— by Polydamas
The February 24, 2015 veto by President Barack Hussein Obama of the Keystone XL Pipeline Project was not in the least surprising. The President had previously threatened to do so and he followed up on his promise. In doing so, the President did his best to destroy the hopes of America for energy independence.
Back in 2008, President Obama campaigned on the mantra of being “the generation that finally frees America from the tyranny of oil”. He has repeated the same or a similar mantra throughout his six years in office. But what does the phrase “tyranny of oil” really mean?
Many Americans who lived through the OPEC cartel’s oil embargo during the mid 1970s, which was imposed in retaliation for President Richard Nixon’s and the United States’ military support for Israel in its 1973 Yom Kippur war, waited in line for hours outside gas stations to buy strictly rationed gas at astronomically inflated prices. They thought that the phrase “tyranny of oil” refers to the improper efforts of Saudi Arabia and other members of the oil producers’ cartel to use their monopolistic control over this commodity to dictate geopolitical decisions and decide the public policy of the United States.
Younger Americans — or those focusing about more recent events — may think that the phrase “tyranny of oil” means something else entirely. According to Consumer Reports, six days after President Obama was inaugurated January of 2009, a gallon of gasoline at the pump cost $1.84. Yet, throughout the past six years of his presidency, gasoline has hovered well above $4.00 and $5.00 per gallon. Average Americans thought that spending double the amount budgeted for gasoline to drive their cars to work and for heating oil to heat their homes during the cold of winter was an economic tyranny.
Whether Americans subscribe to political independence or economic independence from the “tyranny of oil”, it is clear that the key to both is America’s own oil industry and its pioneering hydraulic fracturing and horizontal drilling technology, known as “fracking”. This technology permits recovery of shale oil and natural gas from huge domestic reserves which were previously inaccessible in such places as Bakken in North Dakota, Eagle Ford in Texas, and Marcellus in Pennsylvania. According to U.S. Energy Information Administration (EIA), in 2010, fracking technology resulted in the United States becoming the world’s foremost natural gas producer. This year, the United States is expected to surpass Saudi Arabia and Russia as the largest oil producer in the world.
The article below in the December 29, 2014 edition of the Wall Street Journal, titled “The Progressive Case for Fracking” by James Bloodworth makes a cogent case that liberals should rejoice by the collapse of tyrant oil regimes due to competition from the fracking industry which drives down world gasoline prices and profits. (http://tinyurl.com/l6wegxd). However, this is not what President Obama really means by the “tyranny of oil”.
President Obama speaks in code and is not an environmentalist even though he pretends to be. Dinesh D’Souza noted the glaring discrepancy between President Obama’s environmentalist rhetoric and his deeds in Chapter 9 of his excellent 2012 book “Obama’s America: Unmaking the American Dream”:
“Even as Obama blocks and restricts energy exploration in America, he has been helping other countries exploit their energy resources. Specifically, the Obama administration has bankrolled oil drilling in Brazil, Columbia, and Mexico. This oil is destined not for export to America, but for Brazil’s, Columbia’s, and Mexico’s own use, which includes selling some of it to the Chinese.”
Mr. D’Souza’s book cites an article in the Wall Street Journal that reported that the U.S. Export-Import Bank gave $2 billion in loans and loan guarantees to Petrobras, the Brazilian state-owned gas company, to drill in the Santos Basin near Rio de Janeiro. The U.S. Export-Import Bank also guaranteed $1 billion in loans to PEMEX the Mexican state-owned gas company. In May of 2011, the same U.S. Export-Import Bank approved financing of $2.84 billion to Columbia’s Refineria de Cartagena SA, which is a subsidiary of Ecopetrol, the Colombian state-owned oil company.
More recently, Mr. D’Souza’s point is driven further home by Forbes Magazine’s February 4, 2015 article by James Conca, titled “Nuclear Options – Obama In India”. In this article, it was reported that President Obama reached an agreement with Indian Prime Minister Narendra Modi to sell nuclear power plants to India. India is currently constructing six new reactors and is planning to construct 40 more. India plans in the next 20 years to have more than 60 nuclear reactors that will generate 40 GWe.
Just, by comparison, it should be pointed out that the Environmental Protection Agency and environmentalist groups have not permitted the construction of a single nuclear power plant in the United States since the Palo Verde Nuclear Generating Station in Arizona was commissioned in 1988. According to the Arizona Public Service that operates the power station, its operation conserves “484 million tonnes of carbon dioxide (the equivalent of taking up to 84 million cars off the road); more than 253,000 tonnes of sulphur dioxide; and 618,000 tonnes of nitrogen oxide.”
D’Souza’s book brilliantly explains that President Obama’s hypocrisy, his embrace of the petroleum industry and nuclear power abroad coupled with his rejection of the same industries domestically, is rooted in his third-word, anti-colonial world view:
President Obama “wants to enrich the previously colonized countries at the expense of previous and current colonizers. Anti-colonialists insist that since the West grew by looting the resources and raw materials of the colonies, it is time for global payback. The West must have less and the rest must have more. Unlike the colonial era, we are no longer concerned with cotton, corn or groundnuts; today there is a global demand for oil and other forms of energy. So Obama is attempting a global distribution of energy”.
One of the common mantras repeated by President Obama is that “we consume more than 20 percent of the world’s oil but we have less than 2 percent of the world’s oil reserves”. His prescription to redress the inequality in energy consumption is in essence an affirmative action program for undeveloped and underdeveloped countries that will elevate them, but at the cost of the redistribution of America’s wealth. He wants to depress the American standard of living to pay for the increase in the standard of living of the rest of the world. His redistributivist agenda is predicated upon high taxes and regulations at home whose intent is to destroy the American dream for Americans. In his presidential campaign of 1928, President Herbert Hoover promised Americans voters a “chicken in every pot and a car in every garage”. To top his predecessor in the White House, President Obama has essentially pledged to every inhabitant of a former third-world colony a chicken from every American pot and a car from every American garage.
The Keystone XL Pipeline would have been a safe, economical, and efficient transportation system for distributing shale oil and natural gas from Canada and North Dakota throughout the United States. President Obama knows very well that fracking technology means political and economic freedom for Americans, which is precisely why he vetoed it and further seeks to destroy the domestic fracking industry.
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The Progressive Case for Fracking
Tumbling oil prices have sent repressive regimes around the world reeling. Liberals should rejoice.
Christmas came early for the world’s liberal democracies this year, with news in mid-December that repressive regimes from Russia to Venezuela and from Iran to Belarus are tumbling down an economic spiral. Who or what should we thank for this geopolitical yuletide? The neocons? Pro-democracy protesters? George W. Bush and Tony Blair ?
No. Thank instead American shale producers. The shale-gas and hydraulic-fracking revolution is lighting a figurative bonfire under the world’s petrocracies. Dictatorships that for years blackmailed the West in the knowledge that we would come crawling back for the black stuff are now catching a glimpse of a bleak future.
As the American people and companies shift more of their consumption to cheaply produced domestic energy, the geopolitical leverage of oil-rich autocrats diminishes. A barrel of crude on Monday sold for less than $60, down nearly 50% since June when it went for $115. Take that, ayatollah.
This is a price drop made in the shale-rich heartlands of the U.S. Between 2007 and 2012, shale production in America jumped by more than 50% a year. In that time the shale share of total U.S. gas production rose to 39% from 5%. Last year the U.S. overtook Russia as the world’s leading energy producer; next year America is projected to overtake Saudi Arabia as the world’s biggest producer of crude oil.
One consequence is a massive fall in the price of oil just a few years after the words “peak oil” were being bandied around as gospel by environmentalists. Peak oil now looks like one of the most outlandish theories of our era. Rather than contract, the global supply of energy continues to diversify and expand, in no small part because of the boom in American shale.
This ought to put a smile not only on the faces of free-market economists, but liberals and progressives, too. As America becomes a net exporter of energy, shale could help topple some of the world’s worst regimes.
The relationship between oil wealth and autocracy is well-established, with a number of studies showing that democracy is less likely in oil-rich nations. Oil wealth helps keep dictators in their palaces by allowing vast military expenditure to repress dissent and providing a ready pool of money with which to co-opt their populations through generous welfare stipends.
Sitting atop large and valuable energy reserves also gives autocrats the luxury of keeping a tight lid on economic entrepreneurship. Winning the geographical lottery ensures that the oil money comes in regardless of how little revenue the rest of the economy generates.
Consider Russia and Venezuela. At least some voters in both countries have tolerated the emaciation of civil society while the Putinist and Chavista regimes have learned to use oil money to fend off unrest and buy off loyal cronies. Meanwhile, the armed forces in both nations have been placated with high-tech toys and rising salaries.
Despite legitimate environmental concerns about fracking and horizontal drilling, the long-term impact of shale on the global oil price means that regimes that have long relied on a single export for their survival are facing a potentially ruinous economic future.
Russia’s economic woes are well-documented, largely due to the fact that oil revenues make up 45% of the government budget. But elites in Iran and Venezuela also have the jitters and have been pleading with OPEC, the world’s largest oil cartel, to cut production to prevent the price of oil from falling any lower. Venezuela needs a price of $151 a barrel next year to balance its budget while Iran requires around $131.
So far Sunni Saudi Arabia has been willing to tolerate low prices in order to hurt its Shiite rival in Tehran. Yet Riyadh is no less worried about the long-term consequences of shale than are the Iranians—it simply has a bigger buffer of foreign-exchange reserves with which to soak up the short-term consequences. If oil stays at $60 per barrel in 2015, Riyadh will run a deficit equal to 14% of gross domestic product.
Some of the most vociferous opponents of fracking are liberals, yet the shale revolution has the potential to undermine some of the world’s most illiberal regimes, in the process freeing the U.S. from its bondage to Saudi Arabia, as demanded by progressives for decades. Thuggish governments in Caracas, Moscow and Tehran don’t much like shale either, which ought to endear it still further to democrats.
This is not to dismiss the environmental concerns regarding shale extraction in urban areas, nor to call for the abandonment of a long-term strategy in the West for the development of green renewables. Yet it is to recognize that American shale producers are engaged in a price war with some of the world’s vilest regimes. In that respect, the left should get on board the fracking revolution.
Mr. Bloodworth is editor of the blog Left Foot Forward.
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Oil isn’t cheap — at any price
By Rhea Suh
As world oil prices have slumped below $60 a barrel, tumbling nearly 50% since June to a five-year low, analysts have scrambled to discern the economic and political fallout.
The big picture, though, hasn’t changed: Oil is not cheap, at any price. What we’re charged at the pump for gasoline is just a down payment on the far larger tab we’re running to support our national oil habit. Rather than allow a temporary price reprieve to mask those costs, we should use this moment to take stock and change course.
Every day in this country, we use 800 million gallons of oil. That’s enough to fill the Empire State Building three times. With every gallon we produce, ship and burn, we incur costs that are piling up — for ourselves and our children.
The greatest burden we’re imposing on the next generation comes from the environmental damage we’re doing by consuming this fuel.
Burning oil and other fossil fuels is what generates the dangerous carbon pollution that is driving climate change, the central environmental challenge of our time. The first 11 months of this year were the hottest, globally, of any year since worldwide measurements began in 1880. We have an obligation to protect future generations from the dangers of more extreme heat, fires, drought and storms. Our national oil habit is making matters worse.
At the other end of the process, producing oil comes at a high cost to the natural systems we all depend on for our prosperity, our progress and our very survival.
Fracking — the source of a large and growing share of our domestic oil — has brought the perils of the industrial oil patch to the American backyard. It threatens the water, air, ranches and farms in communities across more than 30 states where this destructive industrial practice is used to drill for oil and natural gas.
Offshore oil production puts workers, waters and wildlife at risk of the kind of disaster that followed the 2010 BP blowout. That disaster killed 11 Americans, dumped 170 million gallons of toxic crude oil into the Gulf of Mexico and threw thousands of people out of work in the fishing, hospitality and energy industries.
Tar sands development is gutting vast tracts of one of the last truly wild places on Earth, the North American boreal forest of Canada, and poisoning waterways local people have relied on for their food and livelihoods for generations.
And Arctic drilling threatens rich habitat where the industry lacks the skills, equipment or knowledge to prevent, contain or clean up a spill.
Shipping crude oil exposes communities large and small to the kind of pipeline blowouts we’ve seen contaminate waters and lands in Michigan, Arkansas and elsewhere, part of the nearly 5,900 pipeline failures that have killed more than 375 Americans and spilled nearly 100 million gallons of oil and other hazardous liquids over just the last two decades. It also puts towns, cities and rural areas at risk of the kinds of oil train explosions we’ve suffered from the plains of North Dakota to the Blue Ridge Mountains of Virginia.
Securing access to oil reserves and shipping lanes worldwide, for ourselves and our allies, imposes huge costs, in terms of treasure and lives, on members of the U.S. military, their families and the taxpayers. The same goes for the U.S. diplomatic corps, which expends enormous resources each year shoring up relationships linked to the global oil trade. To the extent we must borrow money to finance these military and diplomatic operations, we’re passing on the costs of today’s oil to our children. Uncertainty, too, imposes costs. And, here, our dependence on oil is exacting a steep toll.
Oil prices go up, down and up again, depending on global forces. What it means is that our families, our workers, our entire economy is held hostage to global price swings we can neither control nor predict.
That’s why eight presidents — going back to Richard Nixon — have called on Americans, as a nation, to break this costly addiction to oil.
That means investing in efficiency so we can do more with less waste. It means getting more power from the wind and sun. It means building, in this country, the best electric and hybrid cars in the world. And it means remembering that cutting demand and diversifying supply remain the two most powerful tools for dealing with global oil markets we can’t control or predict. That’s the way to help ensure that all Americans have greater access to affordable energy, not just for today or next week, but far into the future.
Rhea Suh, a former assistant secretary of the Interior, is the incoming president of the Natural Resources Defense Council, an environmental advocacy group.