Posted on 04/21/2018 5:40:06 AM PDT by Kaslin
President Trump, in a recent tweet, has drawn attention to a pernicious threat against American interests that has persisted for decades: The Organization of the Petroleum Exporting Countries (OPEC) and its alliance with other petrostates as they seek to control the price and supply of oil.
With its stated goal of reducing the worlds oil glut in sight, the cartel and its unofficial members should have spent their meeting in Jeddah discussing an exit plan for this pact. However, with oil at three-year highs and rising, the group has moved the goalpost yet again, with discussions on extending the cuts even further as well as indefinite coordination on oil production with Russia.
Lets be clear: OPEC has wrapped its actions in rhetoric about stabilizing oil prices to help the global economy. Now that theyve institutionalized their cooperation with Russia and other statesexpanding the groups market share to include countries that represent 55 percent of daily supplyand whittled down excess oil inventories, they can go about their real agenda: Juicing the books for Saudi Aramcos pending IPO, and inflating government revenues to support everything from military spending to lavish lifestyles for their ruling elites. Is this how American motorists want to spend their money?
President Trump is right to say this market manipulation is unacceptable. Gasoline prices are also now at their highestin three years, and analysts see them wiping out the benefits of the presidents historic tax cuts as U.S. households will spend $400 more on average at the pump in 2018 alone. Endemic instability in key oil-producing regionsparticularly the Middle East and Venezuelacombined with the reduction of global crude oil inventories from 400 to 43 million barrels mean that there is little to insulate Americans from an oil price spike.
Oil dependence is a global problem, but Americans are disproportionately affected. Every year, the United States spends $67.5 billion to ensure the worldwide free flow of oil, as we assume the burden of patrolling oil supply lines and engaging in unstable oil producing regions. Even though this commodity is the lifeblood of the world economy, it is priced on an unfree global market subject to OPECs collusion. No matter how much oil we drill at home, we will always be vulnerable to the price spikes and slumps brought about through the actions of countries that dont share our democratic or free-market principles. As we know, an oil supply disruption anywhere impacts prices everywhere.
In addition to these geopolitical challenges, OPECs actions have a very real impact on household budgets. The last time Americans received tax cuts, the benefits were wiped out by oil price spikes. The cumulative impact of the Bush-era tax cuts from 2001 to 2008 increased household income by $1,900, yet household spending on gasoline increased by $2,000 in the same period. Similarly, in 2011, record gasoline prices cost American households an additional $104 billion compared to 2010, offsetting the $108 billion in additional take-home pay from the Obama-era payroll tax cut.
Will we let this happen again?Policy solutions are available, and President Trump can take clear and concrete steps to achieve his goal of energy dominance and mitigate our exposure to OPECs behavior. First, we must continue to develop more of our oil resources here at homethe President has already taken steps to achieve this objective. Second, Trumps EPA must maintain strong fuel economy standards, and use the current rulemaking period to strengthen and modernize fuel efficiency rules that have been effective in saving consumers money for decades. Third, we must encourage the adoption of alternative fuel vehicles running on diverse sources of domestic energy, including electricity, natural gas, and hydrogen. Finally, we must have an honest assessment of our ability to respond to OPECs actions to influence oil prices. President Trump can establish an OPEC commission that will investigate how the cartels actions undermine American interests and propose solutions to counter their influence.
Following these steps lays a clear path towards the energy dominance that Americans deserve.
>>>Oil dependence is a global problem, but Americans are disproportionately affected
I wonder if the president will call for tariffs on oil to promote national security, just like with steel and aluminum, to increase domestic production and lessen our dependence on Opec, Canada and Mexico.
Open up the whole country and surrounding waters to exploration. Throw our whole weight into the fight and break OPEC and Russia at the same time. Tell Pompeo to go to Saudi Arabia and explain to them that either they end OPEC or end our relationship with them. Simple proposition.
The oil tariff would be tied to the price of crude with $50.00/bbl as the baseline. As oil goes above $50.00/bbl the tariff would kick in. 1% tariff per $5.00 increase above the baseline price of crude.
The oil tariff would be tied to the price of crude with $50.00/bbl as the baseline. As oil goes above $50.00/bbl the tariff would kick in. 1% tariff per $5.00 increase above the baseline price of crude.
That would directly increase the price of fuel in the US and amplify the effect of exporters actions deleterious to the US economy. At least in the short run.But it would be the exact opposite of the Ted Kennedy approach of price control imposed on American production, combined with price controls designed to minimize the market impact of OPEC price increases. Under your proposal American society would increase its efforts to increase domestic supply (and I assume that would include Canadian and possibly Mexican supply), and to decrease demand.
I have myself thought that something like that could work, and could prevent foreign manipulations from even being attempted. But I have to report that thackney (if I recall the FReeper handle correctly) had a salient point. He noted that our refineries are optimized for heavier oil than the US fracking revolution produces. This means that our refineries best economic use is in refining imported oil.
We have the Strategic Petroleum Reserve on hand, at least some of it. What we need is a mechanism by which to incentivize American frackers to drill and frack wells and, rather than draining them as rapidly as possible to get their money back quickly, hold some of the product in the ground to function as a SUPER SPR. Enough to stabilize the price for long enough to ramp up drilling/fracking sufficient to stabilize price in the longer term.
That is probably all it would take to tame OPEC, because the Saudis tried once before to break the Frackers by driving the price down enough to bankrupt them, and it didnt work that well. We just need to make it easier for frackers to ramp up production quickly. And that includes the manpower problem. You cant just open a can and take out drill rig operators when you need them.
The military exists as a mechanism to limit abuses by foreign governments; maybe we need to recognize the extent to which fuel production has its own strategic benefits the country.
...I wonder if the president will call for tariffs on oil to promote national security, just like with steel and aluminum, to increase domestic production and lessen our dependence on Opec, Canada and Mexico....
Now thats really funny. Thank you
p
Let’s hope.
For later.
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