The current election cycle and the rising price of gasoline have rekindled interest in energy security and how best to achieve it. We’ve had these spasms of interest and hand-wringing before—many times. And each time we believed we had identified a way to overcome our vulnerability to the disruption or unaffordable pricing of oil, the price would decline, we would become complacent again, and effective, long-term solutions were forgotten.
This time, however, the stakes go well beyond the price of a fill-up at the pump. They involve a predictable renewed recession and prolonged, severe economic hardship for all Americans. As we tackle this energy challenge again, if the outcome is to be any different it may help to start with a few facts:
• Petroleum products drive 97% of all air, sea and land transportation in our country. Oil is truly the lifeblood of every industrial economy. If goods don’t move, revenues stop, jobs are lost and economies collapse. Oil is a strategic commodity, an essential good which if disrupted or priced extravagantly can cause our economy to collapse.
• Unlike other essential commodities such as clothing and food, where we have choices, in transportation fuel we’re stuck with petroleum alone. It enjoys a monopoly.
• The price of oil is set by a foreign cartel. The Organization of Petroleum Exporting Countries (OPEC) owns almost 80% of global oil reserves yet produces only 36% of daily global supply. This dominant position enables OPEC to raise or lower their production to maintain the global supply-demand relationship that suits their interest. If U.S. oil companies produce more, OPEC will produce less.