U.S. and oil – May 4

The oil world’s new bullies
Jim Jubak, MSN Money
Move over, Exxon Mobile. Step aside, BP (BP, news, msgs). Run away home, Chevron. There’s a new set of oil bullies on the block. And they’re named Russia, Iran, Venezuela and Chad.

No need to feel sorry for the Exxon Mobils of the world while you’re filling up your tank with $3-a-gallon gas. Who can feel sorry for a company that earned $36 billion in 2005, more than any U.S. company ever?

But as you seethe about $3 gas now and worry about $4 gas next year, remember that big oil isn’t calling the shots anymore. Venezuela has forced ExxonMobil (XOM, news, msgs) to slink out of the country and has made Chevron (CVX, news, msgs) and ConocoPhillips (COP, news, msgs) take a 75% hike in royalties and a 50% increase in taxes and say, “Thank you, sir, may I please have another?”

Russia is blackmailing all of Europe by saying “sell us your natural-gas delivery companies or no natural gas for you.” Iran has thumbed its nose at the United States and the United Nations, figuring that the world needs its oil too much to actually do anything about its nuclear weapons program. And Chad got the World Bank, the U.S. government and Exxon Mobil to cough up disputed royalties by threatening to shut its oil pipeline.

Boy, you know you’re in trouble when Chad, a country of 8.1 million people living on 1.3 million square miles of desert, can push you around.

…The countries of the European Union have decided to strike the best deal that they can with the Russians now while they tax and invest in solar, wind and nuclear projects to reduce their future dependence on Russia for natural gas. So, for example, Portugal, hardly one of the richest countries in Europe, requires utilities to pay 0.31 euros — about 37 cents — a kilowatt hour for electricity produced from solar projects. (Electricity costs in the United States run about 10 cents to 14 cents per kilowatt hour.) Germany, Italy and Spain have similar programs. The immediate pain is worth it, European countries like these have concluded, to get rid of these bullies.

And the United States? Government policy is a dreadful combination of the laughably irrelevant with the downright dangerous. On Earth Day, President Bush touted hydrogen-powered cars as a future solution to our oil addiction — and his administration has requested $5 billion over the next five years for hydrogen research that may result in a marketable hydrogen vehicle someday. Meanwhile, the administration has proposed a fiscal 2007 budget that would slash funding for research to improve energy efficiency — today — by 20% from 2006 levels.

And to get angry drivers off their backs, Republicans in Congress have proposed sending out $100 checks so drivers can keep buying gas to fill their cars at the pump.

That will sure fix these bullies. Raise gas prices to $3 a gallon, huh? Well, we’ll pay that. And we just dare you to raise it some more.

It’s a message oil bullies — old and new — will certainly understand. It’s just not the one that we ought to be sending.
(1 May 2006)

The war on terror: the energy front
James Woolsey, FrontPage magazine
The following speech was given as part of Restoration Weekend 2006, at the Arizona Biltmore in Phoenix, Feb. 23-26, 2006 — The [FrontPage] Editors.

I’m honored to be invited but, to tell you the truth, since I was a Washington lawyer for 22 years and then I was with the CIA during the Clinton administration, I’m pretty well honored to be invited into any polite company for any purposes whatsoever.

…we should regard this war we’re in as a long one. If you call it the World War IV, the analogy in a sense is to the Cold War, which I call World War III.

But the main idea is that this is a long contest of decades, not years, and it’s one that’s going to require us to do some very innovative and different things, just as the Cold War required us to do some things very differently than we had done in either World War I or World War

…The war we’re in now is a war in which, if you take the 22 Arab states plus Iran, their population approximately equals that of the United States and Canada together: 340 million, give or take 10 million. That area, those 23 states, other than gas and oil, export to the world less than Finland, a country of 5 million people. But the oil and gas earns a very great deal. Saudi Arabia alone earns $160 billion a year from its oil sales. We borrow approximately a billion dollars every working day, $250 billion a year, just for our oil imports. The rest of our imports that we have to borrow to finance because we don’t save enough and don’t export enough. The rest of what we have to borrow, including oil in toto, totals about $2 billion every calendar day; about $740 billion a year.

As we pull into the gasoline pump, we need to look in the mirror and realize who is financing not only our side but also the other side in this war. Then we begin to see what the role of the relative wealth capabilities of the different societies are. We had no real Achilles heel with respect to our economy in the Cold War. We have a huge one right in the hands of our enemy in this current war we are in and it is a three-letter word: oil.

…But my view is that what we need to concentrate on are ways to replace petroleum-based fuels that one can use to quickly, within the existing infrastructure and as inexpensively as possible.

…So we want fuels that are alternatives and today, for all practical purposes, there are none.
(2 May 2006)
Woolsey’s speech covers themes that are familar in the national security arena. I suspect that his view of oil will dominate over other conservative interpretations, such as the libertarians. One thing that puzzles me about this view is that conservation is almost never discussed, even though it a cheap and efficient way to deal with the problem.

-BA

Reducing U.S. Dependence on Middle Eastern Oil
Ariel Cohen, Ph.D, The Heritage Foundation
…Limiting the hold of Middle Eastern oil on the U.S. economy will require creativity and genuine effort. Specifically, the Administration should:

* Prepare for contingencies in which oil-rich coun­tries become destabilized;
* Assist friendly Persian Gulf states in enhancing the security of their oil facilities; and
* Diversify U.S. energy sources and oil imports to reduce dependence on Persian Gulf oil.
* Beyond these general guidelines, it is crucial that the U.S. follow through with these specific measures:
* Boost efforts to roll back Iran’s subversive ideolog­ical, terrorist, and military threats;
* Expand military contingency plans and prepare a rapid reaction force;
* Diversify the energy basket by expanding domestic production of oil and gas and by lifting the bureaucratic barriers that prevent greater use of nuclear energy;
* Encourage expanded methanol and ethanol production and imports; and
* Expand the Strategic Petroleum Reserve.

…Conclusion: It is only a matter of time until America’s energy security, including its economic health and defense capabilities, will be jeopardized by the growing political instability, terrorism, and potential warfare in the Middle East. Over time, the U.S. needs to limit its dependence on foreign oil, especially from the Middle East, shifting to other sources of supply and eventually to new types of energy sources. Lim­iting U.S. dependence on Middle Eastern oil will be a major strategic challenge for the U.S. in the com­ing decades.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Cen­ter for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.
(7 April 2006)
More development of an energy policy from the Right: heavy on military responses, nuclear energy, and opening up new areas to drilling. Some mention of alternative energy sources, but no reference to conservation and efficiency. Also, no reference to global warming.

The About Us page has a quote from Rush Limbaugh: “Some of the finest conservative minds in America today do their work in the Heritage Foundation.”.
-BA

Across USA, wave of anger building over gas prices
USA Today
FRONT ROYAL, Va. — The sunrise turns the night sky pink Tuesday as four travelers meet at the Park ‘N Ride lot off Interstate 66 on the eastern edge of the Blue Ridge Mountains.

A nightmare has brought them together: the price of gasoline, which lists at $2.84 for regular, $2.94 for medium and $3.04 for supreme at the Shell and Exxon stations down the street. Their blue Kia van is bound for Washington, 60 miles away. Today, the one-way trip will cost $10.

…Two weeks ago they faced the inevitable and formed this carpool, which saves them each more than $300 a month and costs them autonomy, convenience and privacy…

So begins Tuesday, May 2, another day in the great gasoline price spike of 2006. Across the nation, it will be another day of debating, bemoaning, analyzing, comparing and predicting the cost of a liquid vital to the nation’s economy, mobility and sanity. Another day when the price of gas will seem as fundamental as the weather..
(3 May 2006)
Long piece describes scenes across the country. Some interesting graphs in the side bar: “What would you do differently” (if gas prices remain high), “Anger targets” (whom do you blame?).