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Oil's Fair In Love And War

OK, it's time to come clean about the Iraq War. It was, at its core, about oil.

But these days, everything is about oil.

I never for one instant thought that the invasion of Iraq and overthrowing Saddam Hussein was part of some ploy to take control of Iraq's oil, and I still don't. That was small potatoes in the big picture -- it was about securing the free flow of oil from the Middle East to the industrial world.

Because without oil, our entire civilization comes to a crashing halt.

Back during the Iran-Iraq war, Iran started mining the Persian Gulf to deny oil tankers -- all of them, not just ones carrying Iraqi oil -- passage and to put a chokehold on the West. The United States chose to "lend" its flag to tankers of non-combatant nations and put the United States Navy to service protecting tankers. Two US warships were badly damaged as a result, but the oil kept flowing.

The high price of oil is a hefty component in the rising food prices we're seeing around the world. Remove oil from the equation, and kiss goodbye a lot of fertilizers, most heavy farm machinery, and the transportation infrastructure that moves food from the farms through the food chain to your dinner table. Worst of all, the price of oil has pushed some folks to start burning food in place of oil.

So, so much of our daily lives depends on fossil fuels, and in ways we never even consider. Most all plastics and synthetic fabrics are derived from fossil fuels. Take a look around your home and eliminate anything that uses plastics, and you'll end up with a whole lot of empty space. Most of our electricity comes from fossil fuels.

And it is an indisputable fact that much of our oil comes from abroad. Of all the misdeeds of the Clinton administration, I would rank among the highest his refusal to allow the development of the oil reserves in the Arctic National Wildlife Reserve in Alaska. When he vetoed the entire federal budget to keep it from development, one of the rationales he gave was that it would be about ten years before we'd see any oil from that area.

That particular event happened in 1995. It's now 2008. The remainder of the math problem is left as an exercise for the reader.

The problem of our dependence on oil does not have any simple solutions. Indeed, it cries out for what I like to call "shotgun problem solving" -- trying several solutions at once, in hopes of alleviating the crisis quickly. It tends to less useful in identifying the root causes of problems, but it does tend to get feasible workarounds and short-term fixes faster.

In the short term, we need to look at the causes of the high prices and potential shortages, and how we can fix them. In this area, I find myself agreeing with Senator Obama and disagreeing with Senators Clinton and McCain about the federal gas tax. A temporary suspension of that measure won't do a hell of a lot. I've seen some estimates that the "holiday" will save the average consumer a grand total of thirty bucks during the summer months. Indeed, I think it will have a long-term harmful effect, as it will give politicians cover to say "hey, look, we did something!" and avoid having to take actions that might actually help matters.

Another bad idea is Senator Clinton's "windfall profits tax" on oil companies. Look up the phrase "biting the hand that feeds you." These companies are huge, and their profits are huge based solely on volume. Their profit margins are actually slightly lower than in recent years (a fraction of the return that Hillary Clinton enjoyed in her brief adventures in cattle futures. Then, Hillary made 999 dollars for every dollar she invested; the oil companies are making about a dime on each dollar), as a percentage of revenues, and they already pay tremendous amounts in taxes. Besides, the real killer right now is not the price of gas, but the price of oil -- and these oil companies don't sell oil, they buy it and turn it into the stuff we need.

And that's not to mention the legions and legions of accountants, bookkeepers, and tax lawyers they employ. You can bet that whatever Senator Clinton decides is enough for them to make

No, short-term, what we need is to find ways to both increase supply and decrease demand, and let the marketplace fix itself. The American people are already doing this on a collective basis, independent of the government; gas consumption is slipping, new SUV sales are down, and people are looking at smaller and more fuel-efficient cars all on their own without anyone from the government telling them to do so or using "carrot and stick" approaches to push them that way.

We also need to increase the flexibility of our supply. As I understand it, we currently have about 45 different blends of gasoline that we produce, almost entirely the result of different federal, state, and local regulations. This is, to put it mildly, absurd. I can understand that a single formulation probably should not be used in every area for every purpose, but the sheer diversity we have now is nothing short of a formula for chaos. It is micromanaging on a scale that we can no longer afford. I would have no problems with the oil companies simply telling certain governments "you say we can't sell gas unless it meets these specific criteria? OK. We'll stop selling in your jurisdiction, and pump more into less restrictive regions." Indeed, I'd welcome it.

I also would not support any messing around with the Strategic Reserve. That is there for a reason -- a genuine shortage of supply. We have plenty of oil, we just don't like the price we're paying for it. In other words, our current shortage is of cheap oil, and the Reserves oil is not cheap -- we'd have to replace it, and at current and future prices. Tapping the Reserves for this purpose is the equivalent of the current "stimulus" payments Washington is sending out -- a simple transfer of money from the government to the people. But in this case, it isn't just money that is being moved around, but oil, and replacing that in the Reserves will be very expensive.

But not as expensive as not replacing it, and then later needing it.

No, leave that alone. That's our national rainy day fund of oil, and it's only partly cloudy right now.

OK, that's short-term. Mid-range, we need to increase the overall oil supply. That means biting the bullet and going after the oil we have under our control right now. Yes, I mean carefully controlled development of ANWR, the oil fields off our coast, and (if Rob will let us) the newly-discovered oil in the Dakotas. With the current instability in the Middle East, as well as the pricks who run OPEC quite happy to keep the price of their oil as high as the market will bear, we need to find a way to screw with their power a bit. The United States, if we put our mind to it, could put a pretty decent dent in their market share and dilute their power -- and I think it's long past time we did just that.

This will also help mitigate the effect of other nations developing and increasing their demand for oil. China and India, just to name two nations, are buying up a lot more oil, and expect to buy even more every year. And they are bidding against us for pretty much the same amount of oil as before.

Long-term, we need to wean ourselves off of oil. As I noted, petroleum is one of the most useful and valuable substances we've ever discovered. We make almost everything out of it. It can -- and is -- used as a component in almost every linchpin of our modern age. And the most common use of it? We burn it. That's right, it literally goes up in smoke.

And it's nasty stuff to burn. While its energy density is remarkable, it still is incredibly vile to produce, refine, transport, and burn. We have so many alternatives to it for energy. (Thank you, Jane Fonda and the rest of the anti-nuke crowd, for your role in keeping us from using that particular energy supply. And thank you, Senators Kerry and Kennedy, for your valiant efforts in keeping your beachfront mansions' views pristine and killing the wind power project off Cape Cod.)

Our problems are the product of literally decades of ignoring the situation, pushing back any possible solution and simply living in the here and now. And it's been a bipartisan accomplishment. There is no quick fix available.

But it ain't going away. Efforts that will not pay off for some time will still be useful, by the time they mature and start working.

For that, we can thank President Clinton for a perfect example of shortsightedness. If we take him at his word that ANWR will take at least a decade to start producing oil in meaningful amounts, that means that we would have had an additional supply of oil -- unendangered by Mideast instability and other foreign concerns -- on line for a least a couple of years now today. But that didn't happen.

Predicting the future is a dangerous thing, but I'll go out on a limb and say that we will still be having trouble with the Middle East and foreign oil in the year 2018. Gosh, wouldn't it be nice to have some additional domestic oil to soften the blows and buy us more time to wean ourselves off of oil?


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Comments (12)

When OPEC created an oil em... (Below threshold)
George Author Profile Page:

When OPEC created an oil embargo in 1973, the United States did not invade the Middle East. The Iraq war was about keeping oil wealth and weapons from a deadly dictator. If Iraq had not been a deadly, aggressive country and had not blatantly defied the United Nations for so long and had some hint of human rights, the Gulf War would not have resumed.

One problem is that no matt... (Below threshold)

One problem is that no matter what action we take re drilling, it's going to take at least 5 years to get a significant flow. That's essentially an eternity in political time - so you can look for actual solutions to be dropped as 'impractical' in favor of visible 'fixing the problem' political garbage.

It's ridiculous we haven't exploited domestic reserves - the time to be drilling is five or ten years back, but when there was cheap oil coming from outside the country, where was the incentive to buck the enviro crowd? (Not like there's been anything ELSE requiring political capital going on in the last 7-8 years.) Now we're feeling a pinch, and the first thing the politicians come up with is feel-good hearings?

We need to get very, very serious about weaning off oil and looking at alternatives. Fusion's turned into a long-term jobs program, with no actual results being expected from government programs. (Polywell activity seems to be coming along well - but that's got a lot of private sector input.) Fission plants - it's relatively cheap, it's relatively safe (what's the half-life of a lot of the pollution coming out of oil refining?) and it's got no greenhouse gasses. Nanotech solar is becoming commercially viable, and it looks like the cost of silicon solar cells is about to drop considerably. We need to pursue alternatives to oil seriously, but first we've got to get the politicians over the environmentalist speed bumps and whack them into thinking for the LONG term instead of concentrating over what will look good for their resume come the next election cycle.

Pumping our own oil seems g... (Below threshold)
jpm100:

Pumping our own oil seems good for the economy. Keeps more money here rather than adding to our trade deficit.

But we are looking at a global issue. The price we pay for oil is set by the global marketplace and the global supply.

In terms of that global supply, OPEC and other producing nations seem like they manipulate supply.

One thing that works in favor though is the inelasticity of oil demand which is the reason the price of oil has climbed so high. But that same inelasticity cuts the other way. A small increase in global supply would have a big effect on prices.

However, to keep prices high, OPEC & friends can cut back supply. It would be a small sacrifice compared to allowing the price to tumble back to levels from 6-7 years ago. Being a cynic I have faith that is how they would respond.

Although there's still value in pumping more of our own oil, to have an effect on the pump we would have to make drastic changes with respect to our relationship with the global marketplace. Drastic options which includes nationalizing the sale of US oil for US consumption only and fixing prices for that oil.

"The crises in Iran and Af... (Below threshold)
groucho:

"The crises in Iran and Afghanistan have dramatized a very important lesson: Our excessive dependence on foreign oil is a clear and present danger to our Nation's security. The need has never been more urgent. At long last, we must have a clear, comprehensive energy policy for the United States.

As you well know, I have been working with the Congress in a concentrated and persistent way over the past 3 years to meet this need. We have made progress together. But Congress must act promptly now to complete final action on this vital energy legislation. Our Nation will then have a major conservation effort, important initiatives to develop solar power, realistic pricing based on the true value of oil, strong incentives for the production of coal and other fossil fuels in the United States, and our Nation's most massive peacetime investment in the development of synthetic fuels."

President Carter 1980

Maybe we wouldn't be in the mess we're in if this country had followed through with this, instead Ronald Reagan scrapped virtually all of these ideas shortly after he took office a year later. It's been downhill ever since. I'm sure this will provoke the Carter was evil crowd, but this was something that he had right.

Reading Jay's piece, I wondered what our response would have been had China or Russia invaded and occupied a country in order to secure the free flow of oil to their part of the industrial world.

Ask the residents of New Or... (Below threshold)
Jamie:

Ask the residents of New Orleans about the effectiveness of the strategy of waiting for the Government to help. It may happen, they may do a stellar job, but it's no substitute for taking some real measures of your own to make things better.

Pledge one (or, if you can) two days a week when you will not, under any but the most dire of circumstances, crank a gasoline engine. Not a trip to the corner store for milk, not a drive to visit the in-laws, nothing. Unless someone needs a trip to the emergency room, do not move your vehicle. Don't excuse not doing this by talking about how your vehicle gets 34 mpg, so it's not much difference...we're striking at the collective difference of EVERYONE doing this that will have a dramatic impact upon consumption.

Approach your employer about working one fewer day a week, and longer hours on the days you do work. Consider that the average commute for working people in America is nearly an hour, and consider that to be two hours per week per person they won't be on the roads and stuck in traffic burning gasoline. Again, if this were done pretty much across-the-board, gas consumption would be changed in large measure.

Take the keys away from your teenager. I have never seen such a propensity for burning gas as I saw in my teen son. He could exhaust the gas tank of a quite economical car in a day's time without even trying. Educate them that there is a purpose they have a car, to get them to the things they MUST attend, not to provide them with recreation in between. If you have not provided your child with a car, don't. At least not yet. Take the time to explain to them how the collective small efforts of everyone makes a big difference in the big picture, and if they're not going to do their part, you won't facilitate their excess.

These are just three little things that YOU can do that will make a difference if enough people get on board. We're at the mercy of OPEC because we've shown them through the years that we will NOT modify the way we live our lives towards more conservation. Time to change that a little.

groucho, you do us a disser... (Below threshold)

groucho, you do us a disservice. Carter was not evil.

Arrogant, inept, incompetent, blind, clueless, ignorant, wrong-headed, stupid, petty, unprepared, and a host of other things, but not evil.

J.

Jay Tea, really? I thought ... (Below threshold)
SPQR:

Jay Tea, really? I thought so for a long time but his recent conduct has changed my mind.

He hates that America that ... (Below threshold)
jpm100:

He hates that America that is.

That is the definition of Evil.

The man created the chaos e... (Below threshold)
SteveC:

The man created the chaos emanating from the middle east, specifically Iran...if that's not what evil is, I don't know what is anymore.

Speaker Pelosi, 26-Apr-2006... (Below threshold)
kevino:

Speaker Pelosi, 26-Apr-2006:

Democrats have a commonsense plan to help bring down skyrocketing gas prices by cracking down on price gouging, rolling back the billions of dollars in taxpayer subsidies, tax breaks and royalty relief given to big oil and gas companies, and increasing production of alternative fuels.

Two years later:
1. No Energy plan - commonsense or otherwise
2. No domestic agenda
3. No budget
4. Troops still in Iraq [I can't wait to see what they do with President Bush's request for another $70B for Iraq and Afghanistan.]

Quick: Without looking it up: Name the top three legislative successes under the new Democratic Party leadership.

groucho - "I wondered w... (Below threshold)
marc:

groucho - "I wondered what our response would have been had China or Russia invaded and occupied a country in order to secure the free flow of oil to their part of the industrial world.

China = Sudan.

They didn't invade Sudan with troops they invaded the place with cold hard cash and own most if not all the oil reserves in country.

China + Sudan = every U.N. resolution offered by the U.S. is shot down and vetoed by China.

Excellent point marc<... (Below threshold)

Excellent point marc

Chicom financed destabilization is the elephant in the room that nobody wants to talk about.




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