When the founding fathers declared our independence, they could not have imagined that, 234 years later, our nation would be so spectacularly dependent on a market dominated by countries fundamentally hostile to America, some implicitly and some explicitly, for something so critical for the functioning of our society: transportation fuel.
Even with somewhat depressed oil prices, since last year’s 4th of July, OPEC, the oil cartel dominated by countries like Saudi Arabia, Iran, and Venezuela which altogether sits on 78% of world oil reserves, took in more than half a trillion dollars for its oil exports, while the economies of net oil consuming countries like the US bled. Money that could have stayed in the US creating jobs and investment opportunities instead filled the coffers of some of our worst enemies.
Our response to the BP spill could worsen our vulnerability.
No matter where one stands on offshore drilling, the oil wells of the Gulf of Mexico contribute nearly one quarter of U.S. oil production. So assuming we don’t implement swift austerity measures to reduce the amount of oil we consume, something that would shatter any hope for economic recovery, a moratorium on offshore drilling such as the Obama administration is calling for will essentially cause the US to increase its imports from the Middle East and send more dollars to unfriendly countries.
Furthermore, such a moratorium will not only drive operators of drilling ships and rigs which are on very high demand to foreign countries, but it could be the biggest gift the US can give OPEC, which today produces less oil than it did four decades ago due to a deliberate strategy of constraining supply to drive prices up. Here is why: All of the world’s 15 largest oil fields, which together produce about one fifth of the world’s oil, belong to national oil companies; eleven of them belong to members of OPEC. Of those eleven, only one, the Saudi Safaniya field, is based offshore. For decades to come, most of OPEC’s oil will remain onshore, cheap to lift, and there is so much oil still locked under OPEC ground that in a recent speech in Washington Saudi King Abdullah said his country stopped exploration missions of new oil fields to save the wealth and pass it on to future generations.
Contrary to OPEC’s nationalized oil companies, international oil companies (IOCs) like BP, Chevron, Shell, Total or ExxonMobil are becoming increasingly dependent on offshore exploration in the Caspian Sea, along the coasts of west Africa and in the Gulf of Mexico to replenish their depleting oil reserves.
Therefore, a ban on offshore drilling would essentially give OPEC a competitive advantage over the IOCs, increasing even further the oil cartel’s ability to manipulate oil prices.
There is a lot of blame to go around and BP will be the first to bear the responsibility for the spill, but it would be sad if our punishment of BP would in fact be a reward for OPEC.
Americans love to hate Big Oil and bashing oil executives in Congressional hearings may be cathartic at a time of such frustrating environmental catastrophe as we witness in the Gulf. But before running BP and its sisters into the ground, let’s not forget that as long as oil has a virtual monopoly over transportation fuel – a monopoly that a smart energy policy would break by ensuring that new cars are platforms on which fuels can compete – weakening the IOCs will merely serve to strengthen OPEC.
COMMENTS
Please let us know if you're having issues with commenting.