Thursday, May 26, 2011
Drilling our own oil improves our trade balance and generates American jobs, so it solves two big problems. But it doesn't solve three other big problems — the price of fuel, our vulnerability to OPEC's whims, and the unbounded wealth making its way from our wallets to radical Muslims.
If we drilled all our own oil, OPEC would still control the price of oil, and therefore would still have the ability to cause worldwide recessions, so it is an incomplete solution, which is completed by the Open Fuel Standard.
The two solutions together help solve all five problems, and they all need to be solved.
People often say, "Well, if we drilled our own oil, we wouldn't have to pay OPEC's price." But the only way this would be true is if we had an American company that was willing to sell oil to American consumers at a better price than the company could get for its oil on the world market. Or if the government forced the American company to sell it to us for less than it could get elsewhere. That seems unlikely.
Therefore, the world market price for oil will determine what Americans will pay for gas. And OPEC is such a large cartel, its production level determines the world price. OPEC deliberately keeps the price high and makes it spike higher occasionally, sending America into one recession after another, and draining us of our wealth. Read more about how this works.
The following is an excerpt from an article in the Wall Street Journal by James Woolsey and Anne Korin:
Oil is a fungible commodity with a global price. Even if the U.S. did not import a drop of oil — or if all, instead of just most, of our imports came from Canada and Mexico — we'd still be vulnerable to the vagaries of the oil market and price manipulation by OPEC.
In 2008, when the world price of oil rose to $147 a barrel, truckers in Britain struck against the huge resulting diesel price. The price skyrocketed even though the United Kingdom was then producing virtually all its own oil...
The cartel that dominates the global oil market sits on 78% of the world's conventional oil reserves. The reason it accounts for only about a third of world oil production is because it is a conspiracy in restraint of trade. When non-OPEC countries drill more, OPEC simply drills less and drives prices back up. If demand is reduced through a one-time improvement in efficiency, OPEC again drills less and prices zip back up...
To outmaneuver OPEC, the market needs to be able to react dynamically. That means giving purchasers of fuel the ability to choose a different fuel at the pump if it's cheaper that day than gasoline or diesel...
One very good way to accomplish this is for Congress to adopt the Open Fuel Standard Act...
Brazilians already have this option: During the oil price spike in 2008, with 90% of their new cars fuel flexible, they bought more alcohol fuel than gasoline.
CBS: "More US drilling didn't drop gas price"
Why You Should Support the Open Fuel Standard Even if You Are Against Mandates in Principle