Is $5 Per Gallon Gasoline Enough?
By E. Ralph Hostetter (08/25/06)
Middle Eastern oil, at least for the time being, has topped out at above $76.00 per barrel. Ostensibly, the latest rise came about following a report from British Petroleum (BP) that its Alaska pipeline, which provides 2.6% of United States’ needs, seriously had eroded and would be shut down for an indefinite period.
The world’s controlled oil production is thin and reacts radically to the slightest threat. The world price of oil spiked by $10 per barrel during the Katrina aftermath, when only two U.S. refineries and several drilling platforms in the Gulf of Mexico region were damaged. These two instances of oil production interruption were but a small blip on the world oil curve, which now proves that perception has overtaken reality.
The present Israeli war with the terrorist group Hezbollah, coupled with pending sanctions against Hezbollah’s sponsor, Iran, over the nuclear enrichment controversy, could erupt overnight into an energy crisis. Prices of crude oil, according to present estimates, could spike to $100 per barrel. Iran’s Foreign Minister, visiting President Hugo Chavez in Venezuela, predicted a rise to $200 per barrel in the event sanctions were placed against Iran by the United Nations. Perception very well could be the ruling factor.
The problem of Middle Eastern oil prices began with the 1973 Arab-Israeli War and the subsequent founding of the cartel OPEC. The price of a barrel of oil in October 1973 stood at $4.31. Gasoline cost about 30 cents per gallon. Crude oil had increased in price per barrel only $1.74 in the previous 25 years. Within two months, by the end of December 1973, the price of oil jumped to $10 per barrel, an increase of 132%, eventually creating a world recession. Over the next six and one-half years the price would rise to $39.50 per barrel by July 1980. The price of gasoline rose five-fold to $1.50 per gallon.
A period of relative calm in the Middle East and the end of the Cold War brought the price of oil from a high of $39.50 per barrel on July 1, 1980 to a low of $11.28 on December 1, 1998. The price of gasoline dropped to 90 cents per gallon. Tensions in the Gulf region, the 9/11 attack on the World Trade Center and the beginning of hostilities in Iraq brought the price of crude oil to $38.02 per barrel by June 1, 2005, and the price of gasoline to $2.50-plus per gallon. In a little more than a year, by August 8, 2006, the price of crude doubled to $76.25. The price at the pump now approximates and often exceeds $3.00 per gallon. In eight years, the price of oil jumped some 700%.
With a war raging in the Middle East, America finds itself on the possible eve of World War III. And still, there is little reaction. The American people remain in quiet complacency. What would it take to awaken the public, to bring the public to a level of rage that would call attention to the impending perils of the day? If the governor of any state were to propose an increase in state gasoline taxes by a mere five cents people would take to the streets with petitions calling for the defeat of the governor in the next election. The price of gasoline has increased almost 1,000% from some 30 cents-plus per gallon at the beginning of the Arab-Israeli War in October 1973 to about $3.00-plus per gallon at present. Yet there is no outrage. Has the American public reduced itself to such a Pavlovian state that it awaits a scare or a shock? Perhaps it has been conditioned to react only to the scare tactics of a corrupt dominant media or the ranting of a vociferous minority.
Media scares have proved very effective. Remember the cyclamate scare in diet soft drinks and the Chilean grape scare involving three grapes with cyanide powder (which cost Chile hundreds of millions in lost revenue)? How about the Alar apple scare or maybe the madcow disease scare that cost Canadian farmers billions of dollars in losses? Don’t forget the Y2K hoax that carried America to the brink and cost U.S. investors trillions of dollars, and please warm up to the developing hoax, a trace of carbon dioxide—37-thousandths of 1% (0.037%) of the atmosphere—contributing to man-made climate change.
Most shocking in all this malaise is the fact that the 100-plus billion dollars we pay our enemies and potential enemies in the Middle East, for oil finances terrorism around the world. America is one of the principal victims and could be financing its own demise. The attack on the World Trade Center in New York City on 9/11 should be a reminder. U.S. energy independence would deprive world terrorists of a major source of income and go a long way toward the balancing of our Federal budget.
It must appear idiotic to the outside world that the most powerful nation on earth, the United States, has surrendered access to its 300-plus billion barrels of known oil reserves in Alaska, the continental United States and offshore to a bunch of envirocrats (anti-capitalist radical activists) posing as environmentalists and the extreme left of a spineless U.S. Congress. The 300-billion barrels of America’s own oil would replace the daily 12 million barrels of imported oil for a period of 75 years, plenty of time to find other sources of energy. The alternatives to energy self-sufficiency are unthinkable and could descend on the American economy in a moment.
E. Ralph Hostetter, a prominent businessman and agricultural publisher, also is an award-winning columnist and Vice Chairman of the Free Congress Foundation.
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