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America Regains the Oil Weapon

In July of 1941, after Japan occupied French Indochina, the Roosevelt administration froze Japan’s assets in the United States. Denied hard cash, Japan could not buy the U.S. oil upon which the empire depended for survival. Seeing the Dutch East Indies as her only other source, Japan prepared to invade.

But first she had to eliminate the sole strategic threat to her occupation of the East Indies—the U.S. battle fleet at Pearl Harbor. FDR’s cutoff of oil to Japan was thus a primary cause of WWII in the Pacific, which led to hundreds of thousands of U.S. war dead, the destruction of Japan, Mao’s triumph in China and a U.S. war in Korea.

A second stunning use of the oil weapon came in 1973. Arab members of OPEC imposed an embargo in retaliation for Nixon’s rescue of Israel with an airlift in the Yom Kippur war. Long gas lines helped to bring Nixon down.

Now the oil weapon appears to be back in America’s hand.

Due to the substitution of natural gas for oil in heating homes and buildings, horizontal drilling, and hydraulic fracking, which enables us to bring oil and gas out of shale rock in places like North Dakota, U.S. production has exploded. We now produce more oil than Saudi Arabia and the benefits are not only economic, but geostrategic.

Cuba excepted, there is no more hostile regime in Latin America than Venezuela’s Nicolas Maduro, the successor to Hugo Chavez. Oil accounts for 95 percent of his nation’s exports. Iran is almost wholly dependent upon oil sales for hard currency. Russia is the oil and gas supplier for much of Europe.

With the price of oil having fallen from over $100 a barrel to below $80 this week, all three nations are suffering plunges in revenue. The United States and Europe are also punishing Russia and Iran with sanctions on their energy sectors.

Iran’s production has fallen sharply. Oil-drilling equipment and the latest U.S. drilling technology that Russia has sought to bring on stream its vast Arctic reserves are being denied to her.

As the oil weapon was used by us against Imperial Japan and by the Saudis against us, we are now wielding this sword. We should remember that it is double-edged.

While it would seem natural for Saudi Arabia, the largest producer in OPEC, to cut production to tighten the oil market and let prices firm up and rise, the Saudis have continued to pump as the price has fallen.

What is Riyadh’s game?

Is the Saudi strategy to let prices fall to where it is no longer profitable for Americans to begin new fracking? Are the Saudis thinking of doing to the new oil-producing champion, USA, what we are doing to Venezuela, Russia, and Iran? Riyadh may want to let the price of oil sink below where it makes sense for energy companies to prospect for new sources of oil or invest more billions in expanding production.

Are the Saudis out to cripple us with an oil glut?

Today, not only are Iran and Iraq producing below potential, so, too, is Libya. And we have been bombing ISIS’ oil facilities in Syria.

A contrarian’s question: Would we not be better off if these countries not only restored oil production, but also expanded production and put more oil on the market than they do today? Demand creates supply, and a world oil market where there is more supply than demand would seem to be to America’s benefit. For we remain the world’s largest consumer of petroleum products. And surely it is to our benefit to enlarge both the reserves and production of oil and gas in North America.

Price pays a huge role in creating, and shrinking, supply. And price, Adam Smith notwithstanding, is something we can control and manipulate, even as China manipulates its currency.

In “America’s New Oil Weapon” [1] in National Review, Arthur Herman of the Hudson Institute urges the United States to take bold steps to increase our supplies of oil and gas.

We should relax the rules on drilling in Alaska’s Arctic National Wildlife Refuge, which has 10 billion barrels of oil locked up. We should use as an economic weapon against OPEC the 700 million barrels in the Strategic Petroleum Reserve. We should allow the export of oil from the United States to enable us to cope with OPEC cutbacks. We should build the Keystone XL pipeline, and the other oil and gas pipelines between us and Canada now sitting in limbo.

What Herman is urging upon us is a new nationalism, a new way of thinking about international economics that puts the U.S. and its allies first, and uses our economic leverage to advance national rather than global interests.

Something the GOP Congress might think about when Barack Obama asks them to surrender their right to amend trade treaties with fast track.

Patrick J. Buchanan is the author of the new book “The Greatest Comeback: How Richard Nixon Rose From Defeat to Create the New Majority.” [2] Copyright 2014 Creators.com.

9 Comments (Open | Close)

9 Comments To "America Regains the Oil Weapon"

#1 Comment By William Dalton On November 14, 2014 @ 2:24 am

Perhaps as part of the tax reform package Congress must consider in the coming weeks, a tariff on foreign oil, pegged to the world price of unrefined petroleum, should be considered.

#2 Comment By PermReader On November 14, 2014 @ 7:48 am

“…to put US and its allies first…to advance national not global interest…”.Of course this interest of the gold white billion is nothing compared the Russian universalism.

#3 Comment By collin On November 14, 2014 @ 11:45 am

At this point in history, considering Valenzuela are Russia are near a Minsky financial crisis point it seems things are falling the US way at this point anyway and we don’t need to do a whole lot more. While Russia is still in the “If-Possible” stage, Valenzuela is at the when stage. Anyway, by the time we starting doing these investments (3 – 5 years) the whole market has changed.

#4 Comment By Basil Eunathco On November 14, 2014 @ 12:14 pm

Whiff. The Saudis increased production and lowered prices because we asked them to. The target is not making US oil too expensive to extract. The target is the Shiites in Iran and their Iraqi colony, and their major backer, Russia. The Saudis are fine at $80 because it only costs them $30. For Russia it’s way more. The current price is a sweet spot that is good for SA, good for the USA, and bad for Russia and Iran. The end.

#5 Comment By Bill Jones On November 14, 2014 @ 10:45 pm

“We should relax the rules on drilling in Alaska’s Arctic National Wildlife Refuge, which has 10 billion barrels of oil locked up.

Clownish beyond belief.

Here’s a pretty good review of oil usage”
[3]

So how many days of supply do we get from 10 billion barrels @ 91 millions barrels a day consumption?

About 3 months.

#6 Comment By EliteCommInc. On November 15, 2014 @ 7:46 am

In “America’s New Oil Weapon” in National Review, Arthur Herman of the Hudson Institute urges the United States to take bold steps to increase our supplies of oil and gas.
“We should relax the rules on drilling in Alaska’s Arctic National Wildlife Refuge, which has 10 billion barrels of oil locked up. We should use as an economic weapon against OPEC the 700 million barrels in the Strategic Petroleum Reserve. We should allow the export of oil from the United States to enable us to cope with OPEC cutbacks. We should build the Keystone XL pipeline, and the other oil and gas pipelines between us and Canada now sitting in limbo.”

I am generally supportive of the expansion of exploiting our own resources. I do think we need to hold said organizations to a high standard of accountability in removal, processing and distribution.

I think weaponizing the matter is more waste than it gains. The purpose is to support US interests and US citizens.
_______________________________

And we frown on this practice,

” . . . even as China manipulates its currency.”

because it creates unbalanced trade by destabilizing products prices through artificial means. That is not quite the same thing as setting a steady state price for market that fluctuates with the same. If we are in fact going to claim some exceptional role in world affairs then we must exhibit above board practice. It does not required] that we not be competitive. But one hopes that we are confident enough not manipulate players in the manner that is said was practiced by JP Morgan against Westinghouse.
Because of its impact on

#7 Comment By ThomasH On November 15, 2014 @ 9:49 pm

Actually no because the US economy is so resilient that fluctuations in the price of oil do little damage and stability does little good. Increased US oil production is good because the difference between the cost of producing it and the value from selling it means increased wealth.

#8 Comment By Kurt Gayle On November 16, 2014 @ 7:28 am

Pat, you’re opening too many not-clearly-labeled cans and pouring their contents into the pot of stew at one time.

Each of the “bold steps” would have repercussions – repercussions that can’t at this time be properly understood.

When we have so little understanding of the possible outcomes of taking so many “bold steps” simultaneously, we should err on the side of caution.

We should do nothing until we have a better, fuller understanding of where all of these “bold steps” would ultimately lead.

#9 Comment By cdugga On November 18, 2014 @ 12:54 pm

Seems like you forgot the double edged sword part! No, not climate change necessarily, but the true costs of dependence on fossil fuels from where ever. Our whole involvement in the ME as well as the second world war in the pacific was because of the necessity of getting energy from petroleum. We know better now. Or, at least you have to know better. So, I suspect you are being facetious if you support a claim that US fracking can compete with the saudi’s putting a straw in the ground, or with the continent of russia with so much gas that siberian gas pockets are exploding out of the ground as the permafrost melts due to that non-existent climate change. If not, please explain what was meant by a double edged sword while rhapsodizing over shale oil, pipelines and texas refinery profits from canadian exports. If all we want is more domestic produced oil we might ask why all the pumps in west texas are working when the price is high, and one third of them are pumping now! Yeah, you can ask the arabs too if you want. Maybe it really is cheaper to just build windmills. From abilene on west past big springs they seem to think so. Like, who needs drinking water when you can frac oil and gas, build windmills, grow cotton and run cattle. Guess they will find out, and somebody is bound to ask why we are putting acid and organic solvents in the small amt of water texas has left, or pumping that canadian corrosive across the most important agricultural aquifer in the country down to texas refineries on the coast with their export facilities.
What are those saudi’s up to? Who is advising them to what end? One possible legit reason to at least maintain our oil industry prowess, would be to insure that petroleum is still traded and financed in dollars through american banks and the IMF, and not through the new chinese bank and their russian partners, all kissing the saudi prince’s hand. Oops, probably did not want to let that out of the bag! But there is plenty more where that came from for those who want to go down on their knees to the oil and gas sponsors of the GOP and their concomitant Emm I See.
Repercussions that are not fully understood!? I guess not until you actually look up. Beep, beep. Who’s in charge of this cartoon? Well, for the next half dozen years we should probably just sit back and enjoy the clowns. You know, drill baby drill. And if we actually do know the repercussions without waiting until we experience them, we can always deny responsibility and claim it has always been in gods hands, god willing. It remains a much easier task to convince the garden of vegetables that they are always right and that if things turn sour it was due to some divine punishment from a wrathful god for our failure to take up the sword against those others who refuse to sing along with the piper. Like, when putin says no heat for you, just say keystone ram, keystone titan, keystone super duty and keystone silverado? Europe may still shiver but it sure is warm inside the golden calf. And what’s good for texas billionaires is good for larger profit margins on huge glutinous golden calves and those who tithe to the gods of our creation. Everythings bigger in texas. Just look at their governor. He’s the biggest, ah, well maybe not the biggest. But he is a fine example, and I do join him in praying for rain.