September 14 is OPEC's -- the Organization of Petroleum Exporting Countries -- 50th birthday. OPEC was formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Since then it has expanded to 12 countries, but its goal is the same: To influence and, if necessary, manipulate the price of crude oil in the world. OPEC accounts for about a third of the world's oil production, so they can, by increasing or decreasing production, affect the price.
In 1957 -- three years before the formation of OPEC -- oil was selling for about $3.00 per barrel. Using the Consumer Price Index, that means oil today should be selling for about $23 per barrel. Instead oil is selling for about $80 per barrel. Even including the rise of China and India as industrial powerhouses, OPEC has been at the center of oil prices for the past half century.
Since its founding, OPEC has sold about $14 trillion worth of oil -- about one out of every five dollars of that -- over $2.5 trillion -- has been provided by you and me every time we've gone to the gas station. If we could have kept just half of that circulating in the U.S. economy that would have been an average of $25 billion staying in America rather than going to fund the royal families in Saudi Arabia and Kuwait; and pay to support unfriendly governments in places like Venezuela and Iran each and every year for the past fifty years.
As the former Director of Central Intelligence James Woosley pointed out in a Wall Street Journal essay: "If [oil] reaches $125 a barrel again, as it did in 2008, then approximately half the wealth in the world -- above and below ground -- will be controlled by OPEC nations."
President Barack Obama has recognized the danger we face in depending so heavily on OPEC oil. In the early 1970's OPEC attempted to influence American foreign policy by instituting a boycott -- meaning no OPEC nation would sell oil to the United States. At the time we imported only about a quarter of the oil we needed and what became known as the "Arab Oil Embargo" still produced dramatic effects socially and economically. Today we import nearly two-thirds of our oil, 70 percent of which is used as our principal transportation fuel, so reducing our dependence on OPEC is a high priority.
The Pickens Plan is the only path to reducing, then eliminating our need for any OPEC oil. By replacing America's fleet of 18-wheelers, trash and recycling trucks; and, municipal and school buses that are now burning imported diesel, with vehicles running on domestic natural gas, we can reduce our need for OPEC oil by half within the next seven years.
While that is going on the 250 million passenger vehicles and light trucks can begin to move from imported gasoline to alternative fuels which would remove our need for any remaining need for OPEC oil.
Keep in mind that while OPEC is controlling oil prices by controlling production, they are forcing the rest of the world to drill for the most expensive oil thus, as Woolsey wrote: "OPEC has very large reserves and cheap extraction costs, while domestic drilling costs for new oil will be many times that of the Saudis.
There's a reason we're drilling in deep water off in the Gulf of Mexico and off the coast of Africa. Currently, OPEC is keeping its easily recoverable oil off the world market to manipulate prices.
There are no fewer than five bills that have been introduced in the U.S. House and Senate which include the Pickens Plan as part of their language. The Nat Gas Act, for instance, has 145 bi-partisan co-sponsors. As the Congress returns for its short pre-election session this week, the leadership in each Chamber -- Republicans and Democrats -- are looking for something that their Members can go home and point to as a victory for the U.S.
Passing legislation which includes the Pickens Plan is well within the grasp of the Congress. It might not make OPEC feel happy, but it would be a great birthday present to the American people.
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