Posted on 10/20/2013 11:29:08 AM PDT by Kaslin
October 17 was the fortieth anniversary of the oil embargo slapped on America by the Organization of Petroleum Exporting Countries (OPEC). That action changed the entire geopolitical map—taking the power from the United States and giving it to the Middle East. As a result of the embargo, the price of gasoline quadrupled, gas stations had multi-hour long lines, and the stock market plummeted—kicking off a serious recession.
My entire driving life has been impacted by OPEC’s actions. On October 17, 1973, I was 15—days away from turning 16. I got my driver’s license on my sixteenth birthday.
It was a different world prior to the embargo. America was the dominant player in the energy market—supplying 63 percent of the world’s oil at the beginning of World War II—and had surplus supply. The surplus neutered OPEC’s previous embargo attempts in 1956 and 1967, as the U.S. was able to fill the demand gap OPEC created.
It wasn’t the embargo itself that changed the dynamic, but the timing of it.
U.S. oil production peaked in 1970 and declined sharply in the subsequent years. When OPEC chose to use oil as a diplomatic weapon in 1973, America was no longer the swing producer with the ability to fill in the gaps. We’d become increasingly dependent on suppliers from the oil-rich Middle East. Scarcity was our reality.
To punish the U.S. for supporting Israel in the Yom Kippur War, OPEC banned oil exports to the U.S. and, eventually, other countries. OPEC then reduced production by 5 percent per month until the embargo ended in March of 1974.
For the past forty years, OPEC has controlled the geopolitical equation. Every president since Richard Nixon has urged the country to strive for energy independence so that we don’t face another energy crisis like 1973.
Remembering the embargo, Henry Kissinger, who was Secretary of State during the 1973 oil shock, said at a national summit on energy security: “You could not make plans in the Middle East or involving the Middle East, without keeping in mind the considerations of the oil market.”
While the social, political, and economic impacts of the embargo have been harsh, there’s also a silver lining: North American producers were forced to find new ways to explore for and produce hydrocarbons—and those technologies and techniques developed by individuals and industry have, once again, changed the geopolitical equation.
The 1973 OPEC oil embargo revealed a serious weakness in America’s energy and national security.
According to the Reuters story on the embargo’s anniversary: “The United States is less reliant each month on Middle East energy, thanks to increasing production of both oil and natural gas from technologies such as hydraulic fracturing, or fracking, which allows extraction of oil and gas from shale deposits.”
While the U.S. is less reliant on the Middle East due to the increasing production of our domestic resources—with our crude oil production up by 50 percent since 2008, it isn’t actually due to hydraulic fracturing, as Reuters states. According to Harold Hamm, who is credited with being one of the first wildcatters to take a chance on developing North Dakota’s Bakken field, saying that “fracking is the root of America’s new supplies of oil and gas” is a misconception that has “been erroneously driving public discourse and policy.” Hamm comments on the embargo’s anniversary in Forbes: “It’s also time for America to hear the truth about the real source of our modern-day oil and natural gas renaissance—horizontal drilling.” (The distinction is important, as fracking has been used by the environmental lobby to create fear, when in fact fracking has been consistently in use for more than 60 years.) Extolling how far America has come since the 1973 embargo, Hamm states: “Never again are we going to be held hostage and extorted.”
Hamm is correct. As the Wall Street Journal says, “greater U.S. oil production gives foreign-policy flexibility.” Likewise, Time Magazine affirms: “OPEC's influence has been diminished, and oil can no longer be used as a weapon the way it was 40 years ago.”
How does energy security give the U.S. “foreign-policy flexibility?” One example is Iran. Reuters reports: “Last year, Washington and its European allies orchestrated a partial boycott of Iranian oil, to compel Tehran to return to talks about its nuclear program. The sanctions against Iran took roughly 1 million barrels per day off world markets—without the price spikes many predicted.” Additionally, U.S. production has helped dampen price spikes from supply problems in Nigeria, Libya, and Sudan—and made us less vulnerable to Middle East oil shocks. Without the domestic supply, current gasoline prices would be higher, not lower.
While U.S. dependence on Middle Eastern oil has reversed course since 1973—increasing for thirty years and declining since 2008, we are surprisingly still importing the same percentage of oil that we did 40 years ago: 35 percent.
?We have come a long way, but there is still much that can be done to reduce use of Middle Eastern oil and improve our energy and national security—and that was the focus of the Oil Embargo +40conference held in Washington DC on October 16. The conference brought together iconic policymakers, leading CEOs, and senior military leaders to discuss the often overlooked threat of oil dependence and the solutions that are now within our reach. (Note: the conference website features an excellent “Forty Year Energy Security Timeline.”)
Sam Ori, Executive Vice President of Secure America’s Energy Future (SAFE), the non-partisan group aimed at reducing U.S. dependency and the organizer of the conference, told me that solutions generally fall into two categories: supply side and demand side.
The supply side is being secured by increasing U.S. oil-and-gas production—but we can do more. Some of the solutions addressed at the conference include calling on President Obama to finally approve the Keystone pipeline, accessing more federal lands, and accelerating approval for drilling permits. SAFE proposes that a portion of revenue generated from new drilling on federal lands should be invested in a research-and-development trust fund to help develop new technologies for using oil more efficiently. Such a trust fund could develop innovations without raising taxes and without government picking winners and losers, such as we’ve seen with Solyndra and the 50+ other green energy projects, which were funded through Obama’s 2009 stimulus bill and have already gone bankrupt or are circling the drain.
On the demand side, the experts recommend diversifying the transportation fleet by integrating natural gas and electricity. Ken Blackwell, a Senior Advisor to SAFE, explains: “electric vehicle technology is uniquely advantageous in the fight against OPEC, because electricity can come from multiple sources including coal, natural gas, and nuclear. Ohio coal should be burned to generate electricity used to power electric vehicles and, as a result, displace oil-based gasoline. We should invest in innovative research to foster oil displacement, not an environmentalist agenda.”
At the conference, Fred Smith, Chairman and CEO of FedEx, addressed the benefits of electric vehicles for short-haul, light-duty vehicles and natural gas for longer haul trucks and Dan Akerson, Chairman and CEO of General Motors, announced a new bi-fuel Chevrolet Impala that will use both conventional gasoline and compressed natural gas.
Robbie Diamond, founder, president and CEO of SAFE, concludes: “The domestic oil boom has already reaped tremendous benefits, but integrating natural gas and electricity into America’s transportation system is a necessary way to diminish both our dangerous reliance on a single commodity and our economic exposure to the global oil market.”
Could America still feel the shockwaves of supply disruptions caused by Middle Eastern instability? Yes, but we are far less vulnerable today than we were in 1973, as the geopolitical equation continues to evolve. A recent report from Citigroup points out that, by the end of the decade, the U.S. “could be freed from the shackles involved in sacrificing a values-driven policy focusing on human rights and democratic institutions in order to secure cooperation from resource-rich despotic regimes.”
Will I ever see $1 a gallon gasoline again? No. But, I am optimistic about America’s potential energy future (if the Obama Administration policies don’t impede its success), and I share Hamm’s enthusiasm: “Perhaps most significantly on the 40th anniversary of the OPEC Oil Embargo, U.S. gasoline prices are down despite an escalating crisis in the Middle East, and we are no longer beholden to go to war and sacrifice American lives to protect our oil interests.”
“They will fade away into the sand dunes and be quickly forgotten. And Islamic terrorism will become a thing of the past.”
Its too late for that.Due to the stupid immigration policies of our government we have imported hundreads of thousands of Muslims into this country and they are already attempting to change our society into what they left.
Terrorist are already living here.Terrorism is not a thing of the past.
You must be my age.
Mexico’s new supply is of the hard to get variety that needs the latest technology from Western Big Oil.
It is my understanding that Venezuela has plenty of the easy to get oil that can be gotten with old school technology. The kind that despots get easily to sell in order to pay armies to repress their own populations.
Canadian oil is not under attack in Canada, at least not successfully. Any Canadian oil that reaches international markets, be it China, Japan or the USA, puts a downward pressure on price.
Keystone would be ideal but not necessary IMO.
The summer I was fifteen I got a job pumping gas at a Shell Service station and the amount most often asked for was a “dollar’s worth.” That was in 1952.
You are right, and I stand corrected.
It’s worthy of note both the Shale and Sands petroleum production was only unlocked recently, and there’s a shake-up going on in the business.
The summer I was fifteen I got a job pumping gas at a Shell Service station and the amount most often asked for was a “dollar’s worth.” That was in 1952.
Very true. But they're going to have to make do with a serious budget cut.
I look at it as a dual security issue. The Arabs influence on US foreign policy is one. The second and biggest is that the Strait of Hormuz will be closed off one day because Iran will get the bomb. Just the threat of a nuclear strike from Iran is enough to shut down the region. The price of gas/oil will be high but when we are oil independent we will at least be able to get the oil/gas.
I think you have about 10 years on me. I worked at an APCO service station just before the going into the Service. Gas was around 20 cents and we washed the windows always and checked air pressure and oil if requested.
And companies like Tesla are all about packing and marketing cars based on current battery technology, when any credible electric car company needs to come up with a revolutionary energy storage technology which can compete with gasoline.
P.S. Used electric cars are basically unaffordable since the cost to replace a worn out battery pack is north of 5K.
Tell the terrorist supporters to go to hell. Also, we could just get out of the ME since there’s no more national security interest to be there.
Balance of trade will start to get closer to our favor and money staying in the states which creates more jobs which creates more tax revenues and smaller deficits.
If only we had a President that made energy independent a national priority.
The left opposes all US energy production.
They want US troops and money flowing the Middle East forever.
Thorium powered nuke plants to supply electricity and use the excess heat to convert coal to liquids using F-T process. That would give the economy an abundance of electricity, and petroleum products. CO2 byproduct of F-T process can be used to produce algae to add back to the coal feed stock.
With Fracking. The demand for OPEC will go to zero.
We will see the “tribes” of the Arab world go crazy.
Who will service their needs? Arab spring will look like a Tuesday morning.
Because everything is delivered with either gasoline or diesel.
Will I ever see $1 a gallon gasoline again? No.
..........
Maybe not but 1.50@gallon gas is definitely in the cards.
I can deal with $1.50 a gallon gas $1.00 or under would be better, but I doubt to, we’ll ever see that again
The thing is that the USA has launched a four front war on the price gasoline. We’re only in the 2-3 year of the war. This war grows out of the culture of the USA and not from any federal policy.
Here are the four fronts.
1.) Fracking oil increases supply. And dramtically so. Because the USA this year and for each of the next five years is expected to increase oil production by 1 million barrels@day.
2.) Fracking increases natural gas production and collapses prices causing buses and trucks to be shifted over to natural gas. This is the TB Pickens plan in action. This is about a seven year program. But once most fleet vehicles are shifted over to natural gas — fully 40% of the demand for oil will be taken out of the USA market. This is huge.
3.) Fuel efficiency. Car are required by law to become more fuel efficient. This is actually happening but slowly over time. My GM gets 20 miles to the gallon which is roughly twice the milage of a GM of 20 years ago.
4.)Electric cars. This is a category killer for the internal combustion engine. But it won’t really take a bite out of demand for another10-15 years. However, the success of the Tesla is already forcing the major car manufacturers to put more money into advancing the technology. Just as TB Pickens is building natural gas stations all over the country—so also is Tesla building electric car battery stations all over the country. The big break through for Tesla was that their car batteries could do over 200 miles before they had to be recharged. this made them suitable for local driving. (All the other electric cars maxed out at 100 miles.) The next big milestone for Tesla is 2016 to see if they can bring out a 30k car with the same specs as their S class.
Biofuels —beyond ethanol—may never be ready for primetime but I’ve seen a couple that look like they might in another couple years. We’ll see.
The net effect of these technologies is that the price of fuel over the next several decades is DOWN.
One of the best cars ever made. A classic!
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