Ever since the supposed threat posed during the “Cold War” we have built and maintained a military establishment that can virtually annihilate everyone and lay waste to the planet. Yet, we tolerate a cartel that fosters a monopoly we would not tolerate in our country that threatens our very existence and allows the infiltration of foreigners by the millions whose support threatens the very economic fiber of our society. Holding on to this position regarding our defense is no longer focused on what is necessary for our defense but, to protect the jobs made possible by this position and the votes necessary to perpetuate it.
The United States is in a unique position as regards world economics. We are the largest single market for goods and services and our currency is the world standard in the trade of commonly traded commodities. Not one nation needs fear that the United States would use its military might to subjugate it or get it to support positions in cooperation with those of the United States. Yet these same nations would cave immediately if we used our economic strength to entice them to support our positions. If our positions are good and for the benefit of mankind why then don’t we use our economic strength when it suits our interests?
The answer is simple. It is because there are those in the United States who benefit from not using our economic muscle and they fund and support those in power who will reciprocate by refraining from action. The OPEC monopoly and the price of oil is a classic example.
Normally the world price for commodities traded across borders is determined by the lowest cost producer. The price of those commodities in individual countries is then determined by government policies which are in place to protect domestic producers or to discourage imports and force the substitution of locally produced equivalents. Since the early 1960s OPEC, that controls about 25% of the world’s supply of crude oil, has inflated the price well beyond its cost of production by withholding supply below demand. Within nearly all capitalist countries this action would be illegal and be met with punitive action by government.
Saudi Arabia is the key player in this drama as it produces nearly half of the OPEC output and can influence what the other OPEC producers do and the world market by simply adjusting its excess production accordingly. I know it can do this because for nearly 15 years I was an executive in the Saudi company that produces it and I knew what it cost to produce. On the other hand, with the exception of possibly dates, Saudi Arabia must import nearly all of the food and many of the other commodities it consumes. A simple threat to place export tariffs on wheat alone the United States and one or two other countries could have dissuaded Saudi Arabia from elevating the crude oil price beyond what constituted a reasonable profit margin. Why wasn’t such a move initiated? The simple reasons is that too many American companies are making a lot of money with a high price for crude and those companies pay lobbyists to persuade politicians to lay off such action.
American producers have long since passed the point where the production of domestic crude can compete with that of the OPEC producers. At the inflated prices created by OPEC’s monopoly domestic production again becomes profitable and wells shut in as unprofitable are again flowing to the extent that while you were not looking, American producers have become net exporters of refined products. The money this generates finds its way into the pockets of the politicians who use it to perpetuate their power and the status quo to the detriment of the consumer and taxpayer. It will not change until the system that allows it changes and that will occur only through revolution as the ballot box, which was supposed to be the way to change the system, no longer suffices to generate change.