This opinion piece by T. Boone Pickens was originally posted on Forbes.com.
I have been saying for many years that the United States has made one of the worst deals in history when we decided to continue paying 100 percent of the cost of protecting oil coming through the Strait of Hormuz even though we get only about 10 percent of that oil.
According to a recent Wall Street Journal article, China and India account for 7.7 million barrels of oil per day from OPEC (including non-Middle Eastern members) while U.S. imports are down to 3.5 million – less than half.
Yet, American taxpayers continue to pay for the Fifth Fleet, based in Bahrain, to patrol the entirety of the Persian Gulf and provide security for oil and gas transportation throughout the world.
The WSJ article quoted a political attaché at the 10-person Chinese embassy in Baghdad as saying, “commercial is commercial and politics is politics,” when asked about parity in paying to protect its assets in the region – especially its growing capacity in Iraq. For comparison, some sources put the size of the staff at the U.S. Embassy in Baghdad at 1,500 plus an unknown number of contractors.
October marks the 40th anniversary of the 1973 Arab Oil Embargo. That was one of the strongest examples of the opposite of the current Chinese thinking: Commercial was politics and politics was commercial. The embargo was an attempt to influence U.S. foreign policy in the wake of the Yom Kippur War of support for Israel.
Although hard to imagine in 2013, the embargo – in addition to long gasoline lines, odd-and-even license plates, and the other mechanisms employed to calm the panic – caused oil prices to quadruple to $12 per barrel. At the retail level, gasoline prices rose from a national average of 38.5 cents in May 1973 to 55.1 cents in June 1974.
In spite of the relatively short-term hiccup in oil prices and the effects on U.S. economy that accrued from the embargo, the policy America has maintained toward Middle Eastern oil has continued over the ensuing four decades. We have committed trillions of dollars and lost thousands of American lives in an effort to maintain some measure of security over the oil and gas coming out of the Gulf and continue to do so today. America does not have an energy policy, it has a national security policy. And that policy has remained essentially unchanged since Jimmy Carter declared the United States would secure Middle East oil supplies with military force if necessary.
If that policy ever made sense, it certainly doesn’t any more. With our oil consumption flattening, while our production of oil and natural gas is increasing, we are far less dependent on OPEC oil than any time since the Presidency of Jimmy Carter. Yet, we have no coherent policy or concerted effort – no effort at all – to develop an energy policy that reflects the realities of the second decade of the 21st century and not the seventh decade of the 20th.
The huge reserves of both domestic natural gas and oil that have become commercially available since the widespread use of hydraulic fracturing and horizontal drilling have changed the balance of power (in our favor) in the global oil and gas equation. If we include Mexico and Canada in a “North American Energy Alliance,” there is little chance we will fall back into the OPEC dependence trap any time in the near- to mid-term future.
We can do some things that are relatively easy that would essentially cancel our need for Middle East oil. One of them is to begin feeding oil from the Strategic Petroleum Reserve (SPR) into the petroleum supply chain. This can be done in such a way as to have no significant influence on prices but, at a minimum, demonstrate we are serious about getting on our own resources. We can also build the Keystone Pipeline that would provide oil to U.S. refineries while, at the same time, keeping North American oil out of the hands of the Chinese, Japanese and South Koreans. Those steps can significantly reduce our dependence on OPEC oil.
I know there will be people who will complain that this is another example of the rampant isolationism threatening to grip the United States. I disagree. I am not proposing an economic blockade of Middle Eastern oil. All I am suggesting is that those nations that are getting the benefit from that oil help pay the costs of transporting it and protecting it.
While the Federal government is looking behind the cushions of the national sofa for stray coins to pay our bills, we can save billions of dollars per year in defense and diplomatic costs, hire thousands of people, and generate billions more for our domestic economy and permanent jobs by simply using the resources that are right under our feet.
We can use our own resources to look after ourselves.