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Oops, wrong again. (photo: e-mendoza)
Correcting Thomas Friedman can keep anyone busy. Today he is excited about the prospect of the United States joining the Organization of Petroleum Exporting Countries. That sounds like a great idea for a country that imports close to 9 million barrels of oil a day.
The basis for his excitement is that the United States is becoming somewhat less dependent on foreign energy imports. The main reason for this is the increased production of natural gas from shale deposits. However it is not clear how long these shale gas deposits will last since it seems that earlier estimates of reserves were seriously overstated. Furthermore, there is almost no plausible story in which increased natural gas supplies and domestic oil production, plus aggressive conservation measures, will cause our demand for imported oil to drop from 9 million barrels a day to zero any time in the foreseeable future.
Of course even if the U.S. miraculously became energy independent it would not free us of concern about events in the Middle East, as Friedman contends, since we are still in a global economy. This means that if war or revolution in the Middle East led to a sharp drop in world oil production it would still have an enormous impact on the U.S. economy.
To see this, imagine that there were severe droughts in Africa and Asia that caused the world price of wheat to quadruple. Guess what would happen to the price of wheat in the United States? That’s right, it would also quadruple. The reason is that wheat producers would export their wheat to take advantage of the higher prices available elsewhere in the world, so we would have to match the world price in what we paid for the wheat consumed in the United States.
Since the United States is a net exporter of wheat, the country as a whole would come out ahead in this story. However, since most people do not own wheat farms, they would end up as big losers, paying much more for their bread and other wheat products.
It would be the same story with oil if democratic revolutions temporarily stopped production in Saudi Arabia and the other Persian Gulf monarchies. We would see the price of gas double or triple. Exxon-Mobil and the other oil companies would see corresponding gains in profits, but those of us who don’t own lots of stock in these companies would still end up as big losers. In principle the government could tax the windfalls and redistribute them — okay, we don’t have to talk about such silliness.
Anyhow, it’s still fun to see Thomas Friedman get excited. I remember an earlier energy episode back in 2006 when he had Nancy Pelosi send a letter to President Hu in China, just after she won control of the House in the November elections. The letter Friedman drafted for her was about how the U.S. would produce clean technology products and export them to China.
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Economist Dean Baker is co-founder of Center for Economic Policy and Research and writes regularly on CEPR’sBeat the Press blog, where this post first appeared.
14 Comments
A young woman named Belen Fernandez has written a book titled The Imperial Messenger that takes down the moustache of wisdom. She is obviously not angling for an msm position. I first saw the book referenced as a premium at Truth-Out.
Forty percent of the cost of each gallon of gasoline comes from oil futures speculation by speculators like Goldman Sachs, Bank of America and the Koch brothers (to name just a few of the wealthiest corporations and individuals rigging the oil futures market), while 60 percent of the cost of each gallon of gasoline at the pump is due to supply and demand issues.
Simple. Restrict oil futures trading, like what happened in 2008, when the financial crisis disrupted oil futures trading for awhile, and both oil barrel prices on the world oil market and gasoline prices at the pump plummeted, barrel prices to below $30/barrel and gasoline to below $2.00/gallon. IOW, it’s the oil futures speculation, stupid!!! Which is what I’d tell Thomas Friedman or anyone else.
Note: A nonpartisan study conducted after the 2008 gasoline price spike in the U.S. and financial crisis worldwide concluded that oil futures speculation was responsible for 40 percent of the cost of a barrel of oil and a gallon of gasoline. Since the oil futures speculators remain unregulated, unrestricted (like ENRON was for awhile back in 2001), then this is bound to still be happening today.
And this is the thanks we get as American taxpayers for bailing out most, if not all, of the wealthy corporations and individuals involved in oil futures speculation, driving up energy costs?!?!?
Of course, if I was of the conspiratorial sort, I’d say that oil futures speculators like Koch Industries and the Koch brothers were not just using their billions to speculate on the oil futures market to drive up prices and gain a hefty profit for themselves, but they were doing so to use rising gasoline prices here in the U.S. to attack President Obama over his energy policies (which have been really, really oil industry friendly; increased domestic production, record number of oil wells drilled, more areas opened up for drilling, shale deposits being explored and exploited, etc.).
Naaaw, the billionaire Culture Warrior Koch brothers would never sink so low…would they? Answer: of course they would. They’ll do anything to help Republicans and destroy Democrats (especially President Obama, our first black president). Hasn’t anyone been paying attention? The Koch brothers, David and Charles, leave their patriotism at the bank and Republican headquarters doors, which are really the same door. They’re like the Hunt brothers who tried to corner the silver market years ago.
That could only have been written by an American hack pundit of the sort that hates unions, thinks Freakonomics is genius, and thinks that the Chinese have the same mindset as he does.
Friedman of course doesn’t understand that China, unlike the US, is not the captive of oligarchs and corporate interests. It may be authoritarian, but its authoritarians actually care about what happens to their country, which is why their government has invested tens of billions in creating a wind and solar (especially solar) export industry that is also increasingly creating merchandise for domestic use.
My Friedman putdown with people who think he has great wisdom is a simple: He has a moderate command of the obvious. Worked quite a number of times.
Well, that moderate-command-of-the-obvious thing used to be accurate. Now, like most of the pols & pundits, he no longer has any nodding acquaintance with the obvious.
Book Salon up with John Nichols’ Uprising: How Wisconsin Renewed the Politics of Protest, from Madison to Wall Street hosted by Robert W. McChesney
Oh, they won’t allow oil to fall below $75 a barrel ever again, much less $30 a barrel. It currently costs $50 to $60 a barrel to frack oil out of the Bakken shale; fracking costs are allegedly dropping to make it so that the stuff will turn a profit at $60 a barrel, but I’ll believe that when I see them actually allow prices to fall that low.
What this dick-head and all the other drill-baby-drill crowd either ignore or don’t know is that oil is a commodity sold on the world market. The oil drilled and pumped out of the ground in the U.S. is not used exclusively in the U.S. This country sells its oil world-wide. No country, to my knowledge, keeps its oil strictly in-house. It all goes into a figurative Big Bucket that everybody buys from at whatever the market will bear.
Unless aliens come down out of the sky with some radical new fuel and transport mode, the idea of ‘Energy Independence’ makes as much sense as a quest to find unicorns. And it will be just as productive.
Thomas Friedman goes euphoric on anything that makes his GOD of capitalism look good.
The guy is the court jester for elite and bourgeoisie.
Thanks Dean for reading little tommie so I don’t have to.
Let’s continue to protect the modern day slaveholders. So how many trillions of dollars will America waste out our collective tailpipesin the next 5-10 years? The is fucking retarded…….
SERVITUDE………..
Well, he’s pushing a pretty good pile of BS if you want a pipeline to Huston to export tarsands oil.
But it’s very bad BS.
Friedman recalls two artistic endeavors of the 1970′s.
Peter Sellers in “Being There.”
And Joe Heller’s “Good as Gold.”
The man has made a career of being vacuous.
This is a very inconsistant statement: “Since the United States is a net exporter of wheat, the country as a whole would come out ahead in this story. However, since most people do not own wheat farms, they would end up as big losers, paying much more for their bread and other wheat products.”
The first sentence in the paragraph repeats the old lie that whatever inflates the GDP is god for the USA as a whole. That is an example of the nonsense of the 1%. It’s NOT true, as increasing wheat prices would have a very bad effect on the vast majority of the population.
Your next sentence sets the facts straight, but why regurgitate the corporate disinformation in the first sentence?