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  Commentary . . .


Sol Sanders Archive
Tuesday, September 27, 2011     INTELLIGENCE BRIEFING

Recipe for global disaster: Energy at home,
energy abroad

President Barack Obama’s war on fossil fuels is adding to world instability already wracked by international debt, demographic bulges and largely unpredictable galloping technology.

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Oil installations in Lake Maracaibo, Venezuela.     Chico Sanchez/EPA/Corbis
Domestic implications of his policies are increasingly apparent: the closing of prospecting and drilling is costing tens, perhaps hundreds of thousand of jobs. The attempt to choose winners and losers through “green energy” subsidies is producing market distortions, huge losses of taxpayers’ funds and corruption rarely seen since the old Soviet Union’s Gosplan. Using executive fiat for arbitrary environmental rulings after Mr. Obama’s “cap and trade” quietly died in Congress is eroding Constitutional government by creating “precedent” for defying public opinion as expressed through the legislative process.

On the world scene, the impact is equally grim, although as always with intricate politico-economic problems, difficult to quantify.

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It is a given, of course, that world energy is, as the economists say, an imperfect market. It runs the gamut: President Hugo Chavez gives 100,000 bbl/da to his ideological buddy Fidel Castro to keep Havana lights on from Venezuela’s production, a principal source of American imports. Hand-me-down restrictive policies, a heritage of the Carter Administration’s misbegotten Department of Energy and its first head, James R. Schlesinger, dogs natural gas. Cartelization of the industry despite all the legislation and litigation since the Supreme Court broke up John D. Rocekefeller’s Standard Oil in 1911 continues to inhibit competition with the Organization of Petroleum Exporting Countries [OPEC] trying to set production quotas to control prices.

Yet, by and large, world energy is fungible — that is, production, stocks and therefore prices in one region impacts the worldwide market. After becoming a net importer in 1970, then doubling imports since the mid-80s to 50 percent of total consumption in 2010, the U.S. as world’s No. 1 consumer [and a producer of 25 percent of the world’s liquid gold] is decisive in establishing price, stocks and supply in other markets.

By impeding U.S. production through its refusal to lift controls, dragging out decisions or initiating or threatening to initiate new controls, the Obama Administration helps put a floor under world prices. That’s despite their erosion by a fall in consumption impacted by the worldwide economic recession, a very “leaky” OPEC struggling to control its 40 percent of world production, and production in the Persian Gulf for some grades a fraction of costs in North America. At a time of growing worldwide economic stagnation, despite the argument the real price of oil is skewed by a depreciating petrodollar in which most of it is traded, cheap oil remains as it has always been the sine qua non of American prosperity — and probably for world recovery.

Higher prices gorge feudal satrapies with their small backward populations in the Persian Gulf, unable to absorb and efficiently utilize capital. Worse, they indirectly finance world terrorists wherever they may be. For example, Saudi subsidies to mosques and community activities in the U.S. and the West as well as in the rest of the Muslim world carry with them Wahhabbi sect preachers insinuating sharia [pre-modern Islamic law] into Western legal codes, advocating armed jihad against “infidels” and even fellow dissident Muslim sects or reformers.

Higher prices produce a petroleum bonanza for the increasingly authoritarian and corrupt Russian regime permitting it to avoid basic post-Soviet reforms. They give Moscow’s inefficient producers increasing international political leverage through gas sales to Germany and other Western countries. They reinforce the Putin regime’s efforts to reestablish Soviet hegemony over Ukraine and Central Asia and Moscow’s hope to intervene in a post-U.S. withdrawal Afghanistan.

Higher prices for its meager oil exports has propped up — along with Obama Administration appeasement — the bloody al-Assad dictatorship at war with its own Syrian people.

Not only has the natural gas snafu produced a temporary domestic surplus — with new technology pointing toward vast new production but it prevents potential liquefied natural gas [LNG] exports to high priced markets such as East Asia. U.S. sales to South Korea, for example, would block a proposed Moscow-Seoul gas project whose transit fees through North Korea would bolster the bankrupt, peace-threatening regime in Pyongyang.

Much of this, again, is the Obama Administration’s heritage. But its pandering to environmentalistas within its ranks has exacerbated old problems and invented new ones. With most of the President’s foreign policy initiatives in shambles, the external manifestations of his energy policy could be the straw that breaks the camel’s back.

Sol W. Sanders, (solsanders@cox.net), writes the 'Follow the Money' column for The Washington Times . He is also a contributing editor for WorldTribune.com and EAST-ASIA-INTEL.com. An Asian specialist, Mr. Sanders is a former correspondent for Business Week, U.S. News & World Report and United Press International.

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