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.
I don’t think you’re understanding of what the Saudis have to accomplish. Every dollar in reduced US production cost puts more pressure on the Saudis and reduces the margin they have to play with to play these games...holds true even if their production costs were $0.01 a barrel.
Also, other OPEC nations have a higher production cost than the Saudis...so their margin to play games with is even smaller, and would be more dramatically affected if we reduced US costs.
You haven’t addressed the predictable negative impact such a tariff would have on US exports (which require energy to produce).
And since my arguments are ‘silly’, I presume you are of the opinion that reducing US oil production costs, by eliminating artificial government interference, is ‘silly’. We disagree on that point.
“They would cut production until the market price reached $95...”
I hope so . . . less money for them and our industry gets protected until it can stand on it’s own.
The only part of your argument I find silly is the claim of self-induced on the debt financing. You can’t finance all this investment in drilling without a LOT of it. Allowing the market to crush some companies because the Saudis play games is not a free market responding to too much debt.
As for the exports, the exporters that are benefiting the most are moving to natural gas run factories, which are not affected by the tariff. And those that want to keep running on oil will have even more incentive to source from here, at a fixed rate contract if necessary.
Who cares if the factory runs on natural gas?
The vast majority of trucks, planes, and ships that move raw materials and finished products will continue to run on oil.
The same is true for one of our largest exports - AG products. One of their biggest input costs is fuel.
And then there’s those industries that use oil as an actual raw material - asphalt, shingles, just about anything made out of plastic. It all goes up.
Its difficult to come up with an industry that would be untouched by a fuel tariff. And using your math, you are proposing that US producers (of practically everything) pay 19% more for energy than their competitors.
And you poo-poo any suggestion to reduce our own energy productions costs?
And once again, where does this 19% go? Government. Every transaction will suck money out of the private sector and put it in the wasteland of government funds.
I’d bet that if I took a gander at the numbers, I would discover that the oil sector is one of the most robust, successful, and growing sectors in our economy. And you want to put a 19% tariff on every other sector...to protect the oil sector?
And I’m the silly one...
US oil production is at 30 year highs thanks to the shale revolution. Not sure anything is wrong with the industry.
I agree, except it should be a general tax on imported oil with a waiver for Canadian and Mexican oil, oil from North America in other words.
Combine that tax on imported oil with a shift to a flat tax reducing the current IRS to a stub.
Several years ago I suggested the exact same thing, and of course was lambasted on FR. I fully agree with you 1000%.
Flood us with cheap oil? We can flood Israel with cheap munitions.
Except cost.
New shale wells in the Bakken have a $78 per barrel break even.
And, they are 90% depleted after two years.
That creates the perpetual necessity to drill in areas that are more and more expensive and less and less productive.
Even with the best technology in the world, it is likely that the break even cost of producing oil and natural gas in the USA will never go down, and, most likely, will continue to go up.
I got back a nice form letter from that George HW Bush gentleman thanking me for my interest in farm policy (I guess they scanned the zip code, anyway).
Haven't thought much of the Bush clan since, less of our 'energy policy'.
Pipeline pumping stations aren't exactly hardened targets. A few jdams and they can't get the oil to market.
Punishing the buyers for the bad decisions of the government won’t fix the problem. If you want us to rely more on domestic oil get the government out of the way.
If you want cheaper fuel, do away with the ethanol requirement.
Keep in mind this more heavily affects Russia, whose export balance sheet is almost completely dependent on energy prices.
Doesn’t that help the Russians? Doesn’t it inflate the price of a BBL of oil to the levels they need to stabilize the Ruble?
Flooding the market with cheap crude would do the same thing as a tariff, wouldn’t it?
Just asking. I don’t know. I agree not building pipelines is concrete stupidity. Obama’s a muzzie. An Iranian has her hand in his back. His CIA head is a muzzie.
We are a muslim country embroiled in local ME politics, when we should be wiping out everyone in the oil market with cheap crude - including the Mexicans.
Which is why producing more and more in a situation in which there is already an oversupply is bad economic math...
I heard the same $80 break even cost from an oil industry expert at a conference last month. The decline in WTI price has him concerned.
You completely missed the point.
A tariff only on Middle Eastern oil to allow our domestic supplies to be built and the necessary infrastructure put in place. ONLY on Middle eastern imports.
The government is NOT in the way to the extent that they are keeping prices high, they are in the way as far as keeping the infrastructure here from getting built.
But price competition is NOT why we aren’t building our domestic supply. Government interference, including outright bans on developing certain reserves, are what’s doing it. It doesn’t matter how expensive you make ME oil as long as our government stands against domestic oil we will not build the infrastructure.
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