Diary

Surging Oil Underscores U.S. Vulnerability to World Events

It is being reported that President Obama is considering tapping into the Strategic Petroleum Reserves (SPR) in response to the surging oil prices and the skyrocketing gasoline prices at the pump.

The SPR was established following the 1974 oil embargo responsible for the long gas lines most of us not-so-fondly remember. The intent was that it be used in an emergency situation stemming from a major disruption of oil inflows into the U.S.

NEWS FLASH, Mr. President: Four-dollar gas is not an emergency.

Save the reserves for a real emergency like another Katrina tearing up the Gulf or the turmoil in the Middle East escalating into war. Moreover, opening the spigot on the reserves will not cover up the negative consequences – present or future, real or perceived – of you and your party’s no-drill policies.

At 19 million barrels per day, the U.S. is by far the world’s largest consumer of oil with China’s 8 million barrels/day coming in a distant second. To satisfy our insatiable thirst for the black gold, 12 million barrels/day are imported from other countries – many of whom aren’t our closest friends. Twelve million barrels per day equals 4.4 billion barrels per year and represents $440 billion per year we are sucking out of the U.S. economy to send abroad. The good news is, it creates hundreds of thousands jobs.

In Saudi Arabia, Venezuela, Canada, etc.

The real story here is not $4 gas. The real story will not be seen on MSNBC or in the editorials of the NYT. The real story is that this minor hiccup in global oil production has once again exposed how dangerously vulnerable the U.S. has become to world events totally beyond our control.

A severe and prolonged disruption of oil flowing into the U.S. will have consequences too ugly to even think about. It is frightening – even horrifying – to imagine the utter destruction to our economy resulting from a prolonged reduction of 40-50% of oil flowing into this country.

The Middle East is sitting on a powder keg, and there are too many dictators, terrorists, and citizens in revolt holding matches to light the fuse. OPEC has our gonads in a vice and their hand on the handle. Venezuela is ruled by an unpredictable, raving madman capable of doing anything at any time. Bin Laden and Al Qaeda are determined to cripple the U.S. economy, and blowing up oil wells or hitting the distribution channels would achieve that goal. A more far-fetched scenario – but not totally outside the realm of possibility – is one in which countries go to war to gain control of the world’s oilfields in the event of chaos and turmoil in the oil patch. After all, oil is the lifeblood of the world’s economic engine.

The world is a dangerous place and there are far too many scenarios that could lead to a global oil crisis. This could be a good time to start buying stock in a company that makes horse buggies. Or horse feed.

While “going green” may sound good, we are no closer to achieving that pie-in-the-sky dream than we were when Obama took office. Besides, we are 15-20 years away from making a significant reduction in our oil usage.

Nor are we any closer to lessening our dependence on foreign oil. To the contrary, actually, by virtue of Obama shutting down some domestic drilling following the BP oil spill and by letting the environmentalists dictate energy policy.

Government historically won’t react to the threat of a crisis until it becomes a crisis. In this case, it’s much too dangerous to wait when there are things we can do to mitigate the destruction a prolonged oil shortage would wreak on our economy.

Drill Baby Drill!