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Oil Rich, Nation Poor

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In the United States today we are so often reminiscence of a time not too long ago where the price of gasoline was only $0.99 a gallon. A haunting reminder of the inflationary trends of today. Those Sunday drives were a time honored family tradition, now only a faded memory. We still dream of the days of cheap oil and gas though. With the recent oil boom in North Dakota and the abundant amount of oil still in Alaska should bring us back those days of inexpensive gas. But, let us not be beguiled. The harsh reality still remains that those prices of yesteryear will never return. That return to inexpensive oil that so many are led to believe just because of today's shale-oil revolution and the hype that the media is touting America's new oil abundance is a very false assumption. Our domestic oil reserves now are more than sufficient to eradicate our dependence on Middle Eastern oil, but all that oil will never will drive the price down to under $50 a barrel. In fact the cost will only continue to skyrocket. The other factor to consider even though right now our oil reserves are capable of handling today's energy needs, tomorrow they will not.

We fail to realize that the cost of finding, extracting, and refining oil has been increasing every year. And that trend is only destined to continue resulting in even higher oil prices driving up the cost of everything we buy. More pain at the pump will continue to drain whatever disposable incomes we have now and for the foreseeable future. It is understandable why people hold the false belief that oil prices will fall. First, since 2008 America's proven oil reserves have increased by more than 25%. Production volumes have risen to more than 9 million barrels per day, a 45%increase. It is because of these startling figures in domestic oil production we see so many stories hyped in the media that the United States now is the third largest producer of oil.

Could it be that the main stream media routinely gets the story wrong? In almost every instance the media like our elected officials put the cart before the horse. They continue to rarely understand the larger context. In racing to meet daily deadlines they simply parrot messages that purveyor data and act like It really is big news that the United States ranks number 3 in oil production. In reality the United States has been a top three oil producer every year since the early 1960's. All in all these production numbers make it seem that we really are on the road to energy independence. Not so fast. The hard cold fact of the matter is that our oil reserves even with this new found oil in North Dakota and Alaska our daily production are both much less than they were 25 years ago. And, yet our consumption is up over 25% in the same period. On a global scale oil consumption has soared. As of today all combined we are now using over 90 million barrels a day. The United States uses a little more than 19 million barrels a day.

Another startling find is that oil production in America will only continue to grow but, no matter how much refined oil is produced it will never be enough to supply all of our energy needs. So, today out of necessity while we twiddle our thumbs on developing alternative green energy sources, the United States as well as the rest of the world must still rely on barrels of oil coming from other places. The biggest problem is, the rising costs associated with finding, extracting, transporting and refining oil from those other places. Many economists agree that the marginal cost of producing the next barrel of oil has now reached $114 a barrel. Factor in the cost of US shale oil the cost is $80 a barrel. This $80 a barrel is the target price before it generates a positive return on investment. The reality is that well into the future that cost for the next barrel of shale oil is defiantly not going down. In the final analysis oil prices will exceed $150 a barrel. Realistically, if we don't develop alternate fuel sources oil prices will climb to well over $200 a barrel and that would cause an economic catastrophe for millions of Americans.

With all the talk about renewable energy sources with the advent of the worlds largest Solar Farm right near Las Vegas and the Wind farms across the great plains many feel that the day of energy independence is fast approaching. Energy independence fueled by renewable green energy sources taking the place of oil there by achieving lower cost energy for all. However, the powers that be still control the chain of events that keep those alternate energy sources too cost prohibitive. Thereby the next generation of fuel that will power the world well into the future remains as elusive as ever.

Recently there have been a chain of events which at any moment could spark a global conflict. The flames of war in the Mid-East would thrust both Russia and the United States into an inevitable confrontation. What all this amounts to is the ever unrelenting thirst for Oil. Many don't realize that Russia is the largest producer of oil. In Russia President Putin realized that to gain control of the oil industry he leveled a $27 billion tax on Yukos, then Russia's largest privately owned company. When Yukos couldn't pay Putin seized controlling interest and then transferred all assets to Rosneft. Basically, now the Russian government under Putin controls all of Russian production of oil. A very startling development.

Recently Putin realized that Rosneft still doesn't have the technical capabilities needed to effectively mine all of Russia' oil fields. Putin needs more funds to continue to mine Russian oil and by keeping instability in the Middle East that money is all but assured. To give Putin an edge Rosneft cut a deal with BP. Rosneft bought BP's share of a joint venture TNK-BP for a cash payout and a significant share of stock in Rosneft. What this intails is that Rosneft needs BP's technical expertise in order to tap into Russia's huge reserves of oil and shale gas. Having BP as a major shareholder also lets Russia continue the pretense that Rosneft is not an arm of the government. In actuality it really is. With BP it makes Rosnelf the largest oil producer in the world today.

What is so scary today is that Putin with his ties to Iran and Algeria Russia now has control over oil prices and still Russia doesn't' even face any significant downward pressure on oil prices even from the United States recent shale boom. In the United States currently, it is illegal to export crude oil from the United States which means that U.S. crude can only be refined by U.S. refineries. Since oil drillers can’t export their crude oil to foreign refineries, once domestic refineries reach full capacity, crude oil production will level off by necessity. With U.S. crude oil production leveled off, downward price pressure on oil will relent and demand in emerging markets will continue to expand.

Many analysts who are predicting that U.S. shale will reduce oil prices are wrong. Unless the U.S. can export its excess crude production to foreign refineries, the effect of the U.S. oil boom on global oil prices will be minimal. What Russia has done is backed the rest of the world into a corner so they can't openly support the Syrian rebels and have a hard time stopping Saudi Arabia from doing so or Iran from supporting the Syrian government.

Without oil and the continued rise of oil prices the economy in Russia is in jeopardy. It is clear that his orchestration of events in the Mid-East are crucial to increasing his leverage on the price of oil all over the world. For the United States our entire economy revolves around oil. It is not just the gas we put in our cars. Our roads are made out of it; our cars run on it; it’s in our food. We use it to build our homes and offices. Oil is used to make the plastics that package and store our products and food. It’s used in the clothes we wear and to ship everything. It’s in the pesticides that ensure our crops aren’t destroyed by insects. Oil is used in the equipment used to farm and to build. Oil is literally used everywhere around us all day. Each barrel of oil contains 42 gallons. That makes 19.4 gallons of gasoline while the rest is used to make practically everything else we are accustomed to using. If the price of oil continues to rise each America will be affected.

Many don't even realize that every American uses 35 gallons of oil and 250 cubic feet of natural gas every day. If the price of oil continues to rise to $250 per barrel the price of every product would skyrocket. One would expect that wages would also rise accordingly not so because there would be no more profit for business just more costs that they have to offset. A domino effect of economic retardation setting off a major deflationary trend making the Great Depression look like a picnic. If the price of oil even comes close to $250 it would mean economic devastation for the United States and Europe. But for Russia and the rest of the oil producing nations it would bring landfall profits. With Russia now controlling most of the worlds oil production even with the United States oil reserves being taped like the rest of the world is still dependent on the one commodity that was used to power the First Industrialized Revolution and that was over 100 years ago.

The world today is being held hostage by an energy source that is proven to have done irrevocable damage to the ecosystems of this planet. Yet governments the world over are being blinded by the colossal amounts of wealth generated by this one all powerful source of energy, oil. That old saying "Where there is great wealth to be had there is also great corruption within." The evidence of this today is overwhelming. All one has to do is look at the landscape of the political process and how it has evolved in the United States.

There are some, very few though in Washington have already seen the handwriting on the wall, the warning signs of an impending global crisis. The biggest concern here is that there are so few that take these warning signs seriously. There is not nearly enough political pressure to make the availability of an affordable alternate green energy source a reality. It is time especially with the upcoming summit on Climate Change in Reykjavik, Iceland this spring to bring the worlds attention that the longer nations are held hostage to an outdated, destructive, and polluting energy source where the only dividend is great wealth for a select few the more hostile and inhospitable our world will become.

The United States has two choices to make now. One is to continue to encourage more production of domestic oil and its refinement which only creates more economic instability for millions of Americans. And, even with relying on more production of oil will still not be enough to cover all of our energy needs now and into the future. The other is to use National Economic Reforms Science and Technology Directives plan of direction to keep the price of oil stable while at the same time integrate the developing newer technologies. It is these newer energy sources like Solar Gas that would eliminate the carbon emissions from our combustible engines. We must also develop and provide, more solar and wind farms that would generate enough electricity for our growing energy needs. If we fail to act on the growing needs for energy by relying on oil other countries especially Russia will continue to dominate and thwart economic progress here in America. They are currently doing it by the continued rising price of oil. The United States cannot afford to delay any longer implementing the energy sources that will power the final third Industrialized Revolution using the many natural resources that are available all over the world.


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