This post continues the conversation in response to my post “Offshore Oil Drilling, Energy Independence, and America’s Security” from April 7th, 2010.

Now let’s set the record straight. While it may be true that Canada and Mexico are the top exporters of oil to the US (when it is broken down by nation), these nations are insignificant when it comes to regions and the greater oil market. Canada and Mexico together are insignificant to the oil market because they do not affect the price of the oil market. This market is what affects our own economy and threatens the security of our nation, creating unwanted entanglements that flow deeper than most realize.

The reality is that the oil market is like any other market in an economy – it fluctuates. But this market is controlled by an exclusive group of nations mainly in the Middle East – the ones who have the most oil – known as OPEC. Neither Canada nor Mexico are card-carrying members, by the way.

Now here is the important thing: in 1945 FDR makes an agreement with Saudi Arabia to secure energy reserves for future interests. From that point on, America has had a vested interest in the Middle East.

Saudi Arabia is the largest member of OPEC, the cartel that sets and controls the price of oil around the world. OPEC controls the oil market and determines the price of oil which then dictates to the rest of the world the price for a barrel of oil.  Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. When added up these members export more oil to the US than Canada and Mexico combined.  Of the twelve OPEC members, the largest producers of oil for the world market are Saudi Arabia, UAE, Iran, Kuwait, Iraq, and Qatar. Canada ranks 14th in the world and Mexico is not even considered among the top 15 for oil nations.  OPEC exports 4400 barrels of oil a day to the US while Canada and Mexico only export 3200 barrels a day.  OPEC also controls 66% of the world oil reserves.  Saudi Arabia owns 261 billion barrels of oil. When you add this together with Iraq, UAE, Kuwait, and Iran (which are all members of OPEC and are situated in the Middle East), their combined oil reserves total over 650 billion barrels – and I didn’t even include every member of the OPEC cartel in the Middle East that produces oil.  Canada has only 180 billion barrels.  When the members of OPEC decide to cut or increase oil production, a move  determined by Saudi Arabia, it affects everything in the global economy.  Ever wonder why we see the President bowing to the king of Saudi Arabia?

In a real market, where price is set by market demand, it is easier to asses the real value of a product. But with a cartel controlling the market as much as OPEC does, there can be no true value – only what the producers set for their sale.  Imagine if the owners of the top 5 computer manufacturers came together and decided how much they will charge for a laptop. Now you are no longer paying a cost of fair market value. Instead,  you pay what they say.

Let’s be honest: how does that affect us? It is easy to see because oil is found in the products you are using right now as you read this blog. Oil is used in products all over the world – the products we all like to use: laptops; cell phones; bike tires; iPods; CDs; shoes; light switches; printers; lamps; trendy water bottles… Ever wonder why that bag of carrots cost more now or why the veggie wrap is more expensive? It is because of the plastic, which is made from oil. Plastic is in everything we use and that makes oil an enormous part of the economy whether or not we admit it.  We are at the mercy of those oil exporting countries. We are at the mercy of the cartel.

President Obama has acknowledged that in order to deal with realistic energy reform, we must use every means at our disposal. In the summer of 2008, President Bush and the Democratic controlled Congress allowed one area off shore to be removed from the ban of drilling for oil in the ocean. Within days, the price of oil began to drop without drilling. Even more importantly, that area has not been drilled for oil.  Doing this showed market holders, like OPEC, that there are more places for America to get its oil needs and that we will do what is needed for our national security.  The same trend should occur with President Obama allowing for the moratorium to finally fade away.  Many of the states within the U.S. have placed certain restrictions on drilling that make it nearly impossible to drill for oil.

The facts here speaks the truth. Our nation is dependent on others for our energy and economy which has been that for too long. Energy independence is a necessity for our national and global security. OIL is a huge part of the American lifestyle, OPEC controls the oil market, OPEC is controlled by the Middle East, which in turn causes entanglements with the Middle East. Wars have been fought and started over similar things.  Japan attacked the US because its energy needs were cut off from the US, their hope was they could move fast enough and capture the oil they needed to keep fighting. The Franco-Prussian war in 1871 was fought over an area rich in minerals and the First World War was a second fight for this area, which then led to World War Two in Europe. 1991 the world goes to war in the Middle East to protect the vital interest of the world’s oil market for fear of Iraq controlling so much of the oil reserves.

The exploration of these oil fields will be done by American companies, not the tax payer/government, putting more people back to work in an economy that needs a lift. At the same time these same companies are building and exploring other means of energy for our nation. Now drilling is not the absolute solution but it is part of a comprehensive complex solution that will take time. 30 years ago we had similar critics say the same thing, when Jimmy Carter was president, that drilling won’t solve anything and it led us where we are today at the mercy of others. Technology has improved, as have our environmental standards, and those who oversee both our natural resources and environment are more than capable of doing the needed work to insure a safe way of getting the oil if possible, if not than why do we have an EPA? Everything in this world is connected to each other in some way.  The Middle East has the largest Oil reserves in the world giving them the ability to control that market and those who need it, which is everyone.

The truth here is that America is dependent on foreign oil because the Middle East sets the price of crude oil which is used in more than just gasoline. China and India are some of the largest consumers of oil used for making all of our essential products (like the computer you are using right now).  If the U.S. does not protect its interest in the Middle East, than what will China do when it comes to issues like the UN Security Council and the U.S. debt?  Our dependency on the Middle East is both direct and indirect. The dependence on Middle East oil has brought unwanted entanglements far deeper than we could have seen in 1945.

Advertisements