The Great Oil Wars: Welcome to the 21st Century
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
There is nothing in the Constitution or Bill or Rights guaranteeing our right to cheap gasoline.
In fact, at about $3 a gallon, gasoline is substantially less expensive in America than in much of the Western world. Motorists are paying double that at pumps in France, Britain, the Netherlands, and Scandinavia.
The higher price reflects the taxes Europeans pay to improve and expand mass transportation and discourage profligate consumption. And it works.
Spotting an SUV on London or Copenhagen streets is rare. Driving a Hummer is considered obscene in Barcelona or Florence. Owning such a monster car is akin to wearing a mink to a Sierra Club fundraiser.
As the oil debate unfolds stateside, and as politicians campaign on energy issues, they might do us a favor by analyzing the facts rather than launching bogus attacks on oil companies and making absurd allegations of price gouging. The charges were investigated far too many times in the past 25 years with no guilty verdict.
Long before the current energy crisis arrived, hundreds of oil experts warned that the 21st century could be the “oil wars” era, given the dearth of supply and rapid increase in demand.
Rising prices reflect a new paradigm. In the last century, America reigned supreme as the premier oil consumer, gobbling up a quarter of global production and building culture, industry, and wealth on profligate energy consumption. In the 1970s, the top 10 energy companies in the world were all American. And virtually all oil-producing countries were friends or client states. Today, only one of the top 10 oil multinationals, ExxonMobil, is American. The others are British, Dutch, Russian, French, Italian, Spanish, Brazilian, and Chinese.
Indeed, China is about to overtake America as the world’s largest oil consumer. And Saudi Arabia, once our main client state, is no longer that. It sells 95% of its oil to Asians who present a geographically closer market and are far more accommodating politically.
Western Europe saw this oil tsunami coming back in the 1970s.
Europeans started weaning themselves off cheap gasoline by imposing high taxes on it, and, particularly in the case of France, building a network of nuclear power generations. France’s nuclear capability is so large today, in fact, that the country exports electricity throughout Europe. High taxes were part of governments’ plans, like administering a vaccine to toughen resistance.
America no longer has time to waste. Talk of punishing oil companies is pandering to a spoiled public. Oil companies are a go-between. They do not own the stuff (Arabs, Persians, and Latinos do). What oil companies do is provide the technology and man power required to extract and refine it. They also undertake huge political risks to deliver the goods, working in dicey places such as Iran, Nigeria, Saudi Arabia, Venezuela, and Iraq, where rule of law simply does not exist. Even in the democratic West, they work in hostile environments such as the North Sea and Alaska. They hit and miss. For taking on that risk, they must be compensated.
The problem of this century is that, unlike in years past, we are not finding oil fast enough to satisfy growing appetites of new economic giants. Also oil consumption is no longer an exclusive American privilege. China and India, among others, are crowding the field. As it stands right now, the world goes through 84 million barrels a day, and that is just about how much the Middle East, Russia, Latin America, and Africa produce. There isn’t more. So every time a bomb explodes near oil fields, or President Chavez of Venezuela and President Ahmadinejad of Iran make some noise, prices jump.
Critics should pick instead on real culprits like the venture capitalists who are not pumping money into “alternative fuels,” such as nuclear power, coal – of which America has the largest reserves in the world – and ethanol.
Still some are taking advantage of the opportunities provided by other forms of energy generation.
Brazil this year has become self-sufficient in energy by producing ethanol from sugar cane.
What is certain is that sometime in the year 2020, pundits will remember fondly the “big oil crisis” that came – and went – in the early part of the 21st century. Between now and then, however, we will live with higher prices and may indeed see an oil war or two.
As the Chinese say: May you live in interesting times.