Stop Blaming OPEC

Let me start off here reiterating that I am very much in favor of expanding renewable energy, energy independence and reducing all dependence on fossil fuels. This is not some fascist agenda, this is common sense for the environment, foreign affairs, human rights and economics. I am also a ferocious defender of human rights. Any cursory browsing of my policy proposals will back this up. The point here being that I am not defending any human rights abuses or environmental damage due to the activities of oil producing countries. 

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Several international organizations have been warning about the extreme risks of a global recession accompanied by famine. These warnings continue to become more urgent and rightly so. To varying degrees such organizations as the World Food Organization, the IMF, the World Bank, the UN Human Rights Council and Human Rights Watch are a few that have been sounding the alarm, stating that increasing interest rates will increase these dangers with no guarantee of success. To varying degrees, each one has also called on lifting trade sanctions. Now, I do not agree with all of these organizations on everything they have to say by a long shot but in this particular case, when they are all issuing extremely similar warnings, it is time to listen. 

Which brings us more directly to the issue of fossil fuels. The narrative being fed to the American public is that inflation is being caused by Russian aggression against Ukraine. There are a number of problems with this claim, beginning with the fact that inflation was increasing prior to the conflict. In 2021 the World Food Organization stated that global food inflation had reached 30%. Most Americans are not aware of this because we have not officially experienced that level of inflation. Officially. The reality is far different. Early in 2022 oil and gas prices were already increasing before the Ukraine conflict began.

Last week, OPEC and OPEC+ announced they will be decreasing oil production by 2 million barrels per day. This is happening as Europe is experiencing unprecedented energy inflation, along with downstream inflation and deindustrialization leading to widespread job losses, currency devaluation and increasing debt. They are expecting to have energy shortages which may include mandatory energy rationing, rolling blackouts during winter and even communications disruptions. 

President Biden, who labeled Saudi Arabia a “pariah state” during his campaign tried calling Saudi Arabia earlier this year to ask them to increase oil production. They did not answer the phone. So, he went to Saudi Arabia, performed the now famous fist bump with the Saudi prince, who is highly implicated in the assassination of a US based journalist, in an attempt to make the request in person. He was denied. Biden has also tried talking with president Maduro of Venezuela, whom Biden claimed was not the legitimate president of Venezuela, also to request that Venezuela increase oil production. Results are pending based on negotiations. Not much is expected, as the US still wants to privatize a large percentage of the Venezuelan oil industry, which Maduro is not likely to agree to. On Iran, the administration is attempting to garner more oil production while still maintaining sanctions which were imposed by Trump. Not much chance of success there. Each of these countries are among the original and current members of OPEC. 

Now, based on the fact that OPEC/OPEC+  refused to bow to US demands for US interests contrary to their own, Biden is implying an intent to impose sanctions on Saudi Arabia. This is pure theater because it will not happen. The value of the dollar is based on the petrodollar system. That system is dependent on US sales of weapons to Saudi Arabia. In return, Saudi Arabia and much of OPEC only sells oil in US dollars. Some OPEC/OPEC+ nations have been gradually moving away from that arrangement, as they have no need for US weapons. If the US breaks the agreement with Saudi Arabia, then Saudi Arabia will immediately cease using the dollar for oil trade, sending the dollar into an instantaneous death plunge. It would not even be a spiral but a high speed nosedive straight into the ground. 

Many Americans will rely on a statement by former president Trump that the US is now an oil exporting nation. Their belief is that this is a permanent situation or that it stopped after Biden took office. Neither is true. The fact is that the US did not export oil for decades. That situation changed under the Obama/Biden administration. The actual statement by Trump should have been that we were a NET oil exporter. That statement was just barely true for roughly 1 ½ years, from 2018 to sometime in 2019. In fact, we were still importing oil at that time and the amount we exported above our imports was only about 160,000 barrels a day. Then, our oil production and hence exports declined in 2019, long before the pandemic began. Since then, we have again been net importers of oil.

There is also the myth going around that Biden has reduced the number of oil drilling permits. In fact, Biden has issued an equal or higher number of drilling permits than Trump did at the same time in his administration. In 2021, the Biden administration issued an average of 333 drilling permits per month on public lands. 

There is also no extraordinary limitation of the use of those permits. As of this time, there are over 9000 drilling permits which are not being utilized. Of those, about 2200 are delayed by legal processes such as environmental impact studies, leaving 6800 valid permits which are not being used. 

The truth is that the US has fewer active oil and gas rigs today than we had in 2018. In November of 2018, we had 1082 total rigs active. 887 of those were oil rigs. Today, we have a total rig count of 764 rigs. 602 of those are oil rigs. So, we have 318 fewer total rigs and 285 fewer oil rigs active today than during the 2018 peak. The decline of the rig count began in 2019, dropped very rapidly in 2020 and never fully recovered.

Nov 2018 

1082 rigs

887 oil rigs

Today 

764 rigs

602 oil rigs

Over 9000 unused drilling permits

2200 held in legal suspension, such as environmental impact studies

Leaving 6800 permits currently usable. 

Biden has issued an average of 333 permits per month on public lands in 2021.

To replace the amount of oil which the US currently imports and achieve energy independence would mean the US would have to increase oil production by at least 100%. To export oil would mean we would have to increase oil production even further. Yet we do not have the refinery capacity to do that. In fact, 5 refineries in the US have closed in the past 2 years. Granted, modern refineries have more refining capacity per unit than older ones did. However, that means when just one gets knocked offline due to storms, extreme cold or technical issues, the impact is more severe. 

So by now you are wondering why this is all true. Because of capitalist US oil industry investors. Even as they are making extreme profits from the US oil industry selling US oil and gas to Europe at inflated prices, they do not want to invest in increasing oil extraction and processing until oil prices are forced higher. Europe is currently paying 400% more for US natural gas than US consumers pay and roughly 700% more than they paid for Russian gas this time last year. In some parts of Europe, the prices are even higher. Europe is also paying much higher for gasoline and diesel. Then one must keep in mind that European corporations tack on additional profits above that. Those corporations are also making considerable profits. In some cases, there are shortages so bad that gas stations have closed. WTI crude is currently $87 a barrel. Investors want oil to be above $110 a barrel to increase production. 

The EU and US administrations are suggesting placing price caps on Russian oil. To which Russia has clearly stated they will cease all oil exports to countries that honor that cap. The result would be a massive and immediate spike in oil prices, possibly to $200 a barrel or higher. Meanwhile, Saudi Arabia has announced they will charge the US more for oil than they charge other nations, should sanctions be imposed on them. This is something which they have done previously, so it is not a threat but a promise.

The Biden administration claims that their concern is energy security for the US and Europe. The steps which have been taken have resulted in the exact opposite. Not only for the US and Europe but have had far worse effects for poorer countries. Not only for oil and gas but for food and fertilizer, leading to the extreme risk of famine in poor nations. This is not a temporary situation. The effects of these intentional decisions will continue for years and cost many millions of lives. This is an absolute certainty. It is also well known and is entirely intentional. 

Just for the US, the Biden administration has been releasing oil from the National Petroleum Reserve (NPR) at such a rate that it is at the lowest level since 1984. This means that our energy security has diminished significantly. After the OPEC announcement, the administration announced even further releases from the NPR. Eventually, that oil should be replaced. Considering that there is no indication that oil prices will decline in the foreseeable future, that means it will cost far more to replace it. The national debt recently exceeded $31 trillion and continues to increase.

What could be done? Nothing which this administration or any potential administration of the two party system would enact. Nothing which our current two party Congress will enact. 

If the concern were genuinely for energy security, there are several things which could be done. The first and most obvious answer would be to lift all sanctions against oil and gas producing countries. The other thing which could be done would be to nationalize the fossil fuel industry. In both cases, this would increase the amount of oil, gas and fertilizer on the global market while securing our own energy supply. This would help not only our own country but Europe and poorer countries, saving many millions of lives, industries and jobs. 

I would be entirely willing to take not just one of these steps but both concurrently. On numerous levels, this would insure energy security not only for the US but other countries as well. By increasing production across all oil producing countries, global energy security is increased while competition brings the cost down. Keeping energy prices down also helps maintain production, meaning jobs. The more inflation and shortages of resources we experience, the more job losses we will see. None of which leads to security at the personal, national or international level. It means increasing insecurity, suffering, conflict and social upheaval. 

None of this means we should not be continuing the move away from fossil fuels. In fact, that effort needs to be accelerated. However, that would be nearly impossible to do if the global economy is intentionally forced into recession or even depression. Increased utilization of renewable energy would mean greater security at all levels, environmental improvement, increased employment and lower energy cost in the long term. Are there flaws to be worked out for renewable energy? Yes but all forms of energy production have had flaws when they were first utilized on a large scale. The same is true with virtually all technologies. Lack of perfection is not an excuse to not be moving in that direction. Avoiding that move is nothing more than propaganda by the fossil fuel industry which has clearly shown a lack of concern for the health of lives or economies many millions of times by this point. Besides, it’s unlikely we will have wars for wind or solar power. The dependency on fossil fuels allows for far too much power via sanctions. That dependency oppresses the ability of developing nations to become more independent and improve their economies or living conditions. It even limits the independence of smaller communities inside of the US. Those limitations are a large part of the whole point. 

Things which should not be considered options would be more government subsidies for fossil fuel companies or forcing them through government mandate to increase production while artificially limiting the global energy supply. Subsidies would increase debt. Mandates would justify increasing energy prices, which would cause more inflation, more suffering, more job losses, more small business failures, more personal and business bankruptcies. As I have illustrated, none of that is necessary. 

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