Commentary - September 2006

Oil Independence

The Key to U.S. Survival

by Lyle Brennan

I got an email recently asking me to boycott Citco gasoline, because the company that produces it (Citgo) is wholly owned by the Venezuelan government. I thought at first it must be one of those urban legends. How could an American gasoline company be owned by a foreign country? However, I did some checking and found out that Citgo is indeed owned by Venezuela, whose leader, Hugo Chavez, is one of Fidel Castro’s closest allies.

Chavez was quoted recently as saying, "Enough of imperialist aggression! Down with the U.S. empire! We have to bury imperialism in this century." Chavez has become the darling of American leftists, who have visited him and appeared on his nationally-broadcast television show. Recent guests have included Cindy Sheehan (the peace activist who camped out near Pres. Bush’s ranch) and Harry Belafonte, who used his television interview to call Bush "the greatest terrorist in the world."

The thought of my gasoline money going to support this guy really made me mad, and I figured a boycott would take away the funds he needs to spread his anti-American messages. That is, until I dug a little further and found out some cold, hard facts about the world oil market.

According to the United States Energy Information Administration (EIA), in 2005, less than 40 percent of the crude oil used by U.S. refineries to make gasoline was produced here. The other 60 percent was imported from Middle Eastern countries, Venezuela and other oil-producing countries around the world.

According to the EIA Web site: "Due to the global nature of the oil market, boycotts by individual consumers or even individual countries cannot reduce the oil revenues of a given oil-producing country. Because the overall consumer demand for products made from oil (like gasoline and diesel fuel) would be unchanged, the oil would simply be purchased by some other country."

In other words, if we decide to boycott a particular regime, we would increase the amount we buy from other oil-producing countries, but those countries would just turn around and purchase additional supplies from the boycotted region to make up the difference. According to the EIA, "Due to the nature of the world oil market, it is impossible to impact the oil revenues flowing to a given country or region with anything short of a sanctions regime, wherein all countries pledge to avoid buying from a particular country."

Another thing to consider is that Venezuela isn’t the only anti-American oil producer. Since most of the world’s crude oil comes from the Middle East, who knows how much oil money gets funneled into support of Al Qaeda and other terrorist groups? I don’t want to support Chavez, but I don’t like the idea of my gasoline money going to Osama bin Laden either.

So, what’s the answer? Reducing our dependence on foreign oil makes more sense now than ever. We need to change the way we produce the power we use every day in our homes, businesses and vehicles. We need to provide incentives for new electricity generation by nuclear and clean-coal plants, as well as solar and wind energy and bio-fuels, such as those made from corn. This issue of Nevada Business Journal contains an article about alternative power sources being developed in Nevada; investigating those ways of producing power and weaning us off foreign oil would be good for our state as well as our country.

However, it will take years to convert our systems over to these new technologies. In the meanwhile, it makes sense to open up the Artic National Wildlife Refuge (ANWR) to exploration for oil and gas. Experts estimate the ANWR coastal plain may contain between 6 billion and 16 billion barrels of recoverable oil, which could supply us for another 30 to 50 years while we’re developing alternative technologies. In the years we’ve been extracting oil from Alaska, the wildlife there has not been adversely affected, and there is no shortage of experts in the wildlife ecology field to help us devise a plan to drill for oil without destroying the local habitat.

Even though boycotting Citgo may not have the economic impact we would like it to have, it still may be worthwhile to do, because it will send a political message that Americans are disgusted with Chavez and his anti-American policies. But the long-term answer seems to be removing the economic and political power Venezuela and other oil-producing countries have over us by asserting our economic independence from foreign oil.

Lyle Brennan Publisher
COMMENTS? email: lyle@nbj.com