The 18 Cent Solution
MAY 2008
Robert McElroy's proposition of positive solutions to the wars in the Middle East over Oil, and how we can conserve our own natural gas and oil resources.
It has not been said enough – ‘To support the troops, use less energy’.
Many Americans believed the US invaded Iraq to remove a threat from Saddam Hussein, but it is not an acceptable conclusion in light of 1997 United Oil of California testimony before a US House subcommittee on the need for and challenges to a proposed oil and gas pipeline through Afghanistan (now being proposed without US participation by Iran). Prior to that, Richard Nixon drew a clear conclusion in his 1994 book, Beyond Peace that the US must continue to control, even if it involves military action, access to Middle East oil in order to protect the US domestic economy.
That is why we are in Iraq and have been in the region for at least five decades. It is about oil and it is about our individual energy consuming habits. We have been feeding at the cheap energy trough for nearly 100 years and now find we can’t afford to continue that lifestyle. High gas prices may help wean us away from impulsive and unnecessary energy use and that won’t hurt us, perhaps strengthen us personally, but it is an election year and Americans are complaining about the price of gas and candidates naturally want to solve the problem.
To ease our pain Senators Clinton and McCain propose a three-month moratorium on the 18 cent per gallon federal gas tax. Such a savings when the price of gas is still going to be around $4.00 per gallon raises the question if those candidates are telling us that there is simply no other solution to high gas prices or consider us to be energy addicts who will scramble gratefully when thrown a bone.
Perhaps because energy policy is a convoluted mesh of foreign policy, domestic economic policy, political ideology, and catering to special interests, the 18 cent solution is easy to peddle but it is not a solution and it is offered when there are immediate and effective solutions available.
In her recent testimony before the House Select Committee on Energy Independence and Global Warming Massachusetts Institute of Technology energy expert Melanie A. Kenderdine, who was a former official at the Department of Energy, explained that there are things government can do and can do immediately.
The Strategic Petroleum Reserve is nearly full at 700 million gallons but President Bush continues to purchase millions of gallons of crude thereby increasing demand and rising prices, Ms Kenderdine explained and added that simply releasing millions of gallons from the Reserve on the market would immediately increase supply and drive prices down. She supported her conclusion by contrasting President Bush’s actions to those taken by Bill Richardson when he was Secretary of Energy in the Clinton Administration. Richardson dumped 30 million gallons of crude on the market. “The results were immediate, in spite of the fact that oil had not yet moved into the market--demonstrating the psychological impacts on the market when the U.S. signals its intention to act. . . By the end of the year, actual oil prices had dropped from $30.94 to $20.38 per barrel, a 34% decrease.” She testified.
A more nuanced approach Ms. Kenderdine described would be swapping out the light crude in the Reserve for less expensive dark crude, capturing an immediate profit without lowering the Reserve content. Her suggestions showed saving or profits upwards towards $9 billion.
What seems to be overlooked in the President’s and Congress’ wean-away-from-foreign-oil strategies is 2005 information from the US Energy Information Administration calculating that North America has 100 years of oil resources. Canada is the largest supplier of crude to the US now that the price has made it profitable to extract from Canadian sand. Mexico is an OPEC aligned country but does not have to function under OPEC price controls and the US itself has untapped oil reserves in which investments were justified when oil passed the $40 per barrel price. Where would we be now if the $600 billion we have spent in Iraq had been directed to nurture an energy relationship with our neighbors?
If we used our own oil we would have nearly 100 years to figure out how to meet our energy needs with the estimated 300 trillion cubic feet of natural gas on the continent, solar and bio-energy solutions.
To be sure we would not have lost over 4,000 troops.
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