How America Subsidizes Its Own Oil Dependency

The following op-ed by T. Boone Pickens ran at The Daily Caller on August 1, 2013.

The Pickens Plan – a plan to wean the United States from Middle Eastern oil – launched in 2008 and from its beginning focused on reducing America’s dependence on OPEC oil. The cornerstone focus: expanding the use of America’s natural gas in heavy-duty trucks and fleet vehicles in place of OPEC oil/diesel/gasoline.

Time after time as I’ve worked on this, people on Capitol Hill have told me they don’t think it is the job of policymakers to influence how America gets and uses energy. “The market will sort it out,” they say. “When gas prices get too high, things will change.” They say they don’t want to pick winners and losers in the transportation fuel arena.

And every time I hear that I remind them that, by not taking advantage of America’s natural gas resources, they are picking winners and losers: OPEC is the winner and we are the losers.

What Washington needs to understand is that there is no free market in energy, and while free market ideals are worth pursuing in other sectors, adhering to zero-tolerance free market energy policies impairs our economic and national security.

In a free market, consumers decide what’s best, absent government influence on supply or prices. But the market for transportation fuel doesn’t work that way. Both supply and demand are manipulated by governments around the world, and consumers never know how much they’re really paying.

The only thing most Americans keep track of is the price we pay at the gas pump. According to AAA, the national average price for a gallon of regular was $3.61 in mid-July.  That was 22 cents higher than a year ago. The fact is, we’ve been paying a lot more than that all along.

How is that? It’s because America pays for our military to protect other countries’ supplies for them. We protect them so we – and other countries – can keep buying their oil. It’s a mission that has cost us more than $4 trillion protecting foreign oil over the past 10 years alone. That number, from a Princeton University study, matched with Energy Information Agency data, works out to be another $1 per gallon we’re paying for gasoline. If that were included on the pump indicator, you can bet things would change. But the price is hidden from you so you don’t know.

Of the 17 million barrels of oil that are shipped out of the Persian Gulf on a daily basis, about 85 percent of it goes to Asian markets including China, Japan, and Korea.  Only about 2.2 million barrels (13 percent) of that oil comes to the United States, yet we pay 100 percent of the costs of protecting it.

This price tag is likely a shock at a time the federal government is combing through every line in the Pentagon budget looking for cuts, while addressing the economic and national security threats of our OPEC oil dependence, which has been a stated priority of United States foreign policy for every President since Jimmy Carter.

In its earliest days our policy was to protect the oil from falling into the hands of the Soviets. Then we decided we needed to arm Iraq to contain Iran. Then we fought Saddam twice, sending U.S. service personnel against Iraqi soldiers who were using weapons we had sold or given to them. Now, we are told, it is our job to keep oil out of the hands of the terrorists, so either we pay for its protection or Iran will shut down the Strait of Hormuz and hold the world hostage.

I say it again: There is no such thing as a free market when it comes to energy. Our dependence on foreign oil is not an economic issue; it is a matter of national security.

Seventy percent of the world’s oil is controlled by government-owned enterprises and most of those governments are not particularly friendly to the U.S. or our way of life. OPEC controls about one-third of the world’s oil supply — enough to manipulate prices to suit their domestic needs – and they control nearly all the surplus production capacity. Everyone else is pumping like mad.

Month after month we send tens of billions of oil dollars to our enemies. They use it to prop up their failed states and to buy off potential attackers. At the same time our military keeps them in power, protecting their oil reserves and escorting their oil shipments as they go to the highest bidder. In effect we are propping up dictators and funding terrorists.

This is not a problem the market is going to solve, but we can choose to solve it ourselves.

The answer is literally under out feet. We are the Saudi Arabia of natural gas. We sit on a massive supply looking for a demand. We can’t change America’s fleet of 250 million cars and light-trucks over to natural gas. But we can change our eight million heavy trucks to run on natural gas. The private sector is already taking steps, installing natural gas refueling facilities at truck stops along major Interstate systems. With leadership and limited government incentives, these efforts could be expanded to make a huge impact on our addiction to OPEC oil. Just getting heavy-duty trucks and fleet vehicles onto American resources cut our imports by 30%. That would go a long way to making us safer.