“Responding to public concern over sharply rising gasoline prices, President Obama announced last week that he was asking Attorney General Eric Holder to launch a criminal investigation of price gouging by oil companies, refiners, and gas stations.
Such posturing is so absurd as to exceed the capacity of satire. The reason gasoline prices are up is that the price of crude oil is up. There is not only a direct correlation between the two, but a causal relationship: The primary cost of producing gasoline is the cost of the oil from which it is refined. It is impossible to make cheap gasoline from expensive oil. To launch a witch hunt against gasoline providers for high price at the pump when oil is selling for $110 per barrel is a truly amazing political stunt...
These graphs show non-OPEC and OPEC oil production, as well as the global price of oil, for the years 1973 through 2011. Note the vast difference in the production patterns: Non-OPEC production rises to meet increased demand. In fact, it nearly doubles — which is what one would expect, since the world economy and world population roughly doubled as well over the same span of time. In contrast, OPEC production figures show no rational trend. Instead, they vary wildly in accord with tactical decisions by the cartel to manipulate supplies and prices. But what is even more stunning is this: In 1973, OPEC oil production was 30 million barrels per day, exactly what it is today. That is, despite the passage of more than a third of a century, during which time the world population doubled in size — and despite the fact that OPEC countries are sitting on top of 80 percent of the world’s commercially accessible oil reserves — OPEC production has not increased at all. OPEC’s complete stagnation in production since 1973 is remarkable, especially when you consider the fact that in the shorter period from 1945 to 1973, the output of the countries that became OPEC grew more than tenfold. Indeed, to take just the single most important example, the production of Saudi Arabia grew at a rate of 16 percent per year from 1965 to 1974. Then the brakes were slammed on, and from 1974 to today, it has grown at a rate of 0.3 percent.
Did Saudi Arabia and the other OPEC countries reach “peak oil” (the maximum rate of petroleum extraction) in 1973? No. Rather, in conjunction with events leading up to and surrounding their 1973 oil embargo, the national governments of the OPEC powers seized control of their oil concessions from the Seven Sisters (the oil multinationals: Exxon, British Petroleum, Shell, etc.), which had developed them. With the new management came a new policy. The Seven Sisters’ policy had been to plan ahead to increase production so as to meet the needs and thereby ensure the continued growth of the world market. As a result of this policy, world oil prices were flat or slightly declining from 1947 through 1972, helping to create one of the greatest periods of economic growth the world has ever seen. In place of this policy, OPEC instituted a new plan, one of restricting production to drive prices up, regardless of the catastrophic effects such actions might impose on the world economy. In the following graph, note the relative stability of oil prices from 1880 through 1972, and the complete instability and wild price fluctuations since OPEC took control of the world oil market in 1973.
The United States uses about 8 billion barrels of oil per year. At the current contrived price of $110 per barrel, we will be charged $880 billion per year for our oil, and the world as a whole will have to pay $3.5 trillion, with 40 percent of the take ending up in the coffers of the OPEC governments.
If there were a free market in oil, its price would be closer to $30 per barrel, and this tribute would be cut by three-quarters. Instead, the price of oil is under the control of a cartel that has placed the industrial world in a state of siege. In exchange for our possessions, they will give us limited supplies of fuel. If we do not wish to be dispossessed, we need to break the siege.”
What is so tragic is that none of this is a surprise. The Middle East in OPEC has been assaulting
The West through its practices for decades. And our response has been to ignore or deny our
our own available resources and let them do it The only happy Americans are the Alaskan mosquitoes
and the Burying Beetle.