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April 2, 2012
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NPR www.npr.org/blogs/money/2012/0…

In his latest column for the New York Times Magazine, Adam Davidson cites Gal Luft, an oil expert who dismisses political proposals from the left and the right to lower the price of gas. We asked him to elaborate in the following post.

When in December 2008, 60 Minutes correspondent Lesley Stahl asked Saudi Oil Minister Ali al-Naimi how much it cost Saudi Arabia to produce one barrel of oil, he didn't blink: "Probably less than $2 to produce a barrel." If it costs only $2 to produce a barrel of oil, then why do we pay over $105 a barrel?

Wall Street, Big Oil, President Obama, the Fed, environmentalists, the EPA have all been accused of pinching hardworking Americans at the pump.

But there is a much more important player that gets much less attention: OPEC.

Members of the oil cartel sit on top of nearly 80 percent of the world's conventional crude reserves. Yet they account for only a third of global oil production.


We need oil now more than ever. In the past three decades, global oil demand grew 45 percent.

During that same time, OPEC's production increased by merely 19 percent, despite the fact that two new countries (Angola and Ecuador) joined the cartel during that time.

Clearly, OPEC could produce more oil if it wanted to. But it won't.

The reason is that OPEC countries produce almost nothing but oil. Their population is growing by leaps and bounds, and because Saudis pay no income tax, the House of Saud will need more and more money to keep its citizens happy, and avoid the fate of toppled leaders in Libya, Egypt and elsewhere.

Since the beginning of the Arab Spring,Saudi King Abdullah almost doubled his Kingdom's budget, committing billions in subsidies, pensions and pay raises in an effort to keep his subjects from storming the palaces.

This expensive response effectively raised the price of oil needed for the Saudis to balance their budget from under $70 a barrel before 2011 to at least $110 a barrel by 2015.

Like it or not, the bill for keeping the Persian Gulf monarchies in power is now being footed by every American. Every time we fuel our car we send an extra 35 cents per gallon, or roughly $6 per fill up, to the Save the King Foundation. Since oil goes into everything we buy from food to plastics, this adds about $1,500 annually to the expenditures of the average American family.

Paradoxically, we are forced to fund social programs for other nations at the very same time we are engaged in a heated debate about cutting social services and entitlement programs at home. It is a sad state of affairs that in the 21st century the world's most strategic commodity is still being controlled by a cartel.

Cartels, by definition, exist to maximize the profits of their members. OPEC members, which last year raked in $1 trillion in oil revenues, are doing that masterfully.

No amount of U.S. drilling or efficiency measures will change that. The cartel's financial needs will drive it to respond to counter moves by its clients: When we drill more oil at home, OPEC can drill less to return to a tight supply-demand relationship. When we use less, OPEC can drill less.

To change this vexing dynamic, consumers must be able to substitute for petroleum by purchasing competing fuels, like alcohol fuels, biodiesel, natural gas or electricity, if they are less costly on a per mile basis. But as long as our vehicles are able to run on nothing but oil, keeping oil monarchs on their throne will remain our national side job.
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:iconmephistophilez:
Mephistophilez Featured By Owner Apr 2, 2012   Traditional Artist
$1 of every gallon goes to oil speculators. So yes, there are lot of hands in the cookie jar, but yet again Wall Street corruption trumps all.

Not sure how much faith I put in an article whose solutions include natural gas and biofuels. Fracking for natural gas is insanely disastrous, it contaminates ground water to a ridiculous degree, it destroys the environment (vast understatement), it causes earthquakes, and it's often the same companies that are drilling for oil. Biofuels (especially in the US) typically use corn, the massive mono-culture is seriously destructive, it causes issues with everything from fertilisers, pesticides, water, soil, to large oil consumption for the machinery and GMO seeds etc etc. Food products being used for fuel add other issues, including famine and increased food prices, and again there are the big corporate players in that industry (and political corruption). I think americans just need to quit being so fucking stupid about oil consumption. SUV sales are back up, there is no decent mass transit, most families have multiple cars, a large chunk of the population are against green energy (and climate change deniers are INCREASING), there's a whole plethora of issues but it comes down to america's love affair of the oil guzzlers and their not wanting to sacrifice a little of their convenience in order to consume less. We're talking about a limited resource, which only purpose is to burn away, and that must be horribly extracted from the ground in a dirty difficult process that isn't always guaranteed results, prices going up are inevitable. Quit fucking whining about it (most of the world pays twice what americans pay already) and start doing more in your own life to help the problem, not add to it.
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:iconcrazywulf:
Crazywulf Featured By Owner Apr 2, 2012  Professional General Artist
lol...I'd like to "Quit whining about it" but the price of gas here on Maui is almost 5 bucks, and just driving back and forth to work is seriously killing me, especially since home health pays peasant wages...
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:iconmephistophilez:
Mephistophilez Featured By Owner Apr 3, 2012   Traditional Artist
You don't have a bus in your area? Maui seems to have a better bus system than a lot of places. And a monthly bus card is only $45 ($30 for students), that's almost half what my bus card costs.

btw, I didn't mean you specifically need to quit whining, I'm just sick of americans in general complaining about gas all the time while being one of the worst countries about consumption and wastefulness etc.
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:iconaimsplode:
Aimsplode Featured By Owner Apr 2, 2012  Professional Photographer
We don't need oil. We should be switching to renewable resources, like Solar and Wind. Oil is a worthless commodity that only causes wars. With renewable energy, which every country can harvest, there will be new wars or drug gangs. Stop ranting about oil and start trying to push for change!
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