Going After OPEC
By INVESTOR’S BUSINESS DAILY | Posted Tuesday, May 06, 2008 4:20 PM PT
Energy: Hillary Clinton says she wants to dismantle OPEC if she becomes president. Actually, that’s not a bad idea. And we have just the way for her to do it.
“We’re going to go right at OPEC,” the candidate said Monday on the campaign in Indiana. “They can no longer be a cartel, a monopoly that get together once every couple of months in some conference room in some plush place in the world, they decide how much oil they’re going to produce and what price they’re going to put it at.”Clinton said that along with her plan to tax oil companies’ “unreasonable” profits, she’d pursue OPEC through the World Trade Organization and by suits under the U.S. antitrust law.
Spoken like a true Democrat. But Clinton’s plan to go after OPEC is a slick PR exercise, and her recent threats against U.S. oil companies are downright dangerous.
“(Oil companies) have record profits,” she said, “that they frankly are just sitting there counting because they are not doing anything new to earn it; they are just taking advantage of what’s going on.”
This is patently false. In fact, oil companies from 1992 to 2006 invested more than $1.25 trillion. Their profits over that time: a little over $900 billion.
Moreover, U.S. oil companies would love to do a lot more, but Hillary and the rest of her Democratic Party colleagues in Congress have kept them from doing so.
If Hillary is really serious about breaking OPEC, she should push something very un-Hillary-like: boosting energy supply by unleashing the very oil companies she now vilifies. They’re America’s secret weapon against the cartel.
That’s right: Pry open more markets overseas and open up the vast resources that we still have available in the U.S. and which amount to literally hundreds of billions of barrels of crude oil and equivalents.
That will hurt OPEC by breaking the back of higher oil prices through added supply. Flooding the market with cheaper oil is the only way to make OPEC squeal — not senseless lawsuits and WTO actions that would take years, if not decades, to get through our legal system.
As we’ve noted repeatedly, U.S. oil reserves offshore, in Alaska and locked up on federal lands in the Midwest are a potential bonanza. If President Bill Clinton in 1995 had approved drilling in Alaska’s ANWR, instead of vetoing it, we’d have millions of barrels more of oil today. And, by the way, Hillary still opposes this.
Around the world, governments control about 80% of all energy reserves — that includes the U.S. And 12 of the 15 largest oil companies are government-owned. The real energy problem, in other words, isn’t Big Oil; it’s Big Government.
As with so many other things, President Reagan got it right when, not even a week after taking office in 1981, he signed Executive Order 12287 decontrolling the price of oil and gas. He then ordered his secretary of energy to focus on encouraging U.S. companies to find and produce more.
It worked like a charm, bringing oil prices down sharply and OPEC to its knees. By 1986, after a 74% drop in the price of oil, some even doubted OPEC could survive.
Such would-be monopolies look invincible when demand rises and prices follow. But when supply increases, prices fall and members start cheating, they look pathetic. This pretty much describes the history of OPEC.
Reagan’s strategy of energy decontrol would work again today. But this time it’s supplies, not prices, that need to be untethered.