberg.com/apps/news?pid=20601086&sid=aFHPjfeUvtl8.

Does he know Obama?

averros said at February 15, 2010 3:15 PM:

Ah, so this is the explanation, thank you, Big Bill.

Soros is the principal financial backer of MoveOn and other "grassroots" organizations which got Obama elected.

Now it's pay back time.

ren said at February 18, 2010 10:47 PM:

Oil underpins our dollars. Saudi's deposit Petrodollars in American banks, where the reserves can be fanned out by a factor of 10 due to fractional reserve banking. In other words, the petrodollars are used as banks reserves, and those banks can then make loans at multiples of their reserve amounts. This feature of our monetary system, in conjunction with the dollar being the world's reserve currency, means that other countries need to export to the U.S. in order to acquire dollars. Exporting countries are forced in a race to the bottom to export in order to acquire dollars to buy from the dollar zone economies. The Gulf Cooperation Council countries are hard pegged to the dollar. Oil then must be purchased with dollars, and the dollars are underpinned by oil.

When we went off the gold standard, we made a deal with the Saudi's. The deal had been fixed in June 1974 by Secretary of State Henry Kissinger, establishing the U.S.-Saudi Arabian Joint Commission on Economic Cooperation. The U.S. Treasury and the New York Federal Reserve would 'allow' the Saudi central bank, SAMA, to buy U.S. Treasury bonds with Saudi petrodollars. In 1975 OPEC officially agreed to sell its oil only for dollars. A secret U.S. military agreement to arm Saudi Arabia was the quid pro quo.

America can print fiat dollars to supply a world in need, where other countries must export to acquire dollars #to buy oil, airplanes, etc. all priced only in dollars#. But, America needs to remain as an importer of last choice in order to keep the scheme going.

Loaning money to Brazil to underpin oil is in keeping with the current global monetary scheme. The Mexican debt crises was caused by cheap loans from American banks. Brazil would be wise not to follow Mexico's example.


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