Posted on 10/14/2014 7:45:55 AM PDT by LRoggy
I know. We are the side that preaches free markets.
But not all markets are truly free anyway.
And this is one time when a substantial national interest needs to be protected.
I’m talking about our incredibly productive domestic energy industry that is on the path to making our oil self-sufficiency a reachable goal, at least if we look at it as North America.
Except there is one player out there that is desperate to kill the baby in the crib.
And in this instance, it’s not the Obama Administration.
Yeah, I know. They’re probably creaming at the possibility that domestic energy supplies of the carbon type are hurting, but so will their green energy friends if oil stays this low for long. No, the enemy in this instance is thousands of miles away and is probably our sleaziest so-called ally.
Yes, the Saudis.
Our so-called friend in the Middle East who also funded Al-Qaeda when we weren’t looking. And so many other wonderful ways they try to ‘play both sides of the street’.
Anyone who is following the recent stock market performances of the domestic energy producers is aware of the damage the Saudi decision to keep pumping supply into the world market, combined with our Administration’s foot-dragging that would allow us to utilize our domestic gift from heaven (imagine how much more effective our energy policy would have been if we spent the Solyndra money, for one example, on converting our trucks to natural gas and help build out our national infrastructure of natural gas filling stations!).
So, time for payback! Time to accomplish two big goals. Put the Saudis in their place and ensure that the cash flow necessary to invest in the future of our domestic supplies, which is not nearly as much of a given at $75 as it is at $95.
Yes, it will not help the consumer. But frankly, after paying nearly $4 per gallon on average for so long at the pump if we ‘only’ fall to $3.50 we can make do. But in the long run it gives us time to convert more and more of our domestic energy for OUR use.
So, Congress and the Administration need to agree on the following:
Starting October 15th, the import price of oil to this country from the Middle East only will be at $95 per barrel. The mechanism for this is that a floating tariff on Middle East oil will be in place. If the cost at the futures market is $80 on purchase the $15 rate is added to it. That money will be used SOLELY on domestic energy infrastructure projects, like the natural gas trucking conversion I mentioned above. Once the market rate goes back over $95 the tariff disappears.
I know this is a tough pill for all of us to swallow philosophically, but this is one time we NEED TO GO TO ECONOMIC WAR on the area of the world that seems to think their birthright is to screw up the rest of the world.
No more.
Time to finally put the Saudis in their place.
We should have done this in 1970’s when the synthetic fuel R&D was shut down by OPEC. Oil price was reduced and synfuels was not cost effective. Of course there was a few political issues involved too. Maybe some in the criminal class were paid off?
I am not against tariffs in principle, but oil tariffs won’t do anything as oil is such a fungible commodity. Even if the Middle Eastern states don’t launder the oil through third parties, Red China and the perfidious European states will happily buy the stuff.
No, we crank up the output (and go to natural gas where it makes sense), and that will lower the price. We can only do so much, as it costs us (and the Canadians) more to get oil than it does the Saudis, but we have come a long way DESPITE hostile policy from the administration (ANWR, Keystone).
Remember when Sarah Palin said “Drill, baby drill”, and the lefties said it would take five years for that to accomplish anything? If we took her advice, we’d be reaping the benefits now.
I’m not really sure we could identify ‘saudi’ oil. Lets face it, somebody in this world is filtering ‘ISIS’ oil through a black market, and it makes it to market under a different flag. And in the Late 1990’s, embargoed Iraq still sold a lot of oil.
But even if we could, tariffs usually cut both ways...and ultimately money is taken out of the pockets of consumers, and put into the hands of governments. Generally its a bad idea.
Now, I acknowledge that OPEC disrupts the market and, as with any commodity, tariffs should be on the table as a response. But in this case, I think the other OPEC nations will cry uncle first, and they won’t be able to keep their price fixing held together.
I read somewhere yesterday that $60 oil was the break even for modern US production. Will we go back to $27 oil and kill off an industry? I have long thought the Saudis would try, and it looks like they are making a run at it. However, I have a suspicion that $27 oil is not even technically possible. The dollar has been de-valued. And, the Saudis are having to invest in new and deeper wells - the shallow stuff is running dry.
Finally, the Saudis have a whole lot of internal problems. The only reason there isn’t an ISIS flag flying over Saudi, with the royal family’s head on a stick is money...street money. The royals have to keep handing it out - and they need oil revenue to do it. Are they in a position to quadruple production to break even at a 75% price cut...risking revolution if they fail? I doubt it.
In general that would be right, but in the short term there was a LOT of debt issued to finance the drilling and the cash flow needed to service it and the continued infrastructure investments requires a higher price in the short term. Oil isn’t as fungible as it used to be and tracking the source is not as hard as it once was.
The financial structure of many of our domestic producers required high debt levels, we can’t let that possible credit issue cause implosion before the market and those companies mature financially.
Let the Saudis do whatever they like with their oil. Let them drain their al-Qaeda supporting treasuries and subsidize American consumers as long as they like. That will boost our economy but cost our domestic oil companies some profits. So be it. The oil companies will survive and consumers will have a little extra money in their pocket.
The Saudis are not going to let this ploy run forever. Right now we should call their bluff and just take their foolishly spent money as long as it is offered.
Very true. Liberals frequently talk about how it takes years to get oil fields up and running. Well, if we would actually develop these oil fields, then 5 years later, they would be pumping oil.
And why have we taken 5+ years to study the keystone pipeline? Why does it take so long to study a project? Why won’t Obama make a decision, one way or the other? I’ve heard Canada may abandon the joint Canadian/US project and build a pipeline just on Canadian land, and export the oil to China instead.
Sure the debt levels are high...but its self inflicted. Instead of tariffs, why don’t we make it cheaper to produce domestic oil and beat the Saudis at their own game?
Example - remember the Deepwater Horizon that had the oil spill? Why do you think this rig (and others) are so far out and in such deep water? Why don’t we use more of the much cheaper jack up type rigs? Well, the answer is the entire state of Florida (and perhaps Alabama) have restricted shallow water drilling off their coasts. With the swipe of a pen, these artificial restrictions could be removed...and we could delay going down the dark tariff road.
And remember ANWR? Every time it comes up, we are told it will take ‘ten years’ to get any oil out of it. In fact, I remember hearing that...10 years ago. Another swipe of a pen, and a relatively cheap US oil source opens up...again helping us beat the Saudis at their own game.
Then there’s all the federal land where oil could be taken from...again one signature opens it up.
I don’t like the idea of simultaneously stunting the growth of our own energy industry, while putting tariffs on imports. Energy = money = energy. That tariff would effectively prop of the price of just about every product that uses energy to be manufactured or shipped - including products we export, and actually harming us industry/farming.
Free trade in crude oil is in the interests of USA ...
http://in.reuters.com/article/2014/09/30/oil-usa-exports-kemp-idINL6N0RV32C20140930
You will NEVER be able to produce cheaper than the Saudis can, no matter what we do. Their marginal cost is hilariously small. That’s why they are so able to swing the market. Oil transportation there is cheap and the geography made drilling much cheaper there too. We can’t compete with that no matter what we do.
And I remember ANWR in the 80’s. I used the same argument. As for self-inflicted, you can’t SELL that much equity to finance this, debt WAS NECESSARY. That part of your argument is just silly. It’s just as much a national interest as it is a corporate one.
I like your idea a lot, but...
...since we are fighting a war right now against Jihadis who have a lot of oil, why not just bomb the Jihadis’ refineries, storage tanks, pipelines and individual wells?
Obama’s policy of bombimg a tank one day, bombimg a truck the next day and bombing a jeep the day after that is clearly NOT working.
That bombing will reduce — if not cut off completely — the “cash” the Jihadis use to pay THEIR foot-soldiers.
And, it will probably keep the price of oil “up” as a bonus “feature”.
I’m sure some of the bed-wetters in Washington will whine about how such economically-targetted bombing would “hurt” the “people” that are now trapped behind enemy lines.
Too bad!
Once those people figure out that they need to run away from areas controlled by ISIS, they will cease being “human shields” for the Jihadis.
Then, we can deploy our “Daisy-Cutter” bombs and bring the bizarre chapter of ISIS to a close, marked by piles of rubble.
THEN, we shall see how eager the Saudis are to use their cheap oil as a weapon against us,
You are probably essentially correct in your premise but it won’t happen. If it does the need will have passed. This country is non-functional.
The best thing would be to completely divorce ourselves from the Middle East. It is, has been and will be a bottomless pit of problems.
Oh, you mean the guys who paid for Wahabbi madrassas to radicalize Muslim children all over the world? Those Saudis?
Naah, they're our FRIENDS.
It is a correct approach.
They would cut production until the market price reached $95...
I agree with this..it is a matter of national security.
Necessity is the mother of invention...we put a man on the moon, we can do without Arab oil.
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