What's old is new again.
In March 1973, the Organization of the Petroleum Exporting Countries began discussing the need to increase oil prices because of the falling value of the dollar. And on April 1 of that year, OPEC Ã¢â‚¬â€œ which was emerging as a force to be reckoned with Ã¢â‚¬â€œ raised prices for its crude by 5.7 percent. A few weeks later, eight OPEC members raised their prices by another 12 percent. In October 1973, OPEC members, angry over America's support of Israel during the Arab-Israeli war, cut off exports to the United States.
In a matter of months, oil went from $3 per barrel to $12. American consumers were outraged. The Nixon administration, worried that OPEC would continue squeezing the United States, began making plans for a military invasion of Saudi Arabia and Kuwait.
Thirty-one years have passed, and yet almost nothing has changed. American imports of Persian Gulf oil are higher today than when Richard Nixon was prevaricating about Watergate. The ugly truth is that, despite three decades of rhetoric, six presidents and a plethora of promises, America still doesn't have a viable long-term energy policy. Despite all that has happened since 1973 Ã¢â‚¬â€œ additional OPEC price hikes, two wars in Iraq and the Saudi-funded attacks on America on Sept. 11, 2001, to name just a few Ã¢â‚¬â€œ America's political leaders still have their heads up their tailpipes.
And now Ã¢â‚¬â€œ surprise! Ã¢â‚¬â€œ OPEC, prodded by our dear friends and allies, the Saudis, has announced that it will cut production by 4 percent. Oil is nearing $40 per barrel. The response by the media has been predictable: lots of stories quoting angry motorists filling their SUVs at the local gas station. The response from Congress and the White House also has been predictable: promises of more big tax breaks and incentives for Big Oil.
It's time for America to grow up when it comes to energy. And it isn't just because OPEC is Ã¢â‚¬â€œ once again Ã¢â‚¬â€œ squeezing world consumers. OPEC's production cut is part of a broader set of facts from which only one conclusion can be drawn: The era of cheap energy is over.
World oil production isn't keeping pace with demand. Energy consumption throughout Asia is soaring. During the third quarter of 2003, China's oil consumption grew by a blistering 16 percent. By 2020, world oil demand is expected to grow by 40 percent.
Production is stagnant. Exxon Mobil, the world's biggest oil company, announced that, despite record profits of $21.5 billion in 2003, its total oil and gas production fell 1 percent. Even Saudi Arabia, the world's biggest oil producer, is having trouble growing production. The country is producing about 9 million barrels of oil per day. And although the Energy Department has predicted that the Saudis will be able to produce 19 million barrels a day by 2020 in order to meet surging world demand, recent studies show that may be a mirage. Saudi Arabia's giant Ghawar field, the biggest oil field on earth, has begun to decline.
Iraqi oil won't save us, either. In March, Iraq's tired oil fields produced about 1.86 million barrels of oil per day. That's about half of the amount Iraq was producing in 1979, right before Saddam Hussein got his country entangled in a bloody war with Iran. And despite America's invasion of Iraq, the ongoing insurgency Ã¢â‚¬â€œ and the frequent pipeline bombings that come with it Ã¢â‚¬â€œ will hamstring Iraq's oil industry for years.
Congress and the White House still are wrangling with a pork-laden energy bill that won't help America's long-term energy security. One of the simplest solutions Ã¢â‚¬â€œ higher taxes on gasoline Ã¢â‚¬â€œ is being dismissed out of hand, even though the Congressional Budget Office says such a tax would be "the most direct way to reduce gasoline consumption."
The unfortunate truth is that America won't ever wean itself from imported oil. But with massive investments in conservation, efficiency, wind energy, solar power and fuel cells, while also spending modest amounts on fossil fuels like coal (yes, coal!) and Alaskan natural gas and oil (yes, drill in the Arctic National Wildlife Refuge!), America has a chance to avert an energy disaster. Otherwise, it is going to be 1973 all over again.