The Amazing
Tale of U.S. Energy Independence
BY PHI L I P K. VERL EGER, JR.
THE MAGAZINE OF INTERNATIONAL ECONOMIC POLICY SPRING 2012
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Golden Rules for a Golden Age of GasIEA (INTERNATIONAL ENERGY AGENCY)www.worldenergyoutlook.org
WEO-2012 to be released 12 November 2012
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Location:
Date: 2012-07-10
We're coming up on 40 years of OPEC trying to set the price of oil as high as they can manage. The oil market is finally at a turning point, non-OPEC production is up, demand is down, and international economics may have finally found a bright spot in 'globalization'.
This week the EU's embargo on Iranian oil came into full force. This is an unprecedented historical event that shows the importance of changes that have affected global energy markets in recent years.
It's not been an easy or quick effort. We've waited for technology and struggled and paid dearly for regulation and taxation, yet somehow the free world's oil industry is prevailing.
The politics have changed on OPEC's side as well. They too have found and stepped into the trap of government benefits. The OPEC leaderships know quite well what the consequences will be if the money runs short and the citizens at the trough have to look up for a "where's mine?" moment. We welcome OPEC nations to the modern world of government servitude. At least the oil wealth is already in their control, no need to pick the pockets of the productive classes, yet.
Strangely, dictatorships based on oil wealth are facing much the same prospect that is occurring in Greece, the first western country to face the "where's mine?" moment. The difference is the folks in Greece were non-lethal. As seen across the Arab world over the past many months losing control is, well, lethal. That's not to say things in Greece, Spain, Italy and Ireland can't become lethal, it will just take more stress on the citizens is all.
The oil consumers have a pretty short list of who to look to for a 'Thanks!". Much of the thanks needs to go - to themselves. Conservation, scaling back, economic recession and efficiency has made a big difference in oil consumption. Reducing demand hasn't been easy, wealth was lost in homes in a major way, so many people have lost jobs - some have gotten back to work at reduced income, and many have just been defeated by an economy watching fearfully for government programs and regulations instead of going after opportunities. For those with an income, we owe the suffering some thanks - this isn't easy for everyone.
The next thank you would go to the independent oil companies. They didn't fold, move offshore, or bleed out their capital and human intelligence. They did have to hunker down, get political and lobby intensively, and push the technology envelope as far and as fast as they could. The U.S. is gaining on oil production; it's simply awash in natural gas. The petroleum business is one industry that can and does still search for opportunity. It's a mind-set, if you know these folks you'd know, they will cope with the onslaught of government programs, regulations and taxes and still somehow keep looking for opportunity - and act on it.
The hardest thanks to give must go to OPEC itself. Nothing is so motivating as an unreasonable price to drive alternatives. Many will say with much truth, that western governments with cute moves like windfall profits taxes back in the day to denying obviously beneficial pipelines today, that the delay was government driven. And OPEC exploited government dithering masterfully and continues to do so. The thanks is hard to give, people are hard put to change and love the freedom and independence of automobiles, getting to the sweet efficiency spot is still a goal to obtain for most, but gradually the economic players are catching on.
Will OPEC's table stay turned? The answer is no, the table will keep turning which means the power of OPEC will recover, and decline several more times until the answer is the table has stopped turning - at yes or no.
The reality is we're all sitting around the table with OPEC. The oil crises aren't oil crises at all - they are a wealth crisis. OPEC countries wanted more money to spend, and they spent it pretty much with the people who bought the oil. A crisis almost always means an adjustment is underway.
Oil Crisis, Financial Crisis, Debt Crisis, name one, they are actually wealth crises looking for adjustment. Some folks are pushing for adjustment, others pushing against - each to their own perceived personal advantage. The crises will never stop coming.
The problem is when crises of wealth involve power. OPEC is an organization of governments that control countries and their wealth. When the wealth declines the power does too. For OPEC recent history on power declines has been, well. Lethal.
Let's not get too cheery, the west and the U.S. in particular are in the same syndrome. The wealth has declined here too. Amazingly the U.S. government undertook a huge power grab as the response seizing nearly 20% of the economy via healthcare. For now lots of folks are all thrilled with the benefits, but the massive moving of wealth has yet to take place.
The power moves to force moving the wealth are already underway. Small arms and ammunition manufacturing is boomin' worldwide. The U.S. Gestapo, 'er IRS is on a hiring binge, the healthcare act ya'll so love, gives the agency police powers for which they're buying military arms by the tens of thousands and ammunition by the millions.
The tables have turned. But the clutchin' grabbin' graspin' by power for wealth continues on. It's moving on in the U.S. to taxes and healthcare - "where's mine" and "here's mine" enforced at the end of a gun.
It won't be long until we look back at the OPEC era as the good old days.
