Answering some questions as to who might be partially responsible for the skyrocketing oil prices and, in case someone hasn’t figured it out yet, revealing on whose side the OPEC countries stand, Abdalla Salem El-Badri, OPEC’s secretary general has declared that, despite the fact that Iran produces less than 5% of OPEC’s 87 million barrels of oil a day, there is no way the remaining OPEC members could make up for the loss of production should Iran choose to take its oil production off line in the event of a military conflict. This, he claims, would result in an “unlimited” increase in the price of oil.
The announcement came in an interview following sessions where oil prices had softened, due in part to lowered estimates of future demand based upon the world’s reaction to rising oil prices. The result was oil driving to record prices eclipsing $147 a barrel.
This statement significantly strengthens Iran’s position in its quest to possess nuclear weapons and effectively gives President Ahmadinejad a political knife to put at the world’s throat declaring “One false move and I’ll destroy all your economies. Put down your missiles or the SUV gets it!!” And, in typical “B” movie style, OPEC is standing there… a bystander and supposedly our friend saying… “Oh dear, he means business… do what he says… do what he says…. he can do it”
Whether what El-Badri says is true or not, is open to debate. OPEC has never been known for it’s rigorous allegiance to the truth. Regardless, the fact that he has chosen this time to make this point, and the way he has chosen to make it, underscores and highlights the critical nature of our dependence on foreign oil and just how essential it is that we break this unhealthy addiction .
Understanding that, whatever the actual situation is regarding the rest of OPEC’s ability to cover any shortfall caused by a defiant Iran shutting down production, the fact that OPEC came out today and addressed the issue the way they did, also leaves little doubt as to their position on the matter. In the simplest terms, OPEC is not a friend to the western world. In our “them” vs “us” world, OPEC clearly is a “them” and, now that we officially have a hostage situation, appropriate urgency is required.
There is, however, good news in the face of this ongoing crisis. Every outward indication confirms that the world’s oil consuming countries have moved oil independence nearer or to the very top of their individual “to do” lists and people are working over time and more to break free from our oil addiction. As if to emphasize the point, Toyota just reported that one of its engineers in Japan literally worked himself to death trying to get ready for the debut of a new Camry hybrid the company is working on.
This societal shift is in direct contrast to America’s response to previous oil crises in 1973 and 1979. Mirroring my previous statements, GM chairman and CEO Rick Wagoner just confirmed that customers didn’t want fuel-efficient cars back when gas wasn’t so expensive. Now we do and the world’s automakers are putting on a full court press to deliver. Rest assured, they will. They always give us what we think we want, even if it isn’t good for us. I sometimes wonder if they learned that from the tobacco companies or if it simply is the law of supply and demand.
People have already changed their driving habits; motor scooter sales are at record levels, people are walking and riding bikes at an unprecedented pace and oil consumption has already begun to decline. People have also begun drinking closer to home and driving slower so an added plus is that auto deaths have also declined.
What’s more, during 2007, there were a total of 5 applications for the construction of 8 nuclear power plants. So far in 2008, there have been 13 applications for 19 new nuclear reactors submitted to the Nuclear Regulatory Commission. A total of 11 new units have already been approved and docketed since the first of the year. The shift to energy independence has begun in earnest and it doesn’t look like there is going to be any stopping it now.
Coincidently, at the same time as Iran is rattling its sabers and using its oil production as a military shield, with the help of the OPEC countries, Iraq has put out a request for bids to qualified producers to join with them in developing their massive oil reserves. Iraqi oil reserves are currently estimated at 112 billion barrels, second only to Saudi Arabia, and it’s estimated that, since much of the country remains unexplored, there could easily be another 100 billion barrels waiting to be discovered. A peaceful Iraq, anxious to rebuild its infrastructure and its country and to share some of the fiscal stability enjoyed by some of its oil rich neighbors, could easily prove the key to bringing an eventual end to this oil crisis and to restore some degree of sanity to the world’s economies.
Day by day, the public outcry for solutions, starting with more exploration and development of the prime targets offshore, in ANWR and elsewhere is beginning to drown out the liberal voices whose only idea is to conserve usage and to tax the oil companies and the radical environmentalists who are more concerned about a caribou than a stable supply of domestic oil.
At the same time, America and its investors are turning their focus on the only hope for an energy independent America, alternative energy and alternative energy stocks. The resourcefulness and determination of American industry and its entrepreneurs represents the future of the American energy scene and a carefully developed portfolio with a diverse selection of both giants, mid sized and emerging technologies could easily provide an investor with exceptional, if not spectacular returns in the years to come.
