Posted on 03/20/2008 11:16:35 AM PDT by Uncledave
By GAL LUFT luft@iags.org
By now it is abundantly clear that the U.S. economy is in dire straits. What should also be clear is that the path to economic recovery will be compromised as long as America is dependent on imported oil to the degree that it is while oil continues to hover over $100 a barrel.
At current oil prices, this country sends overseas $460 billion per year to finance the daily buying of 12 million barrels of imported oil. This amount of money is about the size of our defense budget and three times the size of the ''economic stimulus'' package recently passed by Congress. But the real economic impact of oil dependence is hidden to most Americans. Energy economist Milton Copulos (who passed away this month) calculated last year that the grand total of all external costs associated with foreign oil dependence -- including the cost of oil-related defense expenditures, amortized cost of supply disruptions, and lost economic activity and tax revenues -- stands at $825 billion per year.
A double whammy
To put the figure in perspective, this is equivalent to adding $8.35 to the price of a gallon of gasoline refined from Persian Gulf oil, making the cost of filling the gasoline tank of a sedan $214, and of an SUV $321. At today's oil prices, these costs would be even higher.
For the U.S. economy, oil dependence is a double whammy. While it contributes to our economic decline, it allows OPEC governments, many of which do not have our best interests in mind, not only to laugh all the way to the bank but to literally own the bank. The recent buyout by foreign governments of chunks of America's prime symbols of economic prowess -- like Citigroup, Merrill Lynch, Morgan Stanley, Blackstone Group and Bear Stearns -- is only the preview to what is yet to come should the petrodollar fueled transfer of wealth continue.
To understand the forces at play it is instructive to visualize the scale of OPEC's potential wealth in comparison to that of the consuming countries. At $100 a barrel, OPEC's oil assets stand at roughly $92 trillion, equivalent to almost half of the world's total financial assets and nearly twice the market capitalization of all the companies traded in the world's 27 top stock markets. If one adds the worth of OPEC's huge gas reserves as well as additional oil reserves that have not yet been discovered, the wealth of OPEC more than doubles.
If oil prices climb to $200, as President Hugo Chávez of Venezuela recently warned, this wealth would double again. While the value of the dollar and the U.S. economy is shrinking, OPEC's monumental wealth enables its countries unprecedented buying power. As an illustration, at current oil prices it would take OPEC just six days to buy GM and three years to buy a 20 percent voting block in every S&P 500 company. It is hard to see how such buying power amassed by oil producers would not upset the West's economic and political sovereignty. At the current rate of investment, foreign governments are likely to be increasingly willing to translate their wealth into power, dictating business practices, vetoing deals, appointing officers sympathetic to their governments, dismissing those who are critical of them and imposing Islamic laws on Western corporations.
Since stopping foreign investors from providing cash infusions for big companies in distress is not an option, the only way to stop the bleeding is for the United States and other major consumers to break the strategic stronghold of oil over our transportation system. Congressional leaders can start doing so by mandating that every new car sold in the United States is capable of running on -- in addition to gasoline -- nonpetroleum fuels like alcohols, coal-based fuels and electricity made from domestic resources.
Terrible choice
To make a car flex-fuel so it can run on any combination of gasoline and alcohol would cost an automaker an extra $100 -- the cost of one barrel of oil. If each passenger car and truck sold in America were flex fuel, the cost to automakers would be less than the $30 billion the Fed forked over last weekend to salvage Bear Stearns' riskiest assets.
The United States is essentially facing a terrible choice between a financial meltdown and a metastasizing sovereignty loss, political decline and eventual enslavement to OPEC and its whims. It's past time for Congress to recognize that the solution to our economic predicament lies in our garage.
Gal Luft is executive director of the Institute for the Analysis of Global Security and co-chair of the Set America Free Coalition.
That's my starting list..
No policy. No progress. No WH Leadership. We have had an oil man in the WH for 7 years+ ... so where's the oil policy? We gotta get the basics straight. Domestic Oil, Nuclear and Coal are the energy tripod we need in place now ... and we don't have. Now it will take another 5-10 years. Hopefully by the time a sane program is in place, our GNP will not be the same as Liberia's.
The reason we went to to foreign oil in the frst place was cost ... not domestic shortages ... and then because of the cheapness of the foreign stuff, we didn't develop new sources here.
We need a leader who will shoot a Democrat a day until domestic production and refining are at a point where we can use them to at least temper world oil prices. A FIVE_YEAR PLAN.
You want to stop the money going to Arabia simple. Drill in the straits of Cuba and Florida before the Chinese due it for Castro. Drill in Anwar The Alaskans need the tax money big time. Are you tree huggers so stupid that you cut off your hands to spite your face. We need US oil wells and US Refineries. With our knowledge we could build them safe and sound. All this renewable energy is clap trap pure and simple. If its so great than great take the govt subsidies away from it and it implodes as to what it really is CLAPTRAP from the Tree Huggers who lie worse than Washington does.......While your at it take our Governor Sunshine sam and make him Secretary of The Dept of Stupidity!. Thats where him and Nancy Perlosi and HildaBeast belong! You want a comparison of parties watch carefully Louisiana Democratic State Wilma left 7 years ago. Rebuilding when? Florida Same Hurricane same problems except no levees. Back up and running 72 hours after the Cane. Louisiana let people die in Nursing Homes Florida Called The WVa ANG and flew out the Nursing Home Pt's . Lets see any more questions?
We could deport all of the Democrats, and then our problem would be solved.
Yeah, I knew that, even as I posted it...but there’s no reason for any oil be used for power generation.
I saw an article that grouped heating and power generation together te other day.
Gal Luft is an idiot. Ethanol is part of the problem, not the solution. The only practical solution at this time that is more than marginal is nuclear power, although certainly we should work toward greater fuel efficiency as well.
The problem, of course, is that the Saudis now seem to own all of our politicians, ambassadors, and the whole State Department. Plus the middle eastern departments in our top universities. All bought and paid for with our gas money. Our political leaders are only too happy to work with misguided idiot greenies to keep us dependent on Arab oil.
We just gave the Palestinians a big infusion of cash to subidize their terrorism. Now, why did we do that? Could it be because those responsible have been bought and paid for by the Saudis? Maybe some sheikh told Bush or Cheney, “Give our Palestinian friends some money, and we’ll return the favor by lowering the price of gas by half a cent at your pumps.”
Not even residual oil and petroleum coke that already have had the gasoline, diesel and other lighter product removed from it?
ANWR is federal land, therefor Alaska would receive no royalty payments for it. If it were Alaska State land like Prudhoe Bay, the oil would have been flowing decades ago.
Delete “any” from my post.
Does it matter where it comes from? Oil is a commodity sold on the market, wouldn't it just get exported for higher profit? Petroleum stocks are up, oil imports are down and refineries are slowing production. That tells me there is no shortage and prices are being kept high in the market. Seems that we would have to nationalize the oil industry to directly control the oil and force prices down because I doubt they'll shoot themselves in the bottom line.
Interesting thoughts. And consider that increased production will lead to lower prices and increased worldwide consumption will happily absorb that.
I’ll all for drilling in the US, but we’ve got to start moving away from oil that’s pumped out of the ground. A more electricity-based transportation system is the key: electrified rail, plug-in cars for short haul suburban/urban use, electricity-to-H2, etc.
No policy. No progress. No WH Leadership. We have had an oil man in the WH for 7 years+ ... so where’s the oil policy?
Mind-boggling, isn’t it? He’s pushing hydrogen. :P
Why do you think the US would not pay market rates? As long as we pay close to market rates it will cost more to transport it elsewhere.
Petroleum stocks are up
Not compared to consumption, compare days of supply instead of just barrels.
U.S. Crude Oil excluding SPR Days of Supply
http://tonto.eia.doe.gov/dnav/pet/hist/w_epc0_vsd_nus_daysw.htm
U.S. Total Gasoline Days of Supply
http://tonto.eia.doe.gov/dnav/pet/hist/w_epm0_vsd_nus_daysw.htm
U.S. Total Distillate Days of Supply
http://tonto.eia.doe.gov/dnav/pet/hist/w_epd0_vsd_nus_daysw.htm
oil imports are down
No, they are not.
U.S. Weekly Crude Oil Imports Excluding SPR
http://tonto.eia.doe.gov/dnav/pet/hist/wceimus24.htm
and refineries are slowing production
Every Spring there is a reduction in refinery production as we transition from winter fuels to summer fuels. That is part of the reason for the high gasoline stocks in preparation for the downtime.
That tells me there is no shortage and prices are being kept high in the market.
Oil is a global commodity, we use less than a quarter of it. Oil prices are up all over the world.
Seems that we would have to nationalize the oil industry to directly control the oil
Since most of the oil we consume is produced OUTSIDE the US, just how do you think we are going to get more oil that way?
I doubt they'll shoot themselves in the bottom line
Uhm, nationalizing the companies means bottom line no longer has meaning because it is no longer privately owned, but controlled by the government. You believe government operates more economically than private business?
Dunno..........good points .
There is not a viable realistic alternative that we can choose from for day too day needs. We have to have fuel for our vehicles. But when said market maintains such a profit margin for something that we NEED, HAVE to have ! I say set controls and export limits.
For folks that work at home or live within walking distance of work this is only an issue when they the consumer have the increased costs of manufacturing and transportation etc passed to them as end users.
Add my need to drive almost 100 miles per day too and from work and all I get too choose to drive down price or needs are items I do not need. No I won’t buy a new this or that trinket or new electronics or add on too the home as we can make due with what we have. We need fuel. We need cheap energy. We conserve due price. Cost too us !
I see no relief until we stop the export, rid ourselves of these ridiculous energy taxes and use what we have for America first.
I have ideas, good or bad yet hate too see the goobermint step in and control ANYTHING !
Seriously considering starting a Bio Diesel Club !
Meet one weekend a month to make our own fuel.....I get an average 23 mpg in my truck.
The link is of a man who accidentally stumbled upon the separation and ignition of hydrogen molecules from saltwater utilizing low powered radio frequencies.
We have the technology now to produce hydrogen vehicles.
There is no need to keep debating OIL. Sure, there are hurdles that must be overcome, but America can do it.
We have vehicles that already have fuel cell technology, why not begin creating infrastructure and vehicles that burn this cheap, limitless energy source.
Nuclear power:
1.) The Simpsons cartoon show—not a PBS documentary.
2.) We harnessed it 60 years ago.
3.) Even the French can do it.
Or we can keep looking forward to the next OPEC—BO,HICA!
If you haven't noticed, oil prices have been falling this week.
If you are interested in the longer term pricing, like how we got above $80 dollar a barrel, then you should compare over the time frame that occurred.
As for the source, you will notice the source of the data in the article is the EIA, the data source I linked.
If you haven't noticed, oil prices have been falling this week.
If you are interested in the longer term pricing, like how we got above $80 dollar a barrel, then you should compare over the time frame that occurred.
As for the source, you will notice the source of the data in the article is the EIA, the data source I linked.
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