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Oil crisis redux: We are back where we started

Progressive Cattle Editor David Cooper Published on 23 March 2022

Every 15 years or so, it happens in this country. A gas shortage or price-gouging event that presses every American with a vehicle into fits of depression, anger and an occasional primal scream.

The cycle is back in 2022 after Russia’s invasion of Ukraine. This chapter may be one of the worst yet.

Not counting the 1970s OPEC crisis, when I was just a kid, I’ve experienced it twice: the Persian Gulf War of 1990-91, which was tame and short-lived; and the aftermath of Hurricane Katrina, an oil price spiral that went from 2005 to 2008.

It was the latter that struck me as the most unusual. Prices on pumps surged one day, if not mere hours, after Katrina struck. The gas in those station tanks had already been purchased. Why was the price going up? And why was the need to build supply based on trade with oil-producing nations we don’t trust?

Read that last paragraph again, and you’ll see little has changed. The reasons are manyfold. To explain a resource like energy, an understanding of global market needs some clear-eyed analysis, and a deep dive in supply-demand basics.

In the U.S. oil markets, Russia only provides a small segment – about 3% – of our crude supply, but about 13% of the world’s oil. But with any disruption of a major provider, it rattles other nations and markets. Europe has a major dependence upon Russian oil, so their demand for Saudi and U.S. oil is going to climb and drive prices higher.

While I’m not a fan of Big Oil and its conglomerates, its tight control of energy patents – including more efficient vehicles – and its corrupt record on the environment, the public’s demand to drill away isn’t going to be easy.

It’s like how beef producers choose whether to expand the cow herd. Would you take on the risk of overproduction if there’s a greater risk (consumer decline, weather, inflation) looming on the horizon? Will a president with policies written to phase out fossil fuels be cooperative in a time of skyrocketing inflation? And if you push hard for expansion of drilling, leases and research, will it yield results quickly?

The fact that we remain bogged in this cycle shows clear failure in our country, not just in our leaders but in the energy policies we demand. We still rely on too much foreign oil. We still fear environmentalist lies. Development of alternative fuels continues to go nowhere. And yet we wait until the direst moments of war, inflation and supply chain failures to get riled up.

Last summer, I wrote in this space that inflation was now a reality, and national leaders had to acknowledge it. Any hopes of it being short-lived are gone. This won’t just be a season of inflation and limited supply – of food, fuel, crops and materials – it could possibly be an era.

I truly hope something changes. I don’t want to write about this in another 15 years.   end mark

David Cooper
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