The following op-ed by T. Boone Pickens ran in The Miami Herald on Monday, September 27, 2010.
Sept. 14 was OPEC’s 50th birthday. The Organization of Petroleum Exporting Countries was formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Since then it has expanded to 12 countries, but its goal is the same: To influence and, if necessary, manipulate the price of crude oil in the world.
OPEC accounts for about a third of the world’s oil production, so it can, by increasing or decreasing production, affect the price.
In 1957 — before OPEC — oil was selling for about $3 per barrel. Using the Consumer Price Index, oil today should be selling for about $23 per barrel. Instead oil is selling for about $80 per barrel. Even including the rise of China and India as industrial powerhouses, OPEC has been at the center of oil prices for the past half century.
Since its founding, OPEC has sold about $14 trillion worth of oil. About one out of every five dollars of that — over $2.5 trillion — has been provided by you and me every time we’ve gone to the gas station. If we could have kept just half of that circulating in the U.S. economy that would have been an average of $25 billion a year staying in America rather than going to fund the royal families in Saudi Arabia and Kuwait and to pay to support unfriendly governments in places like Venezuela and Iran each and every year for the past 50 years.
This transfer of wealth is no small matter. As the former Director of Central Intelligence James Woolsey pointed out in a Wall Street Journal essay: “If [oil] reaches $125 a barrel again, as it did in 2008, then approximately half the wealth in the world — above and below ground — will be controlled by OPEC nations.”
President Obama has recognized the danger we face in depending so heavily on OPEC oil. He announced during a speech in Chicago that within 10 years we would be completely off OPEC oil. But we are still importing nearly two-thirds of our oil, 70 percent of which is used as our principal transportation fuel. Reducing our dependence on OPEC needs to be a high priority.
To help the president realize his goal, I introduced the Pickens Plan in July 2008. It remains the only path to reducing, then eliminating our need for any OPEC oil. By replacing America’s fleet of 18-wheelers, trash and recycling trucks; and, municipal and school buses that are now burning imported diesel, with vehicles running on domestic natural gas, we can reduce our need for OPEC oil by half within the next seven years.
Keep in mind that while OPEC is controlling oil prices by controlling production, they are forcing the rest of the world to drill for the most expensive oil thus, as Woolsey wrote: “OPEC has very large reserves and cheap extraction costs, while domestic drilling costs for new oil will be many times that of the Saudis.”
There’s a reason we’re drilling in deep water off in the Gulf of Mexico and off the coast of Africa. Currently, OPEC is keeping its easily recoverable oil off the world market to manipulate prices.
Floridians do not need a lesson on the inherent dangers in deep-water drilling from an oil and gas man from Dallas. The economic damage done by the BP spill due to the fear of oil washing ashore was far greater than damage from the oil itself.
Because of Florida’s position as a leading provider of agricultural products, the advantages to growers, distributors and shippers of 18-wheelers running on cheaper, cleaner, domestic natural gas are obvious:
Every dollar not sent to OPEC for diesel fuel, is a dollar that stays in the U.S., and especially Florida, which is crucial during these difficult economic times.
There is legislation currently before Congress that has broad bipartisan support in both the House and the Senate. If that legislation is adopted it will significantly reduce our dependence on OPEC oil. After 50 years of OPEC manipulating the American economy, this is an excellent opportunity — perhaps the only opportunity — we will have to make that promise of oil independence a reality.
T. Boone Pickens is founder and chairman of BP Capital and architect of the Pickens Plan.