Disinformation Age

Disinformation Age
OPEC lies, the SUV dies.
By Clifford D. May

The folks over at OPEC, the Organization of Petroleum Exporting Countries, must think we’re pretty stupid. The other day, Chakib Khelil, the current OPEC president, asserted that “the intrusion of bioethanol on the market” is responsible for 40 percent of recent increases in the price of oil.

Now how exactly would that work? How does growing sugarcane in Brazil or corn in Iowa push up the price of oil sucked from holes in the ground in Saudi Arabia, Iran and Venezuela? If we roasted the corn and put the sugar in coffee — instead of making it into alcohol fuels — would oil prices go up less?

And if mixing a little ethanol in with gasoline has caused much of oil’s latest price rise, does it follow that replacing oil entirely with alternative fuels would result in even higher oil prices? By that logic, if everyone switched from Coca Cola to Kool-Aid, the price of a bottle of Coke would go up rather than down. (And if you believe that, “drinking the Kool-Aid” might be an apt description for what you’ve been up to.)

They say we live in an Information Age but where energy is concerned it’s more like a Disinformation Age, thanks in no small measure to the money and clout wielded by OPEC — a cartel whose sole interest is to preserve petroleum’s near-monopoly of the transportation fuel market and keep the price of oil as high as possible.

Please note, too, Khelil’s term for competition: an “intrusion” on the market. Guess OPEC won’t be giving away any Milton Friedman Awards this year.

Perhaps Kheilil believes he can get away with blaming the global energy crisis on farmers because so much of the media embraced the earlier slander that ethanol production is causing hunger. In fact, of course, it’s the other way around: Rising oil prices have contributed to higher food prices because oil is used to cultivate crops, to fertilize crops, to transport crops, and to process agricultural products.

But doesn’t devoting farmland to fuel mean there is less land available for food production? Not to any significant extent because we live in a country where there is so much arable land that for years the government has been paying farmers not to farm all of it (lest too much food be produced and prices fall so low that farmers can’t make a decent living). Nor has agricultural science reached the limits of how much can be produced per acre.

What’s more, in other parts of the world — Latin America and Africa, for example — there are vast expanses of land that can be sown (excluding rain forests and critical habitat) — if farmers have the tools.

Brazil provides an example: Over the past 30 years, Brazilian farmers have greatly increased the amount of sugarcane they produce and the amount of alcohol fuel they derive from it. They now have more than enough sugar for the table, and they also are on track to displace half the country’s gasoline demand with ethanol — at $70 per barrel, according to Florida International University scholar George Philippidis. As you well know, oil today is about twice that expensive.

The reason is the dollar’s slide against the Brazilian currency (the real). Within Brazil, the price of a barrel of ethanol has not changed.

Brazil has gone from 80 percent foreign oil dependence to zero per cent dependence. Over the same period, the U.S. has gone from 30 percent dependence to over 60 percent. In addition, Brazil should soon derive 15 percent of its electricity by burning sugarcane waste.

A more plausible rap against ethanol: In the U.S., it receives government subsidies. But the research being done thanks to these subsidies is already giving rise to technologies that will allow fuel in the not-too-distant future to be made from crop residues, grasses, weeds, algae and perhaps plants bioengineered specifically for this purpose — and able to be grown on land unsuitable for food crops.

What’s more, do you really think oil is not subsidized? Former CIA director James Woolsey estimates that U.S. oil companies receive preferential tax treatment worth more than $250 billion a year — and that doesn’t include the military costs necessary to keep oil supplies flowing around the world. We do that because oil is a strategic commodity: Western economies can not function without it. That will be true until the day oil is forced to compete with a variety of alternative fuels.

But that day will be long in coming if OPEC has anything to say about it. And OPEC has a lot to say about it, including Chakib Khelil’s claim that the mere prospect of competition is driving the cost of oil up, rather than providing us with the only weapon that can drive it down. It’s a lie — a big, bold, and obvious lie. But OPEC figures we’re stupid enough to believe it.

— Clifford D. May, a former New York Times foreign correspondent, is president of the Foundation for Defense of Democracies, a policy institute focusing on terrorism.
— Clifford D. May, a former New York Times foreign correspondent, is the president of the Foundation for Defense of Democracies , a policy institute focusing on terrorism.

“What’s more, do you really think oil is not subsidized? Former CIA director James Woolsey estimates that U.S. oil companies receive preferential tax treatment worth more than $250 billion a year — and that doesn’t include the military costs necessary to keep oil supplies flowing around the world. We do that because oil is a strategic commodity: Western economies can not function without it. That will be true until the day oil is forced to compete with a variety of alternative fuels.”

All you pretend free marketers jump in here and tell this dude how wrong he is. You’ve been telling us since the early 1980s that the magic of the free market would solve all our energy problems. Of course, it was and is necessary to pretend that the world market for crude is a free market, which it isn’t and has never been.

What, the US armed forces have been and are necessary to keep the pretend free market in crude functioning? Talk about government intervention (which pretend free marketers will not tolerate!), there you have the ultimate government intervention in the international crude pretend free market.

Today, we have the pretend free market price for crude oil and gasoline. Maybe it’s time so many stopped pretending that an anything but free market actually is a free market. It’s past time the USA set a goal for domestic crude production, and then opened up all promising area for exploration and drilling, AND PRODUCTION. And, NO, we cannot leave it to the oil companies to decide how much to produce and when to produce it. We can subsidize (for a fraction of the inflated cost we are now paying for crude) any idle capacity expense companies incur. When the USA develops an excess capacity for crude production, then we will have leverage and not be at the mercy of governments and peoples that do not wish us well.

After years of mindless babble about how energy supplies are a matter of national security, it’s long past time (about 30 years past time) we acted like we mean that and adopted a national energy policy that sets goals for domestic production of crude, and implements policies to reach those goals. And, also, incentives for the development of alternatives.

Time to stop pretending a free market exists where it doesn’t, and never has except possibly when the US did produce most all of its own energy, and it’s time to start setting goals for domestic crude production and working toward them.

Here is the problem. If we were truly “running out of oil” then we would have to develop alternative energy sources. Whatever the reason one wishes to believe as the “raison du jour” for the price of oil (my favorite is stoopid Dem politicians limiting our own access to our own resources) the realtiy is we HAVE 500 years more of oil. The Arabs have already shown that once we begin to invest in developing our own resources they will just as arbitrarily as they rasied prices drop them. Ask anyone over 40 that lives anywhere near Rifle, Colorado. So the oil companies are hesitant to clamor for more drilling because they know that as soon as we begin to invest in it the ragheads will drop the price and make the investment worthless. The politicians won’t clamor for it for whatever obscure reasons they are telling each other lately (green reasons of environment or contributions). The only people asking for “Drill here, Drill now” are us folks and Washington is pretty experienced at not really giving a damn about what we think. I would bet on gas at 6 bucks a gal. by next summer.

“I would bet on gas at 6 bucks a gal. by next summer.”

Well, you must believe that the scenario is going to play out a while longer until the Arabs stop new US investment by lowering oil prices again, as they did during the 1980s.

But I agree, we could well see a rerun of the 1970s - 1980s. But if anyone is serious when they say that energy supply is a matter of national security, then we will no longer sit around and wait for scenarios to play out, but will take charge and open all promising areas to drilling, and set a goal of being able to produce ___ million barrels per day, or a much higher percentage of our daily crude usage, as well as providing incentives for developing alternatives. And we don’t let oil companies decide how much of new reserves to put into production.

I believe energy is a matter of national security, and if we don’t forget the old political arguments and actually make it a matter of national security, then we’ll screw around and do nothing to improve the situation as before.

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