So far this year America's dependence on Saudi Arabian oil has increased by 20 percent, according to a front-page article in the New York Times ("U.S. Reliance On Saudi Oil Goes Back Up" 08.17.12). After nearly four years in office, that the United States is even more dependent on Middle East oil is shocking testimony to the failure of the Obama Administration's energy policies.
We are presently importing some 1.45 million barrels of oil per day from the Saudis and at the current U.S. price for crude at $96/bbl, transferring $138 million/day to a regime that treats its women as mere chattel and has transferred billions to Wahhabi madrassas and prayer halls to propagate their poisonous anti-Western fundamentalism -- as but one example, the Times of London had the eye-opening headline "Saudis Fund Balkan Muslims Spreading Hate of the West" (please see "If You See Something Say Something' - The Failed Times Square Bombing and The Price of Oil" 05.13.10).
Ironically, much of our dependence on Saudi oil supply could be eliminated by the completion of the Keystone XL pipeline from Western Canada to the U.S. Gulf. The President, seemingly responsive to strident environmentalist criticism to the sourcing of Athabasca tar sands oil, has withheld approval of the pipeline in spite of the fact that Canada is proceeding with the extraction project and will direct the output to other markets on the Pacific Rim if the US continues to demur. A clear example how this administration has it priorities upside down. But there are many other examples of the comprehensive failure of policies relating to energy these near four years past.
- In February of 2009, a month into the Obama presidency, the price of crude oil touched the mid $30/barrel and gasoline under $2.00/gallon. Today we are choking at prices of $96/bbl oil and near $4.00/gallon gasoline. A misguided performance that speaks for itself, especially in that it has become clear that the U.S. could have been at the cusp of being energy self-reliant.
- Near four years into this Administration, we are still without a coherent policy to access our vast reservoirs of oil and gas offshore, on federal lands and Alaska.
-Instead hundreds of millions, if not billions, have been spent on failed alternative energy projects such as Solyndra and tax holidays for alternative energy sources such as windmills. Alternative energy needs be a focus but not to the detriment of energy independence and rational energy pricing. Consider the enormous benefits that would have accrued to the economy and our national security had even a portion of the funds and focus expended on alternative energy been allocated to developing environmentally safe fracking techniques giving us unfettered access to our vast holdings of shale gas and shale (tight) oil.
-The problematic appointment of Steven Chu as Secretary of the Department of Energy. A brilliant physicist but hardly equipped to deal with the rough and tumble of the oil patch, Chu's leanings were made clear in comments to the Wall Street Journal in 2008: "Somehow we have to boost the price of gasoline to the levels in Europe." That would have meant around $8 a gallon. (please see "Energy Secretary Chu and the Price You Are Paying For Gasoline" 04.16.12). Middle America would have said a heartfelt thanks. Sadly, it is a mindset that has permitted prices to increase nearly threefold during his tenure without challenge or push back.
-No far-seeing policies to harness the extraordinarily huge deposits of shale gas to wean us off our dependency on oil by transforming our gasoline-powered transportation fleet to compressed natural gas Where are the government incentives for consumers, manufacturers and distributors alike to undertake this core transformation? With today's price for natural gas at $2.70 mmbtu, crude oil would have to be priced at $18/bbl to compete with natural gas to deliver the same component of energy, not to speak of gas' significantly lower carbon footprint. For those who question whether it can be done, know that in the distant land of Armenia, some 75% of its automobile and truck fleet is propelled by compressed natural gas. (please see "Aspen Ideas, Natural Gas, Armenia Unheralded" 07.09.12)
-In 2008 the Washington Post reported "A Few Speculators Dominate Vast Market For Oil Trading". It was determined that 81 percent of the NYMEX contracts was held by financial firms speculating for their clients or their own account (Please see "Time to Dismiss the CFTC Chairman and His Commissioners" 12.27.10). Since the inception of the Obama Administration, virtually nothing has been done to mitigate nor corral the wild trading of oil contracts on the exchanges. The CFTC is forever holding hearings or asking for commentary from the field, an elegant way for doing nothing. This while the President who had an awakening moment from his reverie on this issue back in April 2011, when the Justice Department was given the mandate to form the "The Oil and Price Fraud Working Group," from which we have not heard a single peep now one and a half years later. Pointedly and materially the nefarious impact of oil futures trading on the price of oil was highlighted in Congressional testimony in May of last year (please see "Are our Leaders Hearing Exxon Mobil CEO Tillerson?" 05.17.11) of none other than Rex Tillerson, Chairman and CEO of the world's largest publicly held oil company, stating categorically that speculation was adding $30 to $40 to the price of each barrel of oil. Coming from someone of his stature and authority in the field, one would have thought action would be forthcoming. We shouldn't have held our breath.
-Over the past 8 weeks the price of oil quoted on the commodity exchanges has increased some 25 percent or some $20/bbl, costing U.S. consumers alone near half a billion dollars a day (daily US consumption of 19.5 million barrels x $20), a price increase that has gone far beyond issues of supply and demand and far beyond potential flare-ups with Iran. Yet we have over 700 million barrels of oil in our Strategic Petroleum Reserve in which we made a massive investment and which is doing us little good other than having made oil more expensive while it was being filled and taken off the market. It is an asset for which we receive little or no benefit and for whose draw-down there is no coherent policy. There is no realization in this Administration that a broadcast willingness to release some oil from the SPR to counter abnormal price movements such as that which we have seen these past eight weeks -- not necessarily very much -- would send the speculators scrambling to the hills and bring a degree of rationality to the trading floors of the exchanges, instead of the one way bets that invite ever more speculation.
-Lastly, what is sorely missing is a hard negotiating stance with our oil providers, especially those in the Middle East. The American public is laying out literally hundreds of millions of dollars a day keeping a massive naval taskforce in the Persian Gulf and near and about the Strait of Hormuz. The taskforce keeps the shipping lanes open for the Gulf States of Kuwait, Qatar, Bahrain, the U.A.E. and of course Saudi Arabia, all charter members of OPEC, to freely ship their cargoes of oil to a world clientele from China to the U.S. Our armada also keeps them safe from the rapacious ambitions of their Iranian neighbor. We pay while they play. Only we pay twice -- once by the OPEC cartel, induced and manipulated price of oil, and again by the vast sums to keep a large portion of our naval fleet to stand bodyguard. Something is very off base in this equation and it is long past due that our government took the issue in hand and arrived at a more equitable arrangement, or possibly just sail away.