As It Meets, Time to Make OPEC Understand Access To Our Market Can No Longer Be Taken For Granted

It is beyond time that all imports of crude oil and major downstream products (i.e., gasoline) coming into the American market should require an import license designating a specific country of origin. For why, and what it means, please read on.

OPEC meets this week to set production quotas. Venezuela and Iran are pressing for production cuts to assure prices do not slip below $100/barrel. Saudi Arabia, forever playing its usual double game, is making mollifying noises, having King Abdullah quoted by their ever pliant mouthpiece, the New York Times, that according to the King, "$100 was too high." This while sending a real-time message to their fellow OPEC cartel coven by sharply marking up prices for October shipments of heavy crude to Asian refiners (Gulf Times, September 7).

So here we sit, waiting for the nabobs to tell us what they will produce and what they will graciously allow us to consume. And why not? It is a poker game they have been playing with us for eight years now, and our hand has been held by the three oil industry "Stooges" -- Bush, Cheney, and Bodman, happily letting us be fleeced while their oil industry cronies cluck contentedly over their backs. Times are good for the OPEC boys. Pass them another cigar.

Well, times they are a changing. Economic conditions and consumption restraint are beginning to take hold. The public has become keenly aware of the risks inherent in the unbridled consumption of fossil fuels, clearly aware of its dangers economically, environmentally and in terms of our national security. Further, they have come to understand the voracious and shameless opportunism of the oil producers to gouge the price of oil ever higher for as long as they can and for as much as they can. In doing so the oil patch has left an indelible conviction of mistrust, being patently unreliable as providers of a significant but diminishingly important resource. And for these reasons alternative energy programs are being set in stone and are not about to be displaced, as has been the case in the past, by the sudden erosion of crude oil prices

In four months time the "Three Stooges" will have been retired and a new relationship will be emerging between oil producer and oil consumer and then it will be the time to play our ace in the hole. Rarely talked about nor alluded to in the past eight years is the fact that in being the world's most important consumer of fossil fuels our market is as important to oil producers as they have been suppliers to our needs. And as such, even as our consumption diminishes, as it will in the years ahead, it will still provide oil producers with their most important market for years to come.

That market should no longer be taken for granted by oil suppliers nor be available to all comers irrespective of their adversarial policies and their pricing strategies. That henceforward all imports of foreign crude oil into the United States should require an import license designating a specific country of origin. Ideally it would be a system put into place, with import licenses freely available without ever a need to impose restrictions. However given, as example, Venezuela's hawkish stance to push prices ever higher, combined with its confrontational and malign policies such as inviting Russia to joint naval exercises and extending invitations to the Russians to establish military bases on Venezuelan soil and permitting Hezbollah to set up a base of operations in the Americas creating terrorist cells looking to kidnap businessmen throughout Latin America with the intention of taking them back to Lebanon, with the further prospect of Hezbollah using Venezuela as a base to "insert terrorists into the United States."

Given their intentions and their dangerously contentious policies, would it not make sense, especially as our needs diminish, and as other supplies become available (such as alternative fuels, natural gas, offshore, North Slope, shale, crude from Brazil and on), that our government have in place a program that could stop or limit imports of oil from national origins that have policies that are inimical to our national interests by simply limiting or refusing issuance of oil import licenses. Perhaps our ability to act accordingly would dissuade Venezuela and others to reexamine their hostile policies. Of course one could argue that oil is a fungible commodity whereby substitution or exchanges with other national producers could in some measure neutralize the objectives of such a program. Yet if there is a serious willingness to implement a viable licensing regime, this too can be dealt with effectively.

In the meanwhile you can rest assured whatever decision is trotted out by OPEC this week it will be dressed up as an exercise in OPEC's beneficence and in "caring" response to the needs of the world's consumers and that our sincere appreciation should be forthcoming.

Comments

[cylindar]

Never mind OPEC, how about cleaning up the sex, drugs, and rock and roll, at the interior dept. with the big oil boys. As I have said many times in replying to your column, the problems are right here in the good old USA not in far off Arabia!!!!

[darthdarcy]

Ray, not to burst your bubble but the Saudi's have $1.5 billion dollars invested in Bush family businesses..!

See what I mean..?

[cylindar]

The U.S. could absolutely not survive without OPEC oil. What your saying is ridiculous and could never be implemented in the real world

[bugdog]

""insert terrorists into the United States."

Is that a bad thing?

[Furby]

I'm not even close to being an expert on this stuff, put I am an expert consumer and this much I know. The only way I'm going to consume less oil is if I can no longer afford to maintain my current level of consumption. And that is certainly what seems to be happening. So based on this simplistic premise, if I were an oil producing country, I would sell as much of the stuff as I can as soon as possible because my gut would be telling me that the gravy train will soon be pulling into the scrap yard. Alternate energy will probably be able to cut our current rate of oil consumption by about a third, and alternate energy will probably be up and running in, let's say, 20 years or so if we haven't killed the planet before then, so I (as an oil producer) have about 20 years left to maximize my revenues before the party's over and the stuff is worth less than half of what it's worth now, if it's worth anything at all.

[lunchbag]

Oil is in, or involved in 80% of things you buy or use. Thus it will hit you no matter what you do. Expect price of vinyl goods to go up due to increased oil prices.

[vippy]

That I don't believe, the price of a quart of oil has not gone up.

[KillTheMessenger]

"Oil is in, or involved in 80% of things you buy or use."

I would make that 100% because of transportation, but the problem is not that we use oil to make things or to transport them, but that we use too much of it with an awfully low efficiency. In other words: maybe 80% of the energetic or chemical value of all petroleum is simply burned without positive effects in poorly optimized machines.

Cut the waste and suddenly it takes very little oil to make most things. And what little oil it takes can always be replaced by something else. And that is exactly where the world is headed: to make and move things without any oil at all.

[Stanley]

Levying a fair tariff on the real cost of energy is needed to realign our priorities with all of our interests. Cheap oil comes at the expense of security, environment and for some even freedom. Propping up hostile dictators and zealots with oil profits is not in our best interest. Yes, they will simply sell to someone else but that is not under our control. Oil in general leaves much of it's real price to the taxpayer and if there was a real accounting we could fairly let the markets work on the best energy sources whether foreign or domestic.

[Paul]

Exactly. And you didn't even mention the amount of money that leaves the country each day and goes into the pockets of our enemies.

[GetAbike]

Raymond. (Can I call you Raymond- I mean we've been through a lot together with oil markets up and down, having our disagreements, throwing crazy ideas out there, trying to come up with something that will work and all).

So this time what you are proposing is like a Costco or Sams Club Membership- but in reverse. Costco would get a card to be able to sell to us?
What if they had a limited amount of product and wanted to sell only a certain amount of goods to all their regular customers? Sort of like the "rice shortage" this last Spring. Each customer could only get two 40 lb bags at one time.
Would their membership card state they had to sell "X" amount to us?
Seems like the kind of contract that Imperial Rome had with Egypt, or Great Britain had with India- you know, Imperialism.
I don't see it working out so well Raymond.
For our future proposals, let's try and focus on conservation. It has proved safe and effective in bringing down the price of fuel without the threat of war, boycotts, and all that sort of mess.

[arvay]

Ridiculous -- the best way for us to "control" our consumption is for gasoline prices to rise and sty high indefinitely.

BTW, there is NO shortage of oil, there's a refining shortage, and that's in the control of our beloved oil companies. Gee, why would they want to do that? Could it be because they can crimp gasoline supplies, invisibly to the American public, blame OPEC, and pocket the money? Ya think?

Actually, maybe an import label might be useful, then the public might learn most of our oil comes from Mexico and Canada, those hotbeds of radicalism and Islamic terror.

Now that the government is nationalizing the mortgage industry, it might be time for the next administration to consider the same for the oil industry.

Might be hard on some of those struggling oil executives, but they can always look for work at Rosneft Lukoil, TNK-BP, Surgutneftegaz, Gazprom Neft and Tatneft.

[Paul]

Absolutely agree that gasoline prices need to rise to $8 or $9/gal like in Europe.

But the refining shortage is not necessarily a giant oil company conspiracy.

Shell is doubling the capacity of their biggest plant in Houston. Its gonna cost billions, but guess what? The demand for gasoline in the US is declining.

How ya gonna explain that investment to the Board of Directors?

If the price of gasoline is high enough, long enough, then the refining shortage will take care of itself.

Put a tax on imported oil.

[KillTheMessenger]

Can you prove that there is a refining shortage? The refining industry itself claims that they are having lower refinery utilization than in years. We have roughly 15% more refinery capacity than we need. So where is the shortage?

And where is that gasoline shortage? Have you ever pulled over to a gas station to find the clerk with a sign telling you that they are out of merchandise?

If not, why are you making these outrageous claims?

[arvay]

"Fixing those bottlenecks is more important than ever as the U.S. gasoline market winds down from a summer of record breaking prices " as ever-growing demand reached the limits of the country"s refining capacity. As tight inventories and fears of supply interruptions sent prices soaring this spring, U.S. refiners stepped on the gas pedal.

Read this

http://www.msnbc.msn.com/id/6019739/

[sixminutemile]

I think its time to make bloggers understand how supply and demand works.

Clearly we could tell any member of OPEC that we don't want their particular brand of oil. And we don't have to buy a drop of oil.

Oh wait I forgot, we need all the oil we can get. And there isn't enough oil in to satisfy our demand. Even with all the good guys and bad guys running at full beaker the cost of a barrel of oil is around $100. The alternatives to oil are many years and billions of dollars away from being effective.

Buying a license doesn't alter the laws of supply and demand. The concepts expressed here are dangerously stupid.

[KillTheMessenger]

We import 60% of our oil. Most of it comes from Canada and Mexico. The portion that comes from OPEC countries is approx. 6 million barrels a day. If we manage to use that much less, we can actually mostly decouple the US oil market from OPEC (although there would be no real economic advantage to this).

6 million barrels... that's about 175 million gallons of gasoline a day. A little more than a gallon a day for each vehicle in the US...

What would it take to cut back by that much? I would venture to guess that it's something like this:

1) Ramp up ride sharing to at least two people per car.

2) Reduce trucking by half.

3) Reduce meat in our diet by half and switch to biofuels that actually work (i.e. NOT corn ethanol)

Possible? Yes. Likely? No.

[vippy]

then why can't we pump our oil in Texas and Oklahoma. Why does the government
regulate the output by 500 gal per month per pump? The government then pays the
oil well owners like they do the farmers for NOT producing. Does that make sense
when we would have our own oil and would have to buy less from overseas.
But who knows what deals Bush made with Mexico, Canada and Saudi?

[Paul]

None of the above.

Raise the price to $6/gal by taxing OPEC oil.

[vippy]

Then tell me why the government does not allow the oil well owners pump more than
500 gal per month in the USA. The oil well owners get paid like the farmers for not
producing. Does that make sense in all of this? And why is the press not on top of
this?

[Paul]

The goal should be to reduce consumption of imported oil.

The only proven way to do this is by raising the price at the pump.

Put a tax on imported oil so the price is $4/gal this year, $5/gal next year, etc until we pay what they pay in Europe ($8 or $9/gal).

It's not about the politics of the supplying countries, it's about the transfer of weath out of the US because of our wasteful methods of transportation.

[Shortyfuse]

I have to admit that I am having a hard time getting the big picture. Heck , I am probably the last one to know that the pipeline in Alaska was no longer American owned. The British own it. I am getting a little tired of BP. When did they sell it and who was the broker? Any more info would help me in my quest for the big picture.

[drkazmd65]

An interesting idea Mr. Learsy - I like it, and it would not be prohibitivly difficult to implement such a strategy - IF only we have a Government that has the will to do it and stand up to the oil corporations and oil money.

Will we have such a Government in place, or at least beginning to have a foothold come Jan. '09? It could happen, but I ain't going to be holding my breath waiting for it to happen overnight.

But - I am more concerned that the new Government focus on upgrading power transmission infrastructure (without ceeding control of this infrastructure to some corporation or cartel of them), and help give a step up to local generation of solar, wind, geothermal, tidal and clean coal (if that isn't an oxymoron), coupled with real efforts to upgrade mass transit, efforts to install a rapid recharge grid, AND strongly promote conservation and green technologies.

Drop our demand for oil, and a lot of the other effects will follow anyway. AND - added bonus - we get to negotiate from a much stronger positon when we put oil passport tracking into place.

Win - Win

[kapo]

A political game has been played in the oil markets. The US Government took an agressive stance towards Iran and allowed the speculators to run wild, allowing prices to skyrocket based on the risk premium of a war with Iran. Then three months before the election, Rice sits down with the Iranians and the speculators get targeted. The strategy is intended to make Americans see $100 a barrel petroleum as something to cheer about compared with $147, and Saudi's get a friendly Republican administration. Guess what happens after the election.

[KillTheMessenger]

"Guess what happens after the election."

We will see oil prices rise because of summer driving season.

They really need to move the election date so you can see that the correlation is between price and demand and not price and election date.

[PenFighter]

hmmm... interesting, then, that in the election off-year of 2007, prices continued to rise through the fall. Even OPEC professed to see no reason for it, not that they were unhappy about it.

[ceindependence]

Well written article that requires thought and consideration. However, why is it that there is ALWAYS someone on this post that will ALWAYS blame the United States for problems.

"If the United States had treated Chavez and Venezuela as a neighbor, a partner in the region, instead of using the power of our government to try to assassinate him and destabilize his country, perhaps we could be counting on getting a greater percentage of our imported oil from them. We could have negotiated directly with Venezuela to gain more access to their oil."......jppohan

Give me the details of who and when we tried to assassinate Chavez! Back up your claims, cause had we actually tried this Danny Glover and Jimmy Carter would have been there to throw themselves in front to catch the bullet. I don't believe you and I think that you are a liar. Prove me wrong!

[cam]

The only way America can control the suppliers is to pay a premium for their oil - which is what is happening, come to think of it.