Oil Exploitation

Posted by Travis on May 22, 2008 at 1:33 am

My grandfather recently told me a story from his childhood, when in the wake of Pearl Harbor, his father silently retreated to his Houston backyard, and began turning up the soil in December 1941.  Although puzzling, his intentions were simple:  plant vegetables.  He later built a coop and a pen, bought pigs and chickens, and soon, his family was self-sufficient.  In an age of minimal networking, most didn’t know where Pearl Harbor was, as the Wikipedia history lessons weren’t readily available as they are today.  He only knew the Japanese had bombed American territory, and in case of enemy invasion, he would be ready. 

The actions of my father’s father’s father are telling.  They embody a level of commitment and a realization that, yes, we are at war.  He also decided to “eat locally;” today, our food travels an average of 1500 miles before hitting our plates.  Inflated food prices are at their highest in 18 years.  Ethanol mandates receive a lot of the blame for this.  According to the US Department of Agriculture last week, however, food prices have only risen 3% due to the President’s mandate to produce 30 million more barrels of ethanol.  In actuality, due to the high gas prices, it costs more to put that food on your plate than it did yesterday.  Gas prices have caused across-the-board inflation.  Today, we don’t even realize we’re at war. 

So let’s look at some of the facts at hand.  Since 9/11, oil prices have more than quintupled.  It’s not hard to conceive, however, when you look at the roster of the Oil Producing and Exporting Countries, an opaque list of dictatorships and kingdoms known as OPEC:  Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.  Obviously, some of these countries are bigger players than the others, but when you look for the cause of our woes, consider the source. 

These select countries collectively set the price of oil, based on… well, not supply and demand in the United States.  Global oil production is up, and US demand dropped 0.8 percent since last year, so the price should have gone down.  However, since international demand has risen due to India and China’s growing impact, prices have risen due to speculation and global fear.  The past year should be an indication of the direction we are heading:  for the first time in history, more cars were purchased in Asia than in the United States.

I remember paying 85 cents a gallon for gas in high school (in the Nineties) and “driving around” all night.  It was possible to fill your gas tank then for ten dollars or less.  Today, it may cost $300 a month or more just to drive back-and-forth to work.  It is now feasible to pay less a month for your car than you do for the gasoline you put in it. 

We are being held hostage by a handful of foreign countries. 

We are literally being held over a barrel. 

Crisis Evolving 

To date, sixty-five percent of our oil is imported.  Consider the fact that (on May 21, 2008) gas is $3.70 a gallon in America, while in Venezuela, it is 12 cents, in Iran, 40 cents, in Saudi Arabia, 45 cents, and in Libya, 50 cents.  Among these countries, only Saudi Arabia is considered a real ally; more on that later.  Europeans pay more than we do for gas, averaging eight dollars a gallon.  Which raises the question:  would we pay eight dollars for a gallon of gasoline?  I guess it depends on how far you drive to work.  At some point, you will see negative returns on commuting to work.  Let’s suppose OPEC continues to ratchet the price: what would happen when gas costs five, or ten, or twenty dollars a gallon?  Would we pay twenty dollars for a gallon of gasoline?  Hopefully, we won’t someday look back fondly at these days, when gas was less than four dollars a gallon, or wish we could simply get gasoline at all.   

What happens when OPEC says oil is no longer for sale?  What if we reach “peak oil” with our remaining economic allies?  It’s enough to pontificate starting a strategic reserve of your very own.  A gasoline outage wouldn’t just affect your driving, though.  Food prices would skyrocket.  Cross country shipments would come to a screeching halt.  Planes would be grounded.  Work and production nationwide would cease; what would happen to the Stock Market?  Are we seeing these effects now?  If it were to become unavailable, what would people do just for a gallon of gasoline? 

Friends Like These 

Some claim Big Oil is responsible for the high price of gasoline.  According to the Department of Energy data from March 2008, 12% of what you pay at the pump goes to taxes, 16% goes to oil companies for refining, distribution, and service stations, while 72% pays for the crude oil.  That variable is set by OPEC.   

Where does our imported oil come from?  Most comes from Canada.  Saudi Arabia is by far the largest known supply of oil in the world.  Roughly seventeen percent of our oil comes from Saudi Arabia. Behind Canada’s twenty-six percent contribution, Saudi Arabia is the major supplier of American oil.  Without Canada, our silent partner and consequently the second largest known supply of oil in the world, we would be putty in the hands of the Middle East.  We currently have a discordant foreign policy in place throughout the entire region due to oil economy.  Instead of basing our relations on human rights, the foundation of freedom, we lay our money down for the Saudi regime.

It’s no mystery that we have a rocky relationship with Saudi Arabia.  Since their discovery of oil, we have sought business with the regime.  After the death of King Fahd in 2005, half-brother Crown Prince Abdullah advanced to the throne.  This position was sought after by half-brother Prince Nayef, now the Interior Minister, who is seen as the heir apparent of the crown.  As King Abdullah is now 84 and Prince Nayef is 75, this shift could happen sooner rather than later. 


So who is Prince Nayef, and how is he different from King Abdullah?  To peel this onion is to reveal a certain “Saudi paradox.”  King Abdullah is a proponent of rapprochement between Muslims and Non-Muslims, known in Arabic as “taqarub.”  He is an ardent supporter of the theory of “Great Capitalist Peace,” in which free market drives foreign policy.  Prince Nayef, on the other hand, is closer to the Wahhabi than King Abdullah, and as Interior Minister oversees the funding of worldwide extremist political groups like Hamas, and various madrassahs, or schools, throughout Saudi Arabia, Pakistan, and various parts of the world, including Gibraltar, shown below.  Put simply, Salafists teach hatred for the West to young children.  From an early age, children are taught that jihadi martyrdom is divine.  From all this, you can deduce that while we are engaged in a Global War on Terror, we are funding both sides of the war. 


Let me include a couple of historical examples to personify Prince Nayef.  As Interior Minister, he is head of the Commission for the Promotion of Virtue and Prevention of Vice (CPVPV), or as we would call it, the Religious Police.  The CPVPC walk the streets and carry sticks to flog those not praying at proper times, as they are responsible for enforcing Islamic law in Saudi Arabia.  On March 11, 2002, a dormitory at a girl’s school in Mecca caught fire, and the Religious Police beat back schoolgirls as they tried to leave without their proper Islamic headdress.  More than a dozen girls died as a result, an act which Prince Nayef defended, saying the CPCPV prevented “mistreatment” of the girls.  In June 2007, the Religious Police beat a man to death in front of his family on suspicions he possessed alcohol. 

We turn a blind eye to the actions of an evil regime to get that oil, and while these actions vilify Nayef on the home front, his interference in the Global War on Terror makes him a more immediate threat to the United States.  Fifteen of the nineteen 9/11 hijackers were from Saudi Arabia.  In November 2002, he absolved the hijackers of all responsibility, and instead blamed Israel of a conspiracy to rouse the Zionist-Crusader Alliance against the Muslim world.  This is the future of U.S.-Saudi relations.  610x.jpg

Maybe last week we saw the beginning of the end.  With impending out-of-control gas prices, the Department of Energy halted sending oil to the nation’s Petroleum Strategic Reserve, located along the Gulf Coast (in great places like Winnie, Texas), to begin in July and to remain in effect through the rest of 2008.  Experts say this action could lower gas prices as much as twenty-four cents.  Earlier that day, President Bush met with his Saudi friends, including King Abdullah, and asked for an increase in production from the Saudis, which would provide some relief at the pump here in the U.S.  The answer was no.  Our economic ally drew a proverbial line in the desert sand.   

Energy Dependence 

We can have our own opinions, but we can’t have our own facts.  One fact is no new oil refineries have been built in this country since 1976.  Years ago, some in Congress suggested oil companies stalled construction to build up their profits.  Congress does not help in this matter, though, while the oil companies debate the sensibility of investing in new refineries and cite ethanol or other alternative fuels as reasons why not to build them. 

This back-and-forth between Congress and Big Oil is not new.  It came to a head today in a Senate Judiciary Hearing as oil representatives testified on Capitol Hill.  Senator Dick Durbin charged the executives, saying, “You have to sense what you’re doing to us.  We’re on the precipice here, about to fall into recession.  Does it trouble any one of you, the costs you’re imposing on families on small businesses, on truckers?”  The President of Shell Oil retorted that federal restrictions on drilling have caused the problems, stating, “If the nation set a goal of increasing domestic production by two to three million barrels a day by opening up new sources of exploration and production, we could demonstrate to the world that we are in control of our own destiny.” 

The fact I submit is this:  as we search for ways forward, any barrier to energy security of any kind is now a national security issue.  With friends like the Saudis, no additional chokepoints are needed.  To protect America and guarantee our foreign policy is not tainted by our energy needs; we must break our dependence.  We are addicted to oil, and we compromise our values in order to get it.  We cannot gain energy independence overnight, though.  Experts project it would take years to render results from new sources.  As we pay over $200 million dollars a minute on foreign oil, and borrow nearly $500 billion a year to pay for it, we import more than 9 million barrels a day, making up twenty-seven percent of the world’s energy demand.  Ninety-seven percent of our transportation infrastructure depends on oil.  These facts add up to show how extremely vulnerable we are.  

Declaring Independence 

What sacrifices have we really made during this war?  Our dependence on foreign oil has steadily grown, and debate over environmental issues has bitterly sharpened.  To advocate raising Corporate Average Fuel Economy (CAFE) standards brands you a hippie.  Consider the fact that doubling our vehicle efficiency would reduce oil consumption by 3.6 million barrels of oil per day; we import 2 million barrels per day from the entire Middle East.  The somewhat bipartisan cap-and-trade proposal by Senators Warner and Lieberman focuses on climate, and is a start to negotiating a path forward, but are not the absolute answer.  However, when coupled with Senator Domenici’s plan to increase production of oil within the United States, it seems Congress is beginning to realize the dire straits into which we stare.

I believe Americans should be able to judge their own transportation needs, and do what they feel they should do.  More than half a century ago, my great-grandfather found it necessary to produce his own food; that American spirit of sacrifice should be within all of us now.  I think when tackled deliberately, fuel economy can be raised without punishing Americans through tax burdens or through employment woes.  It will take a certain amount of understanding on the part of the American people.  Ultimately, a public and determined deliberation will be necessary between private industry, our government bodies, and the people they serve.  I just hope it happens before it’s too late.

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  • On May 22, 2008 at 3:21 am Dad said

    Thank you for relaying the family story I have heard so many times! Grandad was raised hearing first hand accounts from people who had lived in the war torn South and knew what had to be done to survive. Truly, this kind of immediate commitment to the sacrifices necessary for war are not happening today, nor do I know if this country is willing to make those sacrifices. We’ll see, I guess.

    The argument for energy independence never cites history’s lessons that the world should have learned about dealing with Middle Eastern potentates. Nations, including ours, have long been paying ransoms to Islamic tribesmen; first for the guarantee of safe passage through the Med. Sea (Jefferson administration) and now for petroleum. The goods and services rendered have changed, the ideology remains. It will not change. It is as ingrained in their sense of morality as ours is on the Golden Rule. Our only chance is to remove ourselves from dependence on their product. This will certainly require an increase in production but, more importantly, an increase in refining capability. Imagine trying to put out a fire with a garden hose. It doesn’t matter if you have 10,000 gals. of water at your disposal or 1,000,000 gallons. If you try to deliver the water thru a garden hose, your house will burn down before you get enough water delivered. My fear is that “Big Oil ” will find it more profitable to build this refining capability in the foreign countries where the well-heads are and ship finished product to us. If the tax plans designed to punish oil companies currently being touted by at least 1 Presidential candidate are implemented, I fear several members of “Big Oil” will opt to leave only gas pumps on our shores

  • On May 22, 2008 at 12:30 pm Robert said

    I have three matters of interest to respond to this excellent post with.

    1. As the price of oil increases, manufacturers are going to adapt new ways of production. Of course there are deposits of crude sitting off the shores of Florida and on the North American Continental Shelf from the degradation of the Appalachians in the geologic past and the subsequent algal blooms that would have fed off nutrient rich sediments and been deposited from overwhelming bed loads. However, tar sands have become another reality in production. Canada already produces crude from tar sands. These same deposits can be found in the Dakotas. If we were to just tap the fairly obvious and expand on our domestic refining capability, our place on the foreign demand market would decrease, as would the strain on our wallets.

    2. Big oil has large profits but average profit margins. They are in the biggest business in the world, it is no wonder why they are going to have such high profits. However, their ratio of earnings is comparable to smaller businesses. It should not be the business of the US government to punish privately held businesses for being in the most profitable industry in the world. Taxing big oil would only strain consumers at the pump more. Socialist ideals will not extricate us from this current crisis.

    3. We lost our largest bargaining chip when we invaded Iraq and subsequently captured Sadam Hussein (Trav- you may have heard this argument on WNIS this morning). It is true though. We had much more sway in that region when we were the ones holding Sadam at bay and keeping him from invading his neighbors (Saudi Arabia and Iran). We did a job too well because now our influence is diminished and a general outcry of dissent among the American people (which I believe is healthy and what this country was established to protect) convinces nations that military clout is off the table for US options.

    My personal solution? Conversion to engines that are compliant with ethanol, butanol, gasoline, and methanol. We have the ability to make our waste our fuel. It is only a matter of changing some hardware in engines to a more suitable plastic, Brazil did it. Why not move forward and grow and/or scoop up our fuel instead of importing from a region that is currently involved in an economic fatwa against us?

  • On May 22, 2008 at 9:58 pm Jack Thornton said

    Robert is definitely a psychic, because I was telling dad the exact same thing 2 days ago, even the part on how this country’s new policies are making it into a socialist state where the government has their finger in everything. But in all seriousness, I believe the greatest factor in the trouble of the rising oil prices is the ignorance of most American people. They have no idea why this is occurring and what must be done. Most just sluff off the rising oil prices as a result of the war in Iraq, but it is much much more complicated. India and China are the real culprits behind the rising oil prices, but we can’t blame them, they’re just improving their infrastructure. Have you noticed how inexpensive electronics are getting? Maybe it’s because the producers no longer have to ship them from the factory to the docks by bicycle. The independence of America in all aspect of our lives is affected by our attitude towards the rest of the world. We believe we are entitled to the gas just because of who we are, but that isn’t right. Equal opportunities should be given to all countries to consume oil.
    Also, Robert brought forth what I see as the most apparent remedy. The Bio-fuels, whether it be biodiesel from basically any organic matter (which I believe is the best suited) or ethanol from corn, are the way this countries energy should be looking. What did Rudolf Diesel pour into his first Diesel engine? Vegetable oil.
    The Chinese Tallow Tree, which is very prominent in mainland China (and southeast Texas) is noted for having one of the greatest capacity for producing biodiesel per kilogram. Perhaps we should slip the idea to the Chinese (and the Indians) that they have the potential to be making their own fuel which is literally on their back porch. If they began making biodiesel, this could greatly effect the oil prices here and possibly show America the way, because who is going to want to be shown up by the Chinese who have had cars for a week and are already doing it better than us? Exactly

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