How to we bring down OPEC?
Raymond Learsy offers a few suggestions on how to do this in his latest book. Here are some details of what he suggests:
1) Tap the Strategic Petroleum Reserve – The actual number of barrels released would not make much of a difference on the "supply" side of supply and demand, but it would have a profound impact on the oil price. Oil prices are not driven by the free market and supply and demand. Instead, it inflates by OPEC-inspired rumor and irrational fear of certain events that attract investors seeking to make a buck on price gyrations. The result is people buying oil futures and pushing the price higher and higher. But if the government showed that a certain price for oil would trigger a release of a large quantity from the strategic reserve, then it would increase the risk of these investments and drive the speculators to the sidelines. The result…oil prices drop.
2) Nuclear Power – France is 80% nuclear. We are nowhere close to that. Why? Mainly because of political foot-dragging about nuclear waste disposal. One kg of oil produces 4 kw of electricity. One kg of uranium generates 400,000 kw of electricity (more than 7 million kw if uranium is recycled, but Jimmy Carter banned uranium recycling in 1977). It is cleaner, cheaper and if recycled will reduce the volume of nuclear waste that needed disposal. If the enviro-kooks would come to the table on this, we could get more plants built and not only reduce oil consumption, but also help protect the environment.
3) Control demand – Bush pushed through a cap-and-trade Clear Skies initiative as part of his environmental policy. This states that power companies have so many "emission credits" that they can consume, basically keeping a tally on the amount of pollution they dump into the environment. Go over your allotted credits, and you can buy more from a "cleaner" power company. This does two things. It rewards those who are friendly to the environment with more money (and NO tax dollars) and it increases costs for those who don’t take measures to reduce pollution. Why not do the same for gasoline?
Everyone gets an allotment of Gasoline Purchase Permits. Reach your allotment, and you can purchase more on the free market from the private sector (those who take the proper measures to reduce gasoline consumption). You CAN’T buy these credits from the government and therefore it won’t be a hidden tax. Instead, it will reward those who carpool, own fuel-efficient cars, and avoid discretionary driving and it will increase costs for those who don’t. The result is less oil consumption nationwide. This can even be pushed as part of the war on terror. In WWII, people who wanted to do their part against the Nazis planted victory gardens. Now, people could reduce their fuel consumption, make money by selling their allotted extra GPPs and feel that they are doing their part in keeping American money out of the pockets of the rich oil barons of the Middle East. And it would go a long way in altering the world’s perception of Americans as self-indulgent anti-environment consumers.
4) Put OPEC on trial – Oil prices are governed by collusion and OPEC is not afraid to show this when they hold meetings for the purpose of setting production quotas. The idea of these quotas is to limit the amount of crude produced and thus keep the price of oil high. THIS IS ILLEGAL. The World Trade Organization has a rule equivalent to antitrust laws in which it prohibits members from setting quantitative restrictions on imports and exports. This is an outright ban on conspiracies to artificially manipulate markets. If the US led an international "posse" aimed at putting the OPEC nations on trial for this, the "fear factor" that drives much of the oil price could begin to work in our favor and thus lead to lower prices.
5) Alternative sources of fuel – There are A LOT of options here. To do it justice, I will discuss these in a separate post. Tune in tomorrow (or later tonight depending on how much time I have).