Selling America In Exchange for Oil

By Joe Rothstein
Editor, USPolitics.einnews.com

September 21, 2007

The day George W. Bush took office as president, the price of oil closed at $24 a barrel. This week, the price of oil topped $80 a barrel.

The U.S. consumes about 20 million barrels of petroleum products each day. Do the math. Since half of our oil is imported, we are shelling out more than a hundred billion dollars each year to oil exporting countries. England, France and other fuel-intensive nations are not far behind.

So it's hardly a coincidence that on the same day oil closed above $80 a barrel, the Carlyle Group announced that it was selling a 20% ownership interest to the government of Abu Dhabi, and the NASDAQ announced it was selling 19.9% of itself to Dubai. Across the pond, 20% of the London Stock Exchange got sold to the government of Qatar

Abu Dhabi. Dubai. Qatar. These are three countries with very big bucks. Our bucks.

The economies of all the oil producing countries of the Middle East (except for Iraq) have been in high gear during the Bush years. With the outflow of U.S. wealth through the reverse oil pipeline and other aspects of the trade deficit, many countries are growing exceedingly wealthy. And with their money they are buying up a lot of assets we used to consider sacred U.S. property.

What's driving the price of oil? You can point to many culprits, including rising demand from China, India and other emerging industrial countries. But you can also hang a big part of the blame on President Bush and the Congress.

The instability created by the Iraq war, the continuing threats to attack Iran, the domestic policies that reward U.S. oil companies for cutting back on exploration, the failure to do anything very meaningful about developing alternative energy, or mandating more efficient use of energy---all of it contributes to where we now find ourselves.

In other words, our current energy crisis is part and parcel a result of past and current policy failures.

According to economists at the Federal Reserve Board, a 10% increase in the price of oil is likely to result in the loss of 150,000 non-farm payroll jobs in the U.S. The Congressional Research Service says that every 10% increase in oil prices cuts U.S. economic growth between $26 and $142 billion.

Both houses of Congress have produced energy bills and are now wrestling with their differences. And while both of these bills are light years better than the giveaways to industry in prior Republican congresses, combined they are a limp effort to confront the nation's obvious energy challenge.

The Senate bill mandates 35 mpg vehicles by 2020. 2020!! Toyota today is pumping out hybrids that will do far better than that. Plug-in versions can do 100 mpg. And even the 35 mpg mandate is not likely to survive in the final bill.

The House bill has a provision that would require utilities to draw at least 15% of their power from alternative sources by 2020. Again, 2020!! It's by no means certain that this weak tea of a provision can get support in both houses.

During a year in which the leaders of most nations of the world bought into scientists' warnings of pending calamity brought on by global warming, there's no certainty that the new energy bill will address this issue, as it should be addressed, through a tax on carbon emissions---or even through its alternative, a provision that lets polluters trade emission credits with non-polluters.

As for alternative energy, the heavy emphasis is on nuclear power, with all its residual problems, and liquefied coal---a process that has no acceptable waste disposal plan connected with it.

President Bush stands like a big, unmovable slug at the center of current energy planning, since any congressional action will either have to win his signature or overcome his veto. But that's no excuse for the congressional leadership not crafting an energy bill that meets the obvious current challenges--and doing its best to win public support for it.

Whether your concern is the economic chaos of looming $100 oil, the national security implications of our Middle East dependency, threats to the planet from climate change---you pick it---the times demand an aggressive new approach to energy development and use. And we're not seeing it.

In 2005, when oil was about $58 a barrel, two Wharton economists published a study explaining why high oil prices were not having much impact on the U.S. economy. They attributed it to the U.S. becoming more fuel efficient, and using less than half as much fossil fuel to produce a dollar's worth of GDP than it did in the 1970s. The report noted that when adjusted for inflation, the price of oil would have to spiral to $90. That would get people's attention, the study concluded.

$82 and getting close....

Are those who can do something about this paying attention?

Joe Rothstein, editor of US Politics Today, is a former daily newspaper editor and long-time national political strategist based in Washington, D.C.

See all previous articles by Joe Rothstein here.