Catastrophe Waiting To Happen
By E. Ralph Hostetter (09/28/07)
The price of crude oil topped out at $82.07 per barrel on the morning of September 19, the sixth consecutive day that oil prices have reached an all-time high.
The United States consumes over 20 million barrels of oil per day at the present time. World daily production is 82 million barrels. America uses more than 24% of the world's total production. The United States has only 5% of the world's population.
The costs of imported oil to the United States are staggering. Just nine years ago, the price of crude oil was $15 per barrel. At today’s consumption rates of 20 million-plus barrels of oil daily the cost at $15 per barrel would have amounted to $300 million per day or $109.5 billion per year.
At today’s price of $82.07 per barrel the cost to America’s economy of 20 million barrels per day is now $1.64 billion per day or $598.6 billion per year. At present the U.S. domestic production of crude oil is 5.2 million barrels daily or some 1.9 billion barrels per year. This represents a 55-year low from 1950, when the United States had 144 million fewer people.
Gas production is not faring much better, according to recent reports. Reserves are reported to be falling and imports are increasing. The world situation offers little encouragement for optimism. The United States is presently at sword-points with the fourth largest oil producer in the world, Iran. The United States and several of its allies are threatening retaliation, perhaps militarily, if Iran doesn't cease and desist with its nuclear program.
Military forces of both Israel and Syria are gathering and confronting each other in the area of the Golan Heights on their mutual border. Lebanon is in civil war. The United States is at war with an Al Qaeda insurgency in Iraq.
Venezuela, supplier of more than 10% of U.S. imported oil, recently has taken control of the assets of two of America's largest oil companies in that country. President Hugo Chavez is now seeking alliances with all the communist-leaning countries in Central and South America, with particular attention paid to Cuba. Our relationships with Mexico, another principal supplier of oil, are not exactly cozy.
The U.S. Strategic Petroleum Reserve, the world's largest at present, containing 690 million barrels as of August 24, 2007, is maintained by the U.S. Department of Energy and at the present time is at 95% of capacity. Theoretically, at present rates of national consumption, that is enough petroleum to match the U.S. imports of 12 million barrels a day for about 57 days. There is a problem with the strategic reserve, namely the capability for withdrawal from the reserve is limited to 4.4 million barrels per day, or only one-third of U.S. imported oil requirements.
OPEC, the Oil Producing and Exporting Cartel, made up of major oil-producing nations in the world, is alive and well. It has been the principal international price controlling factor for more than 30 years.
In an obviously feeble attempt to curb the long-standing influence of OPEC, U.S. Representative John Conyers (D-MI) Chairman of the House Judiciary Committee, has introduced the "NOPEC (No Oil Producing and Exporting Cartel) Act of 2007.” It "amends the Sherman [Antitrust] Act to declare it to be illegal and a violation of the Act for any foreign state or instrumentality thereof to act collectively or in combination with any other foreign state or any other person, whether by cartel or any other association or form of cooperation or joint action, to limit the production or distribution of oil..." and setting the prices thereof. That will show them the United States means business?
OPEC is not the only cartel the United States faces. There is a "cartel" in America, for want of a better term, a green cartel. The American green cartel is made up of a group of envirocrats posing as environmentalists, using the moral high ground of the movement for their own personal political agendas. They have terrorized a majority of elected Members of Congress with threats of defeat at the polls if they, the Congressmen, dare vote to open vital domestic oil reserves for the purpose of making the United States energy independent. These envirocrats have aligned themselves against the vital security interests of America in denying the nation access to its own energy resources.
The American public appears to be totally unaware of the seriousness of our present energy situation. Not only has the price of oil been affected by such things as weather reports but any change in political conditions in the countries producing the oil can affect the price dramatically. An example of this is the effect that the political conditions in Nigeria have had on petroleum prices.
The United States has to come to the realization that any serious threat to U.S. imported petroleum resources anywhere in the world could create disastrous economic conditions here at home. A major cutback in imported oil resources, for whatever reason, could and will prove catastrophic to our economy.
America will remain at the mercy of the vicissitudes of world politics for 75% of its energy needs and will be unable to achieve energy independence at home so long as it wears the shackles of a green cartel.
E. Ralph Hostetter, a prominent businessman and publisher, also is an award-winning columnist and Vice Chairman of the Free Congress Foundation Board of Directors.
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