An Analysis of the United States Oil Policy and OPEC

HISTORY OF THE PROBLEM:

Since it’s inception in 1960, the Organization of Petroleum Exporting Countries, or OPEC, has drastically altered the not only the oil production industry and it’s market, but has altered the geopolitical economies of the world; the United States itself not withstanding. With the oil price regulating authority that OPEC has acquired, the economies of the world are constantly in a state of flux due to the rulings that OPEC announces on the pricing of the oil; that with the price of oil the prices of heating oil, gasoline, diesel, and the like are directly influenced and with it the prices of other goods and services are also influenced. With this pricing authority comes great political power; enough power to keep the western world held at the mercy of the OPEC nations. It is enough power to cause massive inflation in the 1970’s during the oil embargo. It is enough power that while the United States protests of the human rights violations in countries such as Afghanistan, China and other underdeveloped countries, they turn a blind eye to the human rights’ violations committed in courtiers such as Saudi Arabia calling them “cultural differences”. It is enough power that, if the OPEC nations felt it warranted, they could virtually cripple the United States from lack of oil. All because of the United States has kept their dependence on foreign oil from OPEC producing countries.

POSSIBLE SOLUTIONS TO THE PROBLEM

In dealing with the problem of breaking the United States’ dependence on foreign from OPEC producing countries, there are a number of options that the United States could pursue. The first option for the United States to pursue energy technology that is not dependent on petroleum products. An example of this is the electric car; which even now on the market, there are automobiles that are either powered by electricity alone or a hybrid type of automobile powered by petroleum and electricity. When these automobiles are made more affordable by the American Automaker, there is a good chance that the American car consumer will buy into the idea of an electric car. Not only would this solution be good for stopping American Dependence on OPEC and foreign oil in and of itself, it would be good for the environment
Another solution to the problem is for the United States to stop their dependence on foreign oil altogether and tap into the resources that America has on its’ own. Oil wells that are already present that are capped can be uncapped at pumped as well utilizing the oil potential that is in the state of Alaska; with of course all environmental concerns addressed as much as possible. Not only would producing our own oil break our dependence from other oil producing countries, it would create jobs for Americans; thus providing a more stable economy for the United States.
A third solution to the problem of breaking the American dependence on OPEC oil is for the United States to align themselves with non OPEC nations singularly. By aligning themselves with non OPEC nations, the United States can position themselves to deal with countries on an individual basis; not as a collective like OPEC. By doing, so the United States can pick and chose whom and when to purchase oil from depending on supply and demand from that particular country and by market prices. Pursing this option may also give the United States to not only assist in engaging in fostering diplomatic relations with other OPEC countries, but in aligning with other oil producing countries that are not OPEC nations, the United States can do a great economic service to developing nations with the purchase of their oil.

POTENTIAL PROBLEMS WITH SOLUTIONS

In discussing the solutions to breaking the United States dependence on OPEC oil there are certain considerations that should be mentioned in relation to the possible consequences to these solutions.
In considering the first solution, while the idea of having all electrical cars sounds good, there are two or three categories of those who may not agree: the automaker, the oil lobby, and the American consumer. The American automobile maker may feel it too expensive to switch over to the design and production of an electrical car. The oil lobbyist of which is probably one of the most powerful in Washington D.C. would lobby against the use of electrical automobiles; citing the economical implications in turning away from the use of petroleum products.
The second solution of having the United States utilize their own oil could meet with resistance from not only environmentalists but the oil production companies as well. The cost entailed with setting up new oil sites or refurbishing old sites in America could prove to be a costly challenge for the oil companies. The environmentalists would also have a share in the concern over the effects on the environment from the side effects from a new oil start up in this country; and rightfully so. If the new oil ventures started in this country ended up with the environment becoming worse, the cost of cleaning up the environment could negate the money produced from the oil ventures gained.

A potential problem with the third solution mentioned would be the political fallout that would most assuredly occur after the United States aligns itself with oil producing countries that are not of OPEC. This would come by way of not only the United States being blamed for the economic hardship that would befall that country, but also for the political upheaval that the county would experience as well. The political instability in those regions affected by the United States aligning itself with non-OPEC countries combined with the possible retribution by way of other sanctions or trade embargos may prove to be more costly than the money saved from the new alignment itself.

FINAL SOLUTION RECOMMENDATION

The final solution recommended by the author is combining the first and second solution; thereby having the United States not only explore but actively utilize its’ own oil resources and to produce hybrid automobiles that are affordable to all of the American consumer.

Does this mean it will easy for the American automobile maker accomplish this? Will this be just as easy for the American Oil companies to implement? The answer to this is a resounding NO. But the future benefits to implementing these policy changes will far outweigh the short term difficulty and cost that will be incurred.

References Used

Atlantic Council of the United States, The Middle East Institute, The Middle East Policy Council and the Stanley Foundation. (2003) U.S. Challenges and Choices in the Gulf: Energy Security.

Stobaugh, R., Yergin, D. (2003). After the Second Shock: Pragmatic Energy Strategies. Foreign Affairs, Spring 1979.

WWW.Infoplease.com. (2003) Organization of Petroleum Exporting Countries.

WWW.Oilcrisis.com. (2003). OPEC’s Clout Isn’t What it Used to be.

Reference:

• References Used Atlantic Council of the United States, The Middle East Institute, The Middle East Policy Council and the Stanley Foundation. (2003) U.S. Challenges and Choices in the Gulf: Energy Security. Stobaugh, R., Yergin, D. (2003). After the Second Shock: Pragmatic Energy Strategies. Foreign Affairs, Spring 1979. WWW.Infoplease.com. (2003) Organization of Petroleum Exporting Countries. WWW.Oilcrisis.com. (2003). OPEC’s Clout Isn’t What it Used to be.