Posted on 06/21/2018 1:17:22 PM PDT by Kaslin
This week’s OPEC meeting reveals once again that the market for oil is controlled by nations that collude to manipulate oil prices.
For the U.S. to achieve energy dominance and achieve its policy objectives both home and abroad, Washington must take action to address American vulnerability to the actions of OPEC and Russia. These countries control 90 percent of global oil reserves and use this outsized advantage to influence the price of oil by manipulating production levels to suit their own political needs.
But the relationship is complex and requires a thoughtful assessment of the threat. An Energy Security Commission, similar to the one established by the Trump administration to examine rare earth minerals, should be established immediately to ensure the energy dominance agenda addresses this critical vulnerability. Oil is the lifeblood of the American economy. Consider the following, the U.S. consumes one-fifth of daily global supply, and the country’s transportation sector relies on petroleum for 92 percent of its energy. This dependence exposes U.S. business and consumers to a volatile and unfree oil market, vulnerable to the decisions OPEC and other petrostates make on production levels.
The risk posed by OPEC to our country was most clearly seen in 2014, when the Saudi-led cartel purposefully flooded the market with additional oil to drive down prices and hurt U.S. shale oil producers. From June 2014 to February 2016, the price of oil tumbled from $110 per barrel to just $26. The effects on the domestic energy industry were debilitating, with 310 U.S. oil and gas companies entering bankruptcy since 2015, taking approximately 200,000 jobs with them.
Despite the shale industry recovering, the loss of jobs and investment returns continues to haunt U.S. oil producers as they make investment decisions today. There has also been a profound impact on long-term deepwater oil projects—Rystad Energy calculates a decline of $180 billion in global deepwater investment from 2014-2018, with U.S. offshore investments tumbling 65 percent.
American oil dependence also reorders U.S. foreign policy priorities and costs U.S. taxpayers. The Pentagon spends $67.5 billion every year on keeping global supply lines open to ensure the worldwide free flow of oil, placing our military in harm’s way in the process.
Rising gasoline prices affect policies both home and abroad. Higher pump prices eat into household budgets, and could erase all the consumer gains from the president’s recent tax cuts. Price manipulation also compromises U.S. action overseas, with petroleum costs a tension point in both Iranian nuclear negotiations and Venezuelan sanctions, for example.
Compounding this problem, the U.S. unwittingly funds these governments’ objectives by importing their oil. Since 2001, it is estimated that the total net U.S. trade deficit in petroleum is $3.4 trillion. By comparison, the U.S. net trade deficit with China since 2001 is $4.3 trillion.
The U.S. should hold foreign governments accountable for manipulating oil markets and, once and for all, allow a free market for the most important commodity traded in the world. Creating an Energy Security Commission, either congressionally or through Executive Branch action, would provide lawmakers with actionable policy options for specifically addressing the influence of OPEC member countries and other petrostates.
An Energy Security Commission would help forge a cohesive federal-level response to foreign governments that manipulate oil production at U.S. expense. The Commission would investigate the influence OPEC and others have over the global oil market, assess current American efforts to mitigate these effects, and propose a range of solutions—diplomatic, legal, trade, regulatory and statutory—to President Trump and Congress.
Now is the time to confront the destructive influence of petrostates on U.S. energy security and finally start working toward true energy dominance.
There, fixed it.
We don’t need you stinkin oil, we have plenty here...
And your well capacity is dropping off, paper tiger alert
We are ramping up domestic production at an impressive rate.
We are the world’s largest producer of Oil and Gas (combined), the world’s single largest producer of natural gas since 2009, and are on track to becoming the World’s single largest producer of oil this Fall (we started the year in third place, behind Russia and Saudi Arabia).
The huge offshore and Arctic reserves that the Trump Administration recently opened for development will take years to lease out and get into production, but they will produce for decades after that.
More “cowboyz ‘n indianz” BS about “threats”.
Its opportunity. NO more than 15-17 countries produce significant amounts oil. Imagine an OPEC led by the USA of all producers-bound together ONLY with the USD as the trading currency for all petroleum products-and the producing countries sharing in the “exorbitant privilege” of the USD-being able to issue USD denominated debt.
The total population of those 15-17 petroleum product producing countries does not exceed 750 million people-as opposed to the world of 7.5 billion.
United the energy producers lead the world. And yes the 20th century “Muh Russia” cretins will have to give up their Dr.Strangelove fantasies as the USA partners with Russia.And with Iran. And with Libya. And with Iraq.
and oh BTW -goodbye to the 500 year old central banking system with that.
IIRC the Department of Energy was created to ensure our energy independence and security. It has never done so. And I don't for a moment believe another federal monster would do so.
I’d like to add a few things to your excellent and accurate points. It’s true Saudi Arabia and OPEC tried to kill American Fraking. They failed. Utterly. Yes, we had the highest cost producers go under and some had to default on their high-yield bonds, but the defaults weren’t so bad that it caused a lot of problems for our nation and lower cost, deep pocket producers snapped up the assets at pennies on the dollar. All of a sudden $50 was the new $70 per barrel. Meanwhile, the Gulf nations who can pull oil cheaply out of the ground, had massive society costs built on oil profits and were not able to continue the battle. They burned through their reserves of cash and had to call it quits. They lost. Now, when they collude and conspire to raise the price of oil our producers make more money and expand their operations to put a lid on the cost. Even worse for them, fracking is going global. Add to that America’s growing independence and it sucks to be them.
I think this article is kinda useless. It decries lower world prices for petroleum, but then it talks about the dangers posed by higher prices. Sorta hard for me to see how BOTH conditions could be problems caused by OPEC, occurring apparently at more-or-less the same time.
Anyway, what’s the author’s solution for this Hydra-headed double non-dilemma?
Establish a new government commission — the general purpose way to solve all looming problems!
(Well, at least he didn’t say, “More research is needed.”)
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