Oil Politics

Russia turns off the tap - the entire Western Europe goes into the crises mode. Militants capture the oil fields in Nigeria, US threatens economic sanctions on Iran - the oil price hit $70 per barrel. The oil price hits $70 per barrel - the stock market tanks. Where is the remedy? When can the world economy break from the shackles of oil dependency?

Just to put everything into perspective: US consumes 25% of oil output per year whereas produces only 2% of the world output i.e. 23% of the rest has to be imported and imported from countries in the Middle East. Saudi Arabia, Iraq, Iran, Kuwait and UAE constitute 56% of the world output. The only friendly(questionable) guy in the list is Canada that produces 14% of the world output. So now you understand the impact of alienating the rogue states in the pie – US economy will crumble if they turn off the supply.

And thus enters Saudi Arabia. SA has to be pampered and mollycoddled because SA is such an important pawn in oil politics. Without SA, the entire balance of power tilts away from the US. For further information about US’s continuing diplomatic relations with Saudi Arabia, pick a copy of “Fahrenheit 911” – “Ahaa!! Now it makes sense – everything falls into place, right?”

Now coming back to the important question – Where is the remedy?

I can think about three possible solutions:

1> Cut the Oil Consumption – How? Raise taxes on natural gas and automotive fuel. It not only encourages energy savings but also reduces the budget deficit. At the same time it prevents global warming and encourages people to use public transportation thus reducing congestion in cities like New York and Chicago.

2> Find oil substitutes – This will not happen in a day but the government needs to encourage scientific work and fund research of oil substitutes like hydrogen fuel and solar energy.

3> Find oil reserves in US – This is the most debated solution - oil exploration in Alaska. It is a choice between worse (oil dependency) and worst (ecological imbalance).

I will rather opt for the first two avenues and pursue the third in case of dire needs.

Start turning off those lights…