Many Americans think of the shale revolution as all about oil. Those thousands of wells bring up plenty of oil, after all. But they also bring up a treasure trove of natural gas, Fuel Freedom Foundation co-founder and chairman Yossie Hollander told Atlanta radio station WCFO recently.
And boy, are there a lot of fools.
Food vs. fuel. It’s an argument you’ve likely heard before, and you’re likely to hear again. People in the world are still going hungry, so we shouldn’t be using crops to make fuel. The corn grown in the United States should be going into the bellies of starving children, not our gas tanks. Read more
Americans love choice. Whether it’s deciding what kind of car we drive, what type of food we eat for dinner, or which smartphone we use, there’s an abundance of choices. In fact, our country was even built on the premise of being able to choose what religion you practiced.
For thousands of years, there was a commodity that people across the globe, from China to Rome to Texas, fought bloody conflicts to secure. A product that was used to pay solders and decided the outcomes of wars. No, I’m not talking about gold — I’m talking about salt.
Fuel Freedom Foundation chairman Yossie Hollander delivered the keynote address Nov. 16 at a discussion hosted by the Hudson Institute in Washington, D.C., called “U.S.-China Energy Cooperation: Risks, Opportunities, and Solutions.”
Dwight D. Eisenhower was America’s iconic military leader during World War II and its president from 1953 until 1961. His fatherly smile and his general demeanor lent confidence to Americans. Whether he was one of America’s best presidents is a question for historians to decide. But his last comments before leaving office were historically profound and very prophetic with respect to U.S. involvement in the Middle East.
Ike, as he was affectionately called, said in his farewell address to the nation on Jan. 17, 1961 that “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. … Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”
Regrettably, perhaps since WWII, no American entanglement on foreign soil, indeed, no American war (except perhaps critical wars like Grenada and Panama … a bit of cynicism), has reflected the sustained support of the American people from beginning to end. Many American citizens have had trouble justifying our involvement on moral, military, political, economic and social welfare grounds. Some of the theories, often embellished in rhetoric, used by our leaders as rationales for various wars since WWII, have been discarded because of their simplicity or their failure to conform to post-war facts on the ground. Remember The Domino Theory justifying the Vietnam War?
We have not been entirely honest with the service personnel we have sent to Afghanistan and Iraq. While not a random sample, I have been fortunate to talk with many of the returning soldiers from the wars in Afghanistan and Iraq (including a Special Forces veteran or two), and most believe that, at its core, the nation’s involvement in both countries rests not on bipartisan justifications concerning exporting democracy and freedom, but on the desire to preserve and protect access to oil for the west. Implicit in their comments is a belief that Eisenhower’s warning about the military industrial complex has now become a reality (except that with respect to Iraq and Afghanistan, it is more accurate to call it the military/oil company complex).
The intensity of their perspective, while perhaps forged in part by their being involved up front in the horrors of war and killing, is not theirs alone. “Of course it’s about oil; we cannot really deny that,” said Gen. John Abizaid, former head of U.S. Central Command and Military Operations in Iraq. Former Federal Reserve Chairman Alan Greenspan agreed, writing in his memoir, “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.” In 1998, Kenneth Derr, then CEO of Chevron, said, “Iraq possesses huge reserves of oil and gas — reserves I’d love Chevron to have access to.” Today it does. According to a policy brief from scholars at Harvard’s Kennedy School, “Although, the threat of ‘resource wars,’ over position of oil reserves is often exaggerated, the sum of the political effects generated by the oil industry makes oil a leading cause of war.”
Media reports from over the last decade or more suggest the same nefarious link between war and oil exists concerning Afghanistan; indeed, this link exists between all of our country’s recent wars in the Middle East. Sure, oil is not the only reason we go to war, but those of us concerned with public policy and the fog, as well as human, economic and social costs of war ought at a minimum, try to make sure that citizens in this nation are aware of and can debate the role of oil. More transparency may lead to less national harm and more rational decisions about joining or starting conflicts.
Why, in light of the fact that oil, oil exploration, oil development and oil distribution has been and remains a key variable generating U.S. involvement in many past and present wars, do we, as a nation, avoid a sustained strategic drive to foster the use of alternative competitive fuels, such as ethanol, methanol, natural gas, electricity and hydrogen fuel? Our efforts to date have been relatively minuscule and often are impeded more by a lack of a vision of the public good, ideological and partisan whims, economic and political interests than by an honest appraisal of independent analyses and honest debate. We owe the young people that we sent to battle at least this much. Give them a chance to make love, not war! We can be fuel agnostic and let the public interest and ultimately the marketplace choose the winners when it comes to cheaper, cleaner, safer fuels. The nation and its residents deserve a chance to safeguard the country’s environment, its economy and its security!
(Photo: A ceremony in Iraq in December 2011 marking the withdrawal of the last U.S. troops from the country. Credit: Getty Images)
I just finished a recent Forbes article by Jude Clemente, “Canada is North America’s Great Oil Security Blanket.” Gosh, it’s good to know that Canada can supply 10 million barrels a day for the next 675 years. Just think of the biblical proportions of Canada’s reserves. Methuselah lived only 969 years! I feel safer already.
I am (fairly) comfortable that the French won’t take over Quebec and act out residual imperial desires and that the British won’t try to recapture their former colonies. So, sleep easy and leave a note in the morning to your children, their children and their children’s children, ad nauseam. Future generations of U.S. residents won’t have to worry about the definitions of peak oil or real oil shortages, and we will always have fossil fuel in our future. Our very valued friend to the north can and will produce whatever oil the U.S. requires for centuries.
Aren’t we lucky?! Our decedents will be able to depend on what the author calls “ethical Canadian oil.” Why? He argues that “Canada is a democracy and a free market sought by investors that desire less risk.” Wow…freedom to choose and capitalism; John Rawls and Adam Smith. I am crying with joy. But my emotional high lasts for only a few minutes.
Do we need to substitute Middle East imports for Canadian imports, even though Canada is a trusted ally? Are Canadian oil reserves a real, long-term, strategic benefit to the U.S. and are they ethical (a funny term used in the context of big oil’s historical behavior, speculation with respect to investment in oil and the perils of surface mining)? According to many analysts, oil from tar sands is among the most polluting and GHG emission causing oil in the ground. Aren’t you happy? In light of reserves, we can tether ourselves to fossil fuels for hundreds of years and a range of environmental problems, including, but not limited to, air pollution, landscape destruction, toxic water resulting from tailing ponds and excessive water use. Many scientists warn of increased rates of cancer and other diseases. While the tar sand industry, to its credit, has tried to limit the problems, according to the Scientific American article by David Biello, “tar sands may be among the least climate- [and health-] friendly oil produced at present.” By the way, conversion to gasoline will likely result in higher prices for the least advantaged among us, not exactly Rawlsian ethics.
We are in a difficult position, policy wise. Sure, we can establish long-term institutional relationships with Canada and its provinces that will assure U.S. on-demand access for Canadian oil sands. To do this would be comforting to vested interests and some leaders who still believe that oil is the key to America’s economic future. But business, academic, nonprofit, community as well as government leaders are increasingly searching for alternatives that will be better for the economy, the environment and national security. Weaning the U.S. off of oil, as the president has sought, will require, at least for the transportation sector, substituting a “drill, baby, drill” mentality for a strategy that includes increased use of alternative fuels, open fuel markets and flex-fuel vehicles.
Alternative fuels are not perfect, but for the most part, they are much better than gasoline in light of national energy and fuel objectives. Many replacement fuels, like natural gas and natural gas-based ethanol, cannot compete easily because of government regulations (e.g., RFS, etc.) and oil company efforts, despite large subsidies to limit their purchase by consumers (e.g., lobbying against open competitive markets, franchise agreements, price setting, etc.). Most alternatives appear to have sufficient reserves to provide the consumer with cheaper and better fuel than gasoline for a long time. For example, natural gas seems to have more than a proven 100-year supply, and that’s without further exploration.
The policy framework is easier to define than implement given America’s interest group politics. It would go something like this: As soon as they are ready for prime time and reflect competitive prices, design and miles per tank, increasing numbers of electric and perhaps hydrogen-fueled cars will appeal to a much wider band of U.S. consumers than they do now. The nation should support initiatives to improve marketability of both thorough research and development. Until then, the good or the better should not be frustrated by the perfect or an unreal idealization of the perfect. Please remember that even electric cars spew greenhouse gas emissions when they are powered by utilities that are fired up by coal, and that the most immediately available source of hydrogen-based fuel is natural gas. Currently, there are no defined predictable supply chains for hydrogen fuel. Perhaps, more important, neither electricity nor hydrogen fuel cells can be used in the 300,000,000 existing cars and their internal combustion engines.
So what’s a country to do, particularly one like the U.S., which is assumedly interested in reducing GHG emissions, protecting the environment, growing the economy and decreasing dependence on foreign oil? Paraphrasing, the poet Robert Frost, let’s take the road less traveled. Let’s develop and implement a strategic, alternative-fuels approach that incorporates expanding consumer choices regarding corn and natural gas-based ethanol, a range of bio fuels and more electric and hydrogen fuel cars. Let’s match alternative fuels with initiatives to increase Detroit’s production of new FFVs and the capacity (through software adjustments and conversion kits) for consumers to convert their existing cars to FFVs. To succeed, we should take a collective Alka-Seltzer and build a diverse strong fuels coalition that will encourage the U.S. to develop a comprehensive, alternative fuel strategy. The coalition, once formed, should place its bet on faith in the public interest and good analysis to gain citizen and congressional support. I bet the nation is ready for success — just remember how Linus of the famous Peanuts comic strip ultimately gave up his security blanket.
Photo Credit: http://priceofoil.org/
Everyone likes hidden conspiracies, either fact or fiction. Covert conspiracies are the stuff of great and not-so-great novels. Whether true or false, when believed, they often cause tectonic policy shifts, wars, terrorism and ugly behavior by groups and individuals. They are part of being human and sometimes reflect the inhumanity of men and women toward their fellow human beings.
I have been following the recent media attention on conspiracies concerning oil, gasoline and Saudi Arabia. They are all over the place. If foolish consistency is the “hobgoblin of little minds” (Ralph Waldo Emerson), then the reporters and editorial writers are supportive stringers for inconsistency. Let me briefly summarize the thoughts and counter thoughts of some of the reported conspiracy theorists and practitioners:
- The Saudis are refusing to limit production and raise the price of oil because they want to severely weaken the economy of Iran. The tension between the two nations has increased and, to some extent, is now being framed both by real politics (concerning who’s going to carry the big stick in the region) and by sectarianism. Iran’s oil remains under sanction and the Saudis hope (and may even be working with Israel, at least in a back-office way) to keep it that way.
- No, you’re wrong. The Saudis are now after market penetration and are lowering the price of oil to impede U.S. development and production of oil from shale. Right now, they are not worrying so much about oil from Iran-given sanctions…but they probably will, if there is a nuclear deal between the West and Iran.
- You both are nuts. The Saudis and the U.S. government are working together to blunt Russian oil sales and its economy. The U.S. and Saudis can withstand low oil prices, but the Russians are, and will be, significantly hurt economically. If it hurts Iran so much, the better! But the Cold War is back and the reset is a failure.
- Everyone is missing the boat. The Saudis don’t really control prices or production to the extent that they did in the past. Neither does OPEC. Don’t look for conspiracies, except perhaps within the Kingdom itself. The most powerful members of the Saudi royal family understand that if they limit production to raise prices per barrel, it probably wouldn’t work in a major way. The U.S. has become a behemoth concerning oil from shale. If a nuclear deal goes through, Iran will have sanctions lessoned or removed relatively soon. Should the Russian and West reach some sort of cold peace in Ukraine, Russia will become a player again. When you add Canada, Iraq, Libya and the Gulf States to the mix, lower global demand, and increase the value of the dollar, you get an uncertain oil future. The Saudis, led by their new king, are buying time and casing out their oil future.
To me, the Saudi decisions and the subsequent OPEC decisions were muddled through. Yet, they appear reasonably rational. Saudi leaders feared rising prices and less oil production. Their opportunity costing, likely, went something like this: “If we raise prices, and reduce production, we will lose global market share and maybe, in the current market, even dollar or riyal value. Our production costs are relatively low, compared to shale development in the U.S. While costs may go higher in the future, particularly once drilling on flat desert land becomes more difficult in light of geology, we can make a profit at the present time, even at $30-40 a barrel. Conversely, we believe that for the time being, U.S. shale developers cannot make a profit going below $40-50. Maybe we are wrong, but if we are, our cost/profit equation is not wrong by much. By doing what we are doing, we will undercut American production. Sure, other exporting countries, including our allies in the Gulf will be hurt temporarily, but, in the long run, they and we will be better off. Further, restricting production and assumedly securing higher prices is not a compelling approach. It could cause political and social tension in the country. We rely on oil sales, cash flow and profit as well as reserves to, in effect, buy at least short-term civic peace from our citizens. Oil revenue helps support social services and basic infrastructure. We’ve got to keep it coming.”
The Kingdom understands that it can no longer control prices through production — influence, yes, but, with the rise of U.S. oil development, it cannot control production. Conspiracy theories or assumed practices don’t add much to the analysis of Saudi behavior concerning their cherished oil resources. Like a steamy novel, they fill our reading time, and sometimes lead to a rise in personal adrenaline. Often, at different moments, they define the bad guys vs. the good guys, or Taylor Swift vs. Madonna.
No single nation will probably have the power once held by OPEC and the Saudis. While human and institutional frailties and desires for wealth and power suggest there always will be conspiratorial practices aimed at influencing international prices of oil and international power relationships, their relevance and impact will diminish significantly. Their net effect will become apparent, mostly with respect to regional and local environments, like Yemen and ISIS in Syria and Iraq.
Recently, I asked a Special Forces officer, “Why is the U.S. fighting in Iraq?” I expected him to recite the speeches of politicians — you know, the ones about democracy, freedom and a better life for the citizens of Iraq. But he articulated none of these. He said one word, “Oil”! All the rest is B.S. I think he was and remains mostly right. His answer might help us understand part of the reason for the strange alliance between the Saudis and U.S. military efforts in or near Yemen at the present time. Beyond religious hatred and regional power struggles, it might also help us comprehend at least part of the reasons for Iran’s support of the U.S.-led war against ISIS — a war that also involves other “democratic” friends of the U.S. such as the Saudis and the Gulf States.
The alliances involve bitter enemies. On the surface, they seem somewhat mystifying. Sure, complex sectarian and power issues are involved, and the enemies of my enemies can sometimes become, in these two cases, less than transparent friends. But you know, these two conflicts — Yemen and ISIS — I believe, also reflect the combatant’s interest in oil and keeping oil-shipping routes open.
President Obama has argued that we should use alternative energy sources to fuel America’s economy and he has stated that we need to wean the U.S. off of oil and gasoline. Doing both, if successful, would be good for the environment, and limit the need to send our military to protect oil lifelines. Similarly, opening up U.S. fuel markets to alternative fuels and competition would mute the U.S. military intervention gene, while curing us, to a large degree, of mistakenly granting conspiracy advocates much respectability. Oh, I forgot to indicate that the oil companies continue their secret meetings. Their agenda is to frustrate the evolution of open fuel markets and consumer choices concerning fuel at the pump. Back to the conspiracy drawing boards! Nothing is what it seems, is it?
Photo credit: http://blogs.telegraph.co.uk/finance/