Black Gold: We are sitting on 38 billion barrels
Folks with experience at the worker-bee level know that some projects go through seven phases: 1. Uncritical Acceptance. 2. Wild Enthusiasm. 3. Dejected Disillusionment. 4. Total Confusion. 5. Search for the Guilty. 6. Punishment of the Innocent. 7. Promotion of nonparticipants. Notice: Fix the problem did not make the list.
Alas, this is true with regard to America’s long love affair with oil from the Middle East. If you watched the recent Congressional hearings on gasoline prices on C-SPAN and C-SPAN II, you know Congress is simultaneously into a Search for the Guilty and for ways to Punish the Innocent while seemingly clueless as to its own culpability for making us dependent on foreign oil.
Back in 1950, the U.S. was the world’s leading producer of oil, producing 11 barrels of oil for every one barrel we imported. Then, in the 1960s, ten oil-producing nations formed the Organization of Petroleum Exporting Countries (OPEC). Soon, OPEC was producing over 50-percent of the oil needed by the oil-importing, industrialized nations.
From the point of view of its member states, OPEC is a brilliant concept. OPEC member states pay their oil workers a pittance compared to what a free-market economy must pay its workers to perform dirty, uncomfortable and dangerous work.
Speaking of dirty, uncomfortable and dangerous work, the TruTV Channel (204 on Dish Network) is running a series called: “Black Gold.” It airs on Wednesdays at 10:00 p.m. EDT or 8:00 p.m. MDT. “Black Gold” shows American oil workers facing the constant danger of losing fingers, hands, limbs, even their lives, as they do 24/7 shift work while soaked in ice-cold drilling mud. Or, baking under a broiling sun.
OPEC is well aware that the U.S. is sitting on more on- and off-shore petroleum reserves than the rest of OPEC combined. So, when it looks like the U.S. might decide to regain its former role as the world’s number-one producer of petroleum products, OPEC can flood the world with cheap oil. Or, OPEC can use the withholding of oil as an instrument of foreign policy as it did during the 1973-74 oil Embargo. Back then, the economies of Western Europe and the U.S. almost ground to a halt, prompting lots of talk (but no action) about the dangers of dependence on foreign oil.
Fingers can be pointed at President Nixon (his price controls drove oil investors away), at President Carter (he turned Iran from friend into foe) and at President Clinton (he vetoed Congressional attempts to increase oil production). In December, 2007, Congress adopted the Rep. Mark Udall Amendment to prohibit oil-shale development. As recently as May 15, 2008, the Senate rejected Senator Wayne Allard’s attempt to overturn the Udall Moratorium. Obviously, Congress still doesn’t get it.
Meanwhile, the Law of Unintended Consequences remains in effect. Attempts to legislate against brand-name Big Oil will negatively impact the no-name Little Oil companies that develop 90-percent of our domestic oil and gas wells. Little Oil produces 68-percent of our domestic oil and 82-percent of our natural gas. Oil wells cost between $1.5 million to $3.5 million to drill. Most of the time, no recoverable oil is found.
Because corporations do not pay taxes (the consumer does), mandating an excess profits tax on our domestic oil corporations just means we pay more at the pump – albeit a highly efficient way for Uncle Sam to take in more cash.
If Congress wants to be constructive, it could rid us of the oil futures speculators. That would have an immediate downward impact on gasoline and diesel prices.
But the long-term solution to our energy needs rests on the fundamentals of: increasing supply, reducing demand and on a fundamental belief that American ingenuity will, someday, invent a fossil-fuel alternative.
With bi-partisan effort, we can move from today’s Dejected Disillusionment and Total Confusion. But Searching for the Guilty and Punishing the Innocent are, well…counterproductive.
William Hamilton, a syndicated columnist and featured commentator for USA Today, studied government and politics at Harvard’s JFK School of Government. He is a former assistant professor of history and political science at Nebraska Wesleyan University.
©2008. William Hamilton.