OPEC Strangling American Economy
By Robert Zubrin - (WaTimes)
As oil prices continue to top $120 a barrel, it is time for Congress to take definitive action to break the OPEC cartel, which is taxing the United States into a depression.
This year, with OPEC-rigged oil prices exceeding $120 a barrel, Americans will pay $1 trillion for their oil supply, and the world as a whole will pay $4 trillion. These petroleum costs are up more than a factor of 10 from what they were in 1999, and represent a huge highly regressive tax on the world economy. For Americans, the $1trillion oil levy is equivalent to a 40 percent increase in income taxes across the board — with 60 percent the sum being paid over in tribute to foreign governments.
Make no mistake: OPEC is responsible. This can be seen clearly by comparing OPEC and non-OPEC oil production since 1973, when the cartel’s governments took effective control of the Middle Eastern oil supplies away from the international oil companies. Since 1973, non-OPEC oil production has doubled, in tune with the doubling in size of the world economy over the same period. However, while OPEC has engaged in many wild, short-term production expansions and contractions to manipulate the market, overall OPEC production has barely increased over the past third of a century despite the fact that they are sitting on top of 80 percent of the world’s oil reserves — including all the most accessible oil reserves. This shows that they have had a long-term policy of limiting production in order to increases prices. As economic growth in China and India increases worldwide demand, the OPEC policy of strangling production is threatening to send the U.S. economy into a depression.
The OPEC policy of limiting production in the face of increasing demand is like that of a cruel dog-owner who puts a collar snugly around the neck of a young puppy, but then refuses to let it out as the dog matures. So as the dog grows, the collar gets tighter and tighter until it chokes to death. But it is not the growth of the dog that kills the dog; the culprit is the dog owner who refuses to let out the collar. This is what OPEC is now doing to the United States, the industrial world at large, and to the Third World — whose impoverished people can least afford to pay for overpriced oil.
Averaged over the U.S. population of 300 million people, the $ 1 trillion OPEC-induced burden levies a tribute amounting to $3,300 per head — for every man, woman and child in the country (or $13,200 for a family of four). The average American worker makes about $45,000 per year, or $35,000 after taxes paid to Uncle Sam. In 1999, a worker supporting a family of four had to pay 3 percent of his disposable income for oil. Now Uncle Saud and Uncle Hugo are taxing him for over 35 percent of his take-home pay. Is it any wonder that such people are not buying houses? Such a massive drain of cash from the pockets of consumers must perforce cause the real estate market to collapse — as well as affecting many other kinds of consumer goods.
And this is just the beginning. OPEC leaders, including Venezuela’s Hugo Chavez and Iran’s Mahmoud Ahmadinejad, are already openly discussing raising the price of oil to $200 a barrel or more. In that case, Americans’ oil tribute will rise to $1.8 trillion per year, paid to an evil cartel whose total worldwide extortions will cost the global economy more than $7 trillion. If we want to avoid complete economic defeat, we need to destroy the oil cartel.
In order to stop the OPEC looting of the U.S. and world economies, we need to break the cartel’s vertical monopoly by creating fuel choice on a global scale. Congress can make this happen with a stroke of the pen, by passing a law requiring that all new cars sold in the United States be flex-fuel vehicles that can run on any combination of gasoline, ethanol or methanol. The technology is readily available and it only costs about $100 per vehicle.
By making America a flex-fuel vehicle market, we will effectively make flex fuel the international standard, as all significant foreign car makers would be impelled to convert their lines over as well. Around the world, gasoline would be forced to compete at the pump against alcohol fuels made from any number of sources: This includes current commercial crops like corn and sugar; cellulosic ethanol made from crop residues and weeds; methanol, which can be made from any kind of biomass without exception as well as coal, natural gas, and recycled urban trash.
By creating such an open-source fuel market, we can enormously expand and diversify humanity’s fuel resource base. We will thus protect all nations from continued blackmail, robbery and — indeed, in some cases — starvation induced by the oil cartel.
Taxation without representation is tyranny.
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(Powerline)
The largest American oil company, Exxon Mobil, is only the 14th largest in the world, and is dwarfed by the really big oil companies–all owned by foreign governments or government-sponsored monopolies–that dominate the world’s oil supply. …
94% of the world’s oil supply locked up by foreign governments, most of which are hostile to the United States, the relatively puny American oil companies do not have access to enough crude oil to significantly affect the market and help bring prices down. …
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Good article, and what I think is a good solution at the end.
May 23rd, 2008 at 6:31 pmI was with him until the last couple of paragraphs… food in your gas tank is not a good thing, fer chrissake!
May 23rd, 2008 at 6:38 pmHow about we use some of our own frigging reserves? Iraq is coming on line now but we need more close to home. Mexico is in decline because they haven’t reinvested and Canada is giving it their all but their production capacity is hard to ramp up because of the type of extraction they have to do.
Get “plug-in” hybrids on the market and burn down the EPA with everyone in it and things will get better pretty quickly. The Tribes are building at least one new refinery on their land in the Dakotas or Montana because they can bypass the whole enviro-whacko issue. Every tribe with the land should follow suit. I know there are some that have access to costal Maine waters that could use the money…
I hear all this great talk about flex fuel vehicles with ethanol and methanol in there, which is all fine and dandy except for the fact that it’s a terrible idea. We could be producing Biobutanol from algae that wouldn’t even need to be mixed with gasoline to be used in a car…but I guess algae farmers’ lobbyists aren’t as good as corn farmers’ lobbyists to get federal subsidies. It’s such a no-brainer because we could be producing a fuel from a self-renewing, rapidly propagating fuel source that competes directly with gasoline and OPEC itself. Instead we’re using a fuel source that only propagates during certain times of the year and takes 400 pounds to make 25 gallons and can’t even be used by itself in a gasoline engine….jeez this makes me so mad!
May 23rd, 2008 at 6:59 pmIt’s the Dhimmis that are letting OPEC do it.
“As economic growth in China and India increases worldwide demand…”
Globalization was a grand idea eh?
” passing a law requiring that all new cars sold in the United States be flex-fuel vehicles…”
great idea. But why not threaten to fuck em all up if they don’t quit first. Then at least the libs will freak out and OK drilling everywhere.
May 23rd, 2008 at 7:02 pmLet me summarize the four policy points proposed by the Democrats:
1. Increase regulation on oil trading
2. Suspend filling the Strategic Petroleum Reserve
3. Focus on alternative energy
4. Implement a windfall profits tax
Let me summarize a vote to allow shale oil development in the U.S. for you:
1. A proposal to increase the supply of domestic oil and allowing states to benefit from that was rejected along political party lines.
2. Democrats view increasing the supply of oil as irrelevant to the price of gasoline.
Now, let me interpret that for you:
1. The government must rigidly control the actions of the marketplace
May 24th, 2008 at 5:17 am2. The government must rigidly control supply
I’m tired of haring everyone bitching about “fuel vs. food” and ethanol subsidies. Please take the time to do the minimal amount of research and stop buying into the disinformation the MSM is paid to feed you. Bio fuels are responsible to about 8% of the increase in the price of food. The rise is oil prices accounts for 32.5%. Four times as much as bio fuels *sigh*.
As far as ethanol subsidies. Has anyone bothered to look into what they actually are? The subsidies everyone is bitching about is a blenders credit given to oil refiners so they mix ethanol with their refined gasoline. It is 51 cents per gallon. Without this “incentive”, ethanol would probably be entirely locked out of the petroleum market because it will have no way to be distributed. There is a reason there are only 1,400 E85 stations nation wide and some 170,000 gas stations. E85 is a competing fuel to petroleum. Station owners are under contract not to sell any competing fuels. That’s why most E85 stations are in places like mom and pop milk and grocery stops that happen to have a few gas pumps. There is only one place in Phoenix AZ that sells E85 and I have to drive 30 miles each way to get to it. It is a petroleum company - the place that fills up the big gas trucks.
Corn ethanol uses feed corn not the kind humans eat. We produced the second largest corn crop since the 1940’s last year w/ a surplus left over. 10% of the corn grown in the country is used for human consumption. The remainder of the corn after the ethanol is produced is distillers grains. These grains are used as animal feed. We had so DDG’s left over last year we had to export it to other countries.
The point of this article is that petroleum is a monopolistic fuel that yes - “we are addicted to” and needs some good old fashion competition. Capitalism 101.
Hasn’t it occurred to anyone that there are no competing transportation fuels to petroleum?
So don’t believe the spoon fed hype that we are burning food using bio fuels. That too is good old propaganda you are spewing.
May 24th, 2008 at 8:07 am