Tag Archives: OPEC

Fifty years after the oil embargo crisis of 1973, no American policy for energy independence

From CFACT

By Ronald Stein 

The oil embargo of 1973 imposed by the Organization of Petroleum Exporting Countries (OPEC) and other Arab oil-producing nations was imposed in response to the United States’ support of Israel during the Yom Kippur War.

The embargo led to a sharp increase in oil prices and a shortage of fuels for the military, airlines, ships, and vehicles in the United States and other countries, as well as a shortage of products from oil.

Few may remember the long lines at gas stations which were one of the most visible effects of the oil embargo. In some cases, people waited for hours to fill up their tanks. The shortage of oil also led to price increases, and many people were forced to make sacrifices to conserve fuel.

The oil embargo of 1973 was a major event in the history of the United States.  It led to a recession in the United States and other countries. It also led to thoughts of a needed energy policy in the United States. The United States began to develop alternative sources for oil and for electricity, such as solar and wind power.

President Richard Nixon played a key role in the construction of the Trans-Alaska Pipeline, which carries oil from Prudhoe Bay on Alaska’s North Slope to the port of Valdez. Nixon signed the Trans-Alaska Pipeline Authorization Act into law in 1973, and he worked to overcome environmental and political opposition to the project. The pipeline began operating in 1977 and has since transported more than 15 billion barrels of oil.

President Richard Nixon gave a speech on America’s energy policy on November 7, 1973, in which he outlined his plans to reduce national energy consumption and called on U.S. citizens to follow his lead in achieving energy independence. In his speech, Nixon acknowledged that the United States was facing an oil crisis for the American economy’s demands for fuels, and the products that are based on crude oil, and he blamed the crisis on several factors, including the Arab oil embargo, the growth of the U.S. economy, and the country’s continued reliance on foreign oil.

Now, 50 years later, none of the administrations that followed Nixon have done anything to establish a policy for America’s energy independence from another embargo disaster. We’re talking about a 50-year span of administrations from Presidents Ford, Carter, Reagan, Bush Sr., Clinton, Bush, Jr., Obama, Trump, and now Biden.

As World War I and II historians Russia, China, and OPEC know, the country that controls the minerals, crude oil, and natural gas, controls the world!  They all know there is no substitute for fossil fuel product dominance in the foreseeable future, even on a longer-term horizon. To believe a transition to just electricity from renewables is possible from the products manufactured from fossil fuels and act accordingly is suicidal for humanity. As former Congressman Don Ritter of Pennsylvania wrote  “It’s the real “existential threat.”

Today, President Biden and California Governor Newsom remain oblivious to the fact that wind and solar only generate electricity. Neither Biden or Newsom can identify one product that wind and solar can manufacture for mankind. And worse, neither has a backup plan to replace all the products and fuels that are based on oil!

Biden is campaigning to rid America of oil, and Newsom, by continually decreasing California’s in-state oil production, Newsom’s personal energy policies continue to force California, the 4th largest economy in the world, to be the only state in contiguous America that imports most of its crude oil energy from foreign countries. That dependence, via maritime transportation from foreign nations for the state’s crude oil energy demands, has increased imported crude oil from 5 percent in 1992 to almost 60 percent today of total consumption. California’s growing dependency on other nations, like Saudi Aramco is a serious national security risk for America.

Today, both Biden and Newsom campaign to go green with EV’s, and wind and solar for electricity generation. Through the encouragement of tax incentives and subsidies to go green, they are providing financial incentives to China, who already controls the supply chain for the minerals and metals to go green, furthering our total dependence on China to achieve the green goals of America.

In the 1970s, Nixon also took steps to increase domestic energy production. He opened more federal lands to oil and gas drilling, and he encouraged the development of new sources for electricity, such as solar and nuclear power. He also created the Energy Research and Development Administration (ERDA), which was responsible for researching and developing new energy technologies.

Nixon’s energy policies were not without their critics. Some argued that his policies were too focused on conservation and not enough on production. Others argued that his policies were too expensive and that they would harm the economy. However, Nixon’s energy policies were generally successful in helping the United States to weather the energy crisis of the 1970s.

Here is a list of some of President Nixon’s energy successes in the 1970s:

  • Opening more federal lands to oil and gas drilling
  • Created the Environmental Protection Agency (EPA) in 1970
  • Created the Occupational Safety and Health Administration (OSHA) in 1970
  • Created the National Oceanic and Atmospheric Administration (NOAA) in 1970
  • Created the United States Consumer Product Safety Commission (CPSC) in 1972
  • Signing the Trans-Alaska Pipeline Authorization Act into law in 1973
  • Creating the Energy Research and Development Administration (ERDA) in 1974
  • Passage of the Energy Policy and Conservation Act of 1975

Those 1970s agencies were created in response to several challenges facing the United States at the time, including environmental pollution, occupational safety and health hazards, and consumer product safety. The creation of those agencies helped to improve the quality of life for Americans and to protect the environment.

Today, America is offering tax incentives and subsidies to go green at any cost, and implementing policies to rid the country of oil with no backup plan for a supply chain of products from oil that are the basis of the economy. Instead of achieving energy independence, America continues to increase its dependence on China for “green”, and Russia and OPEC for oil products demanded by our economy.

With no policy for energy independence, God help America!

This article originally appeared at Heartland

Author

  • Ronald Stein
  • Ronald Stein is an engineer, senior policy advisor on energy literacy for CFACT, and co-author of the Pulitzer Prize nominated book “Clean Energy Exploitations.”

Peace Breaks Out In The Middle East As US Influence Declines: From OPEC To OPEC+

Tilak Doshi writes at Forbes:

American president Franklin Delano Roosevelt (R, 1882 -1945) meets with King Ibn Saud (1880- 1953) … [+]GETTY IMAGES

Historians will mark the low point of Pax Americana in the Middle East by several rather brutal humiliations that American prestige has undergone under President Joe Biden’s presidency. Examples would include having phone call requests by the US president declined by Saudi Arabia and the United Arab Emirates in March last year and mass media pictures of the impersonal fist-bump between Joe Biden and de facto ruler and Crown Prince of Saudi Arabia Mohammed Bin Salman (or “MBS” as he is familiarly called) in July.

The US president had come to Riyadh with a begging bowl but failed to convince the Saudis to rescue the US gasoline market from high prices by opening the Arab oil tap in time for the mid-term US elections. This was after the President Biden had promised to make the Kingdom a “pariah” during his 2020 election campaign in response to the killing of Jamal Khashoggi.

With the decline of US dominance in Middle East security affairs, a spate of intra-regional diplomatic moves towards peace seems to have broken out. This might sound ironic to observers of American diplomacy and military power in the region. But an assertive Saudi foreign policy under its Crown Prince and the vastly altered circumstances caused by Western sanctions on Russia’s oil and gas exports saw Riyadh distance itself from Washington.

It instead turned to China in March 2023 to underwrite its security guarantees in return for diplomatic rapprochement with Iran. In the event, MBS favored restoring diplomatic relations with Iran without Washington’s assistance, a move described by an unnamed US diplomat as “giving Biden the middle finger”. At a stroke, MBS displaced the “oil-for-security” deal that has lasted over three quarters of a century between the US and Saudi Arabia since Franklin D. Roosevelt’s historic meeting with King Ibn Saud in 1945.

In a 1926 Hemingway novel, a character is asked how he went bankrupt to which he remarked “Two ways, gradually and then suddenly”. The loss of US prestige in the Middle East, marked by the protracted military debacles in Iraq, Syria, and Afghanistan, might be termed “gradual” by some historian’s metrics. But last month’s China-brokered resumption of diplomatic relations between Iran and Saudi Arabia — historical enemies across the millennia-old Shia-Sunni divide – is a sudden and profound turn of events in Middle East affairs. All CIA Director William Burns could do in a surprise visit to Saudi Arabia in early April was to express Washington’s “frustration” and feeling “blindsided” by Saudi Arabia’s sudden move to get along with its neighbors.

The Old Order

Roosevelt met with King Abdul Aziz Ibn Saud on February 14, 1945, aboard a U.S. Navy destroyer in the Suez Canal. It was the first time a U.S. president had ever met with a Saudi Arabian king, and the encounter laid the foundation for U.S.-Saudi relations that would continue for over 75 years encompassing 14 presidencies until Joe Biden’s. The celebrated quid pro quo traded US military power and regime security for the Ibn Saud family in return for the unhindered flow of Arabian oil to Western markets. This served as a key pillar of the Bretton Woods international economic order after the Second World War.

During the first phase of Bretton Woods (1945 – 71), the US dollar — backed by gold — served as the world’s international reserve currency. The US and Western Europe dominated the IMF and the World Bank, the twin Bretton Woods institutions overseeing the global economy outside the Iron and Bamboo curtains of the Soviet Union and Communist China. Under pressure from rising inflation and creditor nations wanting to redeem gold, President Richard Nixon was forced to remove the dollar from its gold peg in 1971.

In the second phase of Bretton Woods since 1971, the purely fiat US dollar — based on the “full faith and credit” of the US Federal Reserve — serves as the global reserve currency. At a national debt exceeding $30 trillion (117 per cent of US GDP in 2022), and increasing by $1 trillion a year, faith in the US debt market cannot be taken for granted. It took 215 years for US debt to reach $7 trillion; it has added another $7 trillion since March 2020. Political parties on both sides of the aisle do not seem too concerned about budget deficits and the national debt. This, to say the least, does not inspire confidence for lenders who want to hold dollar-denominated debt.

The Yom Kippur War (1973) and resultant OPEC embargo that led oil prices to skyrocket in the United States threatened the status of the fiat dollar. In the wake of the oil price shock, President Nixon empowered then secretary of the Treasury, William Simon, to get the Saudi monarchy “to finance America’s widening deficit with its newfound [oil] wealth.” In a further elaboration of the original Roosevelt-Ibn Saud “oil-for-security” deal, the Saudis under King Faisal promised to denominate global oil purchases only in dollars and in return Washington would provide military aid and materiel to the Kingdom. The quid pro quo came in the form of guarantees that the Saudis would “plow billions of their petrodollar revenue back into Treasuries and finance spending” of every US administration since.

A Spate of Peace Moves

The Middle East regional order has undergone a dramatic realignment under President Biden’s watch. Following the landmark Chinese-brokered deal between Saudi Arabia and Iran on resuming ties last month, the US was again left on the sidelines a few weeks later. It could only passively observe yet another major diplomatic initiative, this time between Saudi Arabia and Syria, mediated by Russia. After rounds of discussions in Moscow and Riyadh in recent weeks, the emerging Damascus-Riyadh rapprochement is signalled by a series of reciprocal state visits by the region’s leaders.

Following a previous trip to the United Arab Emirates last year, Syrian President Bashar al Assad arrived in the United Arab Emirates last month for his second official visit. Marked with greater ceremony this time, the March meeting in Abu Dhabi with UAEUAE +1.2% President Sheikh Mohammed bin Zayed al-Nahyan occurred when more Arab states have signalled openness to resumed relations with Damascus. Last week, President Bashar al-Assad received Saudi Foreign Minister Prince Faisal bin Farhan in Damascus in the “most significant step” yet towards ending Syria’s decade-long regional isolation. Even though Assad’s government remains under US and Western sanctions, Syria could be formally welcomed back into the Arab League at next month’s summit in Riyadh.

Since the Syrian civil war began in 2011, Gulf states including Saudi Arabia and the UAE joined the US in backing rebels fighting to overthrow President Assad. The turnaround by the Gulf Arab states to now support bringing Syria back into the Arab fold has accelerated hopes for wider regional peace in the Middle East. The Saudis and its Gulf allies have resumed diplomatic relations with Qatar and have begun improving ties with Turkey. The proxy wars in Yemen and Syria have de-escalated as part of the China- and Russia-brokered rapprochement processes in the regional order. The US is no longer the prime — or even peer — mover in the Middle East security stakes. One analyst of regional affairs was led to observe wryly that “Middle East nations are making peace without Washington.”

From OPEC to OPEC+

Following the Russia invasion of Ukraine just over a year ago, the U.S., U.K. and the European Union along with their closest allies imposed the most comprehensive and unprecedented set of sanctions on a sovereign nation in modern history. These included the expropriation of Russian Central Bank’s foreign exchange reserves held offshore and expulsion from the SWIFT international payments system. Expectations in Washington and Brussels that this would “rubble the rouble”, devastate the Russian economy, and help lead to regime change with the ouster of President Vladimir Putin quickly proved wishful.

The Russian economy is now slated by the IMF’s latest economic outlook to outperform Britain and Germany this year. Russia posted a record current account surplus of $227 billion in 2022, up 86% from 2021. Russia replaced revenues lost from its oil and gas exports to Europe with a pivot to China, India, UAE, Turkey and other countries not participating in the Western-led sanctions (i.e. the rest of the world outside the “collective West”). Its oil export levels have not seen any significant reduction. Last week, Reuters reported that oil loadings from Russia’s western ports in April rose to the highest since 2019. Though sold at discounted prices, Russian oil and gas exports to markets in the “Global South” have enjoyed relatively high international commodity prices even if below the peaks immediately after the Ukraine invasion.

Gone are the days when the OPEC cartel with its Saudi lynchpin played a role as the US-allied “central banker of oil”, opening the oil spigot if oil prices went too high for the Western-dominated global economy. It is the OPEC+ group that is now in the driver’s seat, combining Saudi Arabia (and its Gulf allies) with Russia. The former is the world’s largest exporter of crude oil while the latter is the world’s second largest oil exporter and largest natural gas exporter. Absurdly enough, the third heavy weight contender in the global oil and gas trade, the US itself, is hobbled by an administration which boasts a ‘whole-of-government’ commitment to anti-fossil fuel climate policies.

In March 2022, the IMF’s Economic Counsellor Gita Gopinath said that “sanctions on Russia could erode the dollar’s dominance by encouraging smaller trading blocs using other currencies.” That is precisely what has happened. An increasing number of countries are trading oil in currencies other than US dollars. Russia’s oil and gas exports have been paid for in roubles or gold, and now increasingly in yuan, as the US dollar and the Euro are “toxic” on its sanctioned books.

Indian refiners have started paying for most of the Russian oil purchased through Dubai traders in UAE dirhams (pegged to the US dollar) instead of US dollars. China has reportedly agreed to pay for imports of Russian oil, gas and coal in some combination of rubles and yuan. Speaking at an educational event this week, Anton Siluanov, Minister of Finance of the Russian Federation, said that the country is “actively working with partner countries in order to have its own ‘circulatory system’ of international payments” and that the ruble and yuan are increasingly replacing the dollar in trade between China and Russia.

Arriving At A Multi-Polar World

In a recent interview on Fox News, Senator Marc Rubio said that “In 5 years…there will be so many countries trading currencies other than the dollar that we won’t be able to impose sanctions on them.” Robert F. Kennedy Jr., who recently announced his candidacy as the democrat nominee for US presidency in 2024, described the decline in the efficacy of US financial sanctions more forcefully: “The collapse of U.S. influence over Saudi Arabia, and the Kingdom’s new alliances with China and Iran are painful emblems of the abject failure of the Neocon strategy of maintaining U.S. global hegemony with aggressive projections of military power.”

Peace has a chance of breaking out in the Middle East. OPEC now is better understood as OPEC+, the new oil cartel. Russia and China have emerged as full-fledged actors in the Middle East security outlook despite limits to their military force projection capabilities. And the US — the exceptional country or, to its critics, the hitherto global hegemon — now operates in a multipolar world.

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I have worked in the oil and gas sector as an economist in both private industry and in think tanks, in Asia, the Middle East and the US over the past 25 years. I focus on global energy developments from the perspective of Asian countries that remain large markets for oil, gas and coal. I have written extensively on the areas of economic development, environment and energy economics. My publications include “Singapore in a Post-Kyoto World: Energy, Environment and the Economy” published by the Institute of Southeast Asian Studies (2015). I won the 1984 Robert S. McNamara Research Fellow award of the World Bank and received my Ph.D. in Economics in 1992.