Article Originally Published on blog.americansforenergy.us in September 2011.
During Spring, oil prices reached over $100 dollars per barrel ̶ the highest price since 2008. This summer, oil prices fell due to the global economic recession. In direct correlation to the volatile oil market that followed the Spring price hikes, the U.S. domestic economy has floundered. With minimal job growth, rises in food prices and debilitating effects on the housing market, it becomes apparent just how much high oil prices impact the U.S. economy.
Clemson University Professor David Bodde says, “What we are seeing in terms of the price [of oil] is more of a financial demand phenomenon more than a supply and demand phenomenon.” Bodde further explains that in order for the economy to recover, oil prices need to be consistent. However, there is little the U.S. government can do to influence the global price of oil since it is a fungible commodity and the U.S. only produces about 8% of the world’s total supply.
OPEC , the Organization of Petroleum Exporting Countries, sets the global price of oil since they are the largest petroleum producers; theoretically basing the price of oil on supply and demand. However, history suggests that supply and demand is not the determining factor of oil prices. Gal Luft, executive director of the Institute for the Analysis of Global Security (IAGS) argues that, among other factors, the recent inter-organizational politics of OPEC may further exacerbate the unpredictability of oil prices in the near future.
In late July, Islamic Revolutionary Guards veteran Rostam Ghasemi was appointed the new petroleum minister of Iran. Iranian President, Mahmoud Ahmadinejad explained that the nomination of Ghasemi will promote Iran’s objective to align the complex oil industry with its national interests. Iran currently holds OPEC’s rotating presidential seat. Therefore, Ghasemi will act as the de-facto president of OPEC in the coming months.
Ghasemi, a former Chief Commander of the Iranian Revolutionary Guard, will be sure to uphold Iranian national interests, which poses a threat to Saudi Arabia’s longstanding control of OPEC decision-making. Luft contends that, while there is the obvious historical Sunni-Shia rift between Saudi Arabia and Iran, as well as the ideological dispute over regional hegemonic power, there is another contentious issue at hand; instead of the member states of OPEC falling in line with Saudi Arabia’s decisions as they have in the past, they are now attempting to raise the price of oil to cover their own economic needs. Both Iran and Saudi Arabia are largely dependent on oil revenues. However, Iran would rather see the price of oil per barrel around $140 in order to balance its budget. Saudi Arabia, on the other hand, can maintain its budget with oil prices about $90 per barrel.
In June, OPEC members, for the first time in two decades, were unable to agree to an increase in output levels or establish the price of oil per barrel. The widespread civil unrest in many Middle Eastern countries has weakened their economies, causing OPEC members to make decisions individually rather than as an organization. These disparities, coupled with Iran and Venezuela’s insistence on higher oil prices, have divided OPEC’s members and reduced Saudi Arabia’s influence. With Rostem Ghasemi holding the reins of OPEC, the international community will likely see inflated oil prices for the remainder of the year.
2011 has illustrated that dependence on foreign oil makes the U.S. economy vulnerable- America can no longer afford to be at the whim of OPEC . With Middle Eastern civil turmoil, revolutions, and power politics, America needs to end its dependence on foreign oil. The government should be focusing on utilizing all available resources in order to become energy independent. On shore and offshore drilling should be permitted; natural gas expansion should be encouraged; clean coal production for the purpose of creating fuel via methanol should also be pursued, as well as the continuing production of biomass fuel. By acknowledging that capricious oil prices are the source of our economic problems, we can work to solve the problem by reducing our dependence on foreign oil, which will create long-term employment and help to balance the trade deficit.
As gas prices continue to range between $80-$100 dollars per barrel, Americans will pay $500 billion to OPEC and other foreign governments this year alone. While the President prepares to address Congress regarding job creation on Thursday, America should be demanding that he and Congress create an effective energy policy that will mobilize multiple sectors of the economy rather than simply promoting each party’s preferred energy sources. Until this occurs, we can be sure to see further unemployment, a depressed economy and higher prices at the pump.
Wednesday, January 18, 2012
Monday, January 9, 2012
Defeating Al Qaeda: The Energy Offensive
May 17, 2011 - In the aftermath of the siege and death of Osama bin Laden, counter-terrorism officials prepare for Al-Qaeda's response. The home front is on alert with heightened awareness for both soft and hard target attacks. There have been numerous false alarms, including the foiled terrorist plot in New York City a couple weeks ago. Intelligence analysts assert that Al-Qaeda is seeking to conduct a large-scale attack, proving to their enemies the group's resilience and adaptive modus operandi, while rallying support from affiliates.
In the last decade, however, the elimination of key individuals within the terrorist network has left Al Qaeda on the defensive, forcing the remaining operatives into hiding and reducing their effectiveness. Furthermore, intelligence gathering and dissemination has improved tremendously since 9/11. Law enforcement officials have thwarted numerous attacks by radical individuals such as the cases involving Bryant Neal Vinas and Najibullah Zazi, two men who, on separate occasions, traveled from the United States to Pakistan, and underwent weapons and explosives training in Al-Qaeda's training camps, but were foiled by the FBI before they were able to carry out their missions.
Yet, while this is good news, it has opened up other security threats. According to Mario Mancuso, the former Deputy Secretary of Defense for Special Operations and Counter-Terrorism during the Bush administration, "my chief worry at the moment is the Saudi and Gulf oilfields." If terrorists were to attack and disable Saudi and Gulf oilfields, America would pay the highest price. Mancuso explains that such an attack would be logistically easier for terrorists to accomplish since the oilfields are in their backyard, and with America relying so heavily on oil exports, their attack would have long reaching effects in several markets.
In Osama bin Laden's 2004 videotaped address, he expressed Al Qaeda's "policy in bleeding America to the point of bankruptcy." This "bleeding" would surely occur if Al-Qaeda were able to successfully wipe out an oil refinery, such as was attempted in 2006 on the Abqaiq oil processing plant in Saudi Arabia which handles nearly two-thirds of Saudi's oil output. Yet an attack would not necessarily have to completely take out an oil processing plant to strike a major blow at the United States. Any attack that inhibited or decreased the flow of the nearly 21 million barrels of oil the US imports every day for a prolonged period would cause economic damage. A sample of this economic damage has been previewed the last couple of months with the rise in oil prices from the turmoil occurring throughout the Middle East.
It is for this reason that the United States must not only protect itself from acts of terror against its citizens. The US must also find a way to decrease our reliance on the Middle East as a major exporter of our transportation fuel.
On May 3, a bipartisan group of leaders in the House of Representatives, led by Mr. John Shimkus, put forth a bill that seeks to employ existing domestic resources as transportation fuels. The bill is called the Open Fuels Standard Act (OFS), H.R. 1687. This initiative seeks to open the fuel market, so that alternative fuels including methanol, ethanol, biodiesel, compressed natural gas, and electricity can compete with gasoline. The real key here is methanol. Methanol which is known as wood alcohol, can be made from coal, natural gas, biomass and urban trash. The OFS requires that by 2017, 95% of vehiclessold in the U.S. must be either flexible fuel capable of using methanol, ethanol, or gasoline equally well, or has been warranted by the manufacturer to run on an alternative such as natural gas (CNG), electric, hybrid plug-in or biodiesel.
An open fuel standard would allow American motorists to choose their fuel source at the pump based on price and fuel source, rather than the current policy which forces drivers to pay astronomical prices at the pump which then go to fill the coffers of foreign governments, including several governments that are not our allies. By creating competition at the pump, OFS will constrain the price of oil, drastically cutting the ability of OPEC (the Organization of Petroleum Exporting Countries) regimes to tax Americans.
It is only through divesting the Middle East of its power over the U.S. fuel market that we can hope to win the War on Terror. Military attacks against terrorist cells are important, of course, but it is of equal importance that the U.S. actively pursues its energy security with an effective energy policy. The American people should not be forced to spend increasing sums of money at the pump to support Middle Eastern governments and OPEC.
In the last decade, however, the elimination of key individuals within the terrorist network has left Al Qaeda on the defensive, forcing the remaining operatives into hiding and reducing their effectiveness. Furthermore, intelligence gathering and dissemination has improved tremendously since 9/11. Law enforcement officials have thwarted numerous attacks by radical individuals such as the cases involving Bryant Neal Vinas and Najibullah Zazi, two men who, on separate occasions, traveled from the United States to Pakistan, and underwent weapons and explosives training in Al-Qaeda's training camps, but were foiled by the FBI before they were able to carry out their missions.
Yet, while this is good news, it has opened up other security threats. According to Mario Mancuso, the former Deputy Secretary of Defense for Special Operations and Counter-Terrorism during the Bush administration, "my chief worry at the moment is the Saudi and Gulf oilfields." If terrorists were to attack and disable Saudi and Gulf oilfields, America would pay the highest price. Mancuso explains that such an attack would be logistically easier for terrorists to accomplish since the oilfields are in their backyard, and with America relying so heavily on oil exports, their attack would have long reaching effects in several markets.
In Osama bin Laden's 2004 videotaped address, he expressed Al Qaeda's "policy in bleeding America to the point of bankruptcy." This "bleeding" would surely occur if Al-Qaeda were able to successfully wipe out an oil refinery, such as was attempted in 2006 on the Abqaiq oil processing plant in Saudi Arabia which handles nearly two-thirds of Saudi's oil output. Yet an attack would not necessarily have to completely take out an oil processing plant to strike a major blow at the United States. Any attack that inhibited or decreased the flow of the nearly 21 million barrels of oil the US imports every day for a prolonged period would cause economic damage. A sample of this economic damage has been previewed the last couple of months with the rise in oil prices from the turmoil occurring throughout the Middle East.
It is for this reason that the United States must not only protect itself from acts of terror against its citizens. The US must also find a way to decrease our reliance on the Middle East as a major exporter of our transportation fuel.
On May 3, a bipartisan group of leaders in the House of Representatives, led by Mr. John Shimkus, put forth a bill that seeks to employ existing domestic resources as transportation fuels. The bill is called the Open Fuels Standard Act (OFS), H.R. 1687. This initiative seeks to open the fuel market, so that alternative fuels including methanol, ethanol, biodiesel, compressed natural gas, and electricity can compete with gasoline. The real key here is methanol. Methanol which is known as wood alcohol, can be made from coal, natural gas, biomass and urban trash. The OFS requires that by 2017, 95% of vehiclessold in the U.S. must be either flexible fuel capable of using methanol, ethanol, or gasoline equally well, or has been warranted by the manufacturer to run on an alternative such as natural gas (CNG), electric, hybrid plug-in or biodiesel.
An open fuel standard would allow American motorists to choose their fuel source at the pump based on price and fuel source, rather than the current policy which forces drivers to pay astronomical prices at the pump which then go to fill the coffers of foreign governments, including several governments that are not our allies. By creating competition at the pump, OFS will constrain the price of oil, drastically cutting the ability of OPEC (the Organization of Petroleum Exporting Countries) regimes to tax Americans.
It is only through divesting the Middle East of its power over the U.S. fuel market that we can hope to win the War on Terror. Military attacks against terrorist cells are important, of course, but it is of equal importance that the U.S. actively pursues its energy security with an effective energy policy. The American people should not be forced to spend increasing sums of money at the pump to support Middle Eastern governments and OPEC.
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