Being Saudi Arabia's Bitch

Back in 2008, I was working in the advertising end of the car business. One day I was riding along with a co worker, en route to a client meeting, where we stopped to get gas. The price was around 3.50 a gallon. We began talking about how on one hand the price was getting so high and on the other hand, the long term conditioned effects it would have on people. I remember remarking how it would make people cheer if the price went below 3.00 again.

That fall and winter, as some may recall, the gas price did plummet, but then quickly rose again to over 3.00 once again in short order. Since then, we have ridden between 3 and 4 dollar gas prices consistently.

Until now.




If you have bought gas in the last week or two, you probably have noticed it's falling price. Indeed many areas of the country are now below the 3 dollar mark. In my area of Delaware, it is well into the 2.60s at most stations as we speak. So, is it time to break out funny hats and party like it's 1999?

Well, not quite.

As prices fell over the last few months more right leaning news outlets began sending up warning signals, about how these fast falling prices could cost jobs, and actually be a net negative on the economy. Immediately more liberal outlets slammed that speculation as "Obama hating" and the like. Then last night, I caught Rachel Maddow doing a report on falling gas prices and it's potential negative impacts. A story that could have been on Fox a month ago.  And last time I checked, Maddow is hardly an Obama hater.



 
So is Rachel right? Is Fox right? Is "2 dollar a gallon gas" the worst thing that could happen to us?

Well, it kind of depends on where you sit. For example, if you are a struggling single mom or family trying to make ends meet, your gas prices being slashed by 30 or 40% certainly can mean more money for the other things in life. If you run a taxi company or a trucking company, lower fuel costs certainly can be a positive to the bottom line. And I think to most drivers out there, they would see lower gas prices as a good thing.

But what if that single mom worked in a store that the employees of the local drilling company patronized? What if that trucking company was hauling fuel from drilling sites to be refined and delivered to consumers? And now, because the price has crashed, there is no profit in the drilling so the company is forced to cease operations, and lay off workers. Just to cite a couple examples.

And the shrinking profits, unlike some of the rising ones, will "trickle down" ... of that you can be sure.

So, I think it's at least fair to say that a sudden decline in gas prices can be a mixed blessing. For some, it will help the money better equal the month. But for others, it can reverse positive economic trends, for sure. And I am quite sure that if the falling price trend continues, it will be another example of how we are "all in this together." We are interconnected economically as much as we like to think of ourselves as independent. We simply are not.

But we Americans, especially over the last couple of decades, tend to think too short term and too "small picture." In order to break that cycle, we need to seriously look at the hows and whys of these energy prices and what we can do down the road to be in control.

What's that you say? You think we are in control now? Oh no, sir / madam, we most definitely are not in control of these prices.

Is the President / Congress / Governement in control? No, they are not. Never have been. Oh, they can sometimes raise or lower a gas tax or subsidize an industry, and they do, from time to time, to give some illusion of control, but that is really just a short term (there's that word again) fix, if not a dog and pony show for the people most of the time.

Are these "billionaire oil barons" in control? No, they are not. They would like to be, and as the kings of the local market they can sometimes inflate or deflate prices a few cents here and there for short term benefits (there's that word again!), but overall, they are as helpless as little kittens when it comes to the big picture of prices.

What about those "speculators" we hear so much about? They surely can control the price, right? Again, no, not really, outside of short term (yep, again!) manipulations. The larger "market forces" always take over in the long term.


Ok then, if none of these powerful entities are in control, it must be us, right? The almighty American citizen! Like in 2008 when we got mad at 4 dollar gas and made the price plummet to 1.61 by the end of the year. Yes, we must be the uber powerful in this economic battle.

No.

Gas plummeted in the fall of 2008 because of the economic crash. People stopped spending, stopped driving. It might be convenient to look back at the gas price in a vacuum and declare it a consumer victory (you know, before the government stepped back in and screwed us in some libertarian fantasy) but it wasn't. It was the residual effect of an economy in tailspin. We couldn't have been in less control.

So who is in control? Saudi Arabia.

Remember when Wal-Mart was exploding on the US population over the last 20 years? Remember their business plan? The plan was pretty simple, and sound, albeit heartless. Wal Mart would come into town, set up and literally drive everyone else out of business in the local market by selling below cost. Wal Mart, being so huge and rich, could afford to lose money, for years, if necessary, just to choke the life out of every other competing business in the area.

Then, after phase 1 was complete, Wal Mart was free to regain it's lost revenues by raising prices back up and at the same time, co-opt all the skilled and talented people who had been put out of work by them by hiring them at Wal Mart for a fraction of what they previously earned.

Wal Mart has done this over and over again, shamelessly. It has made them go from a big retail entity to one so large it simply has no equal anymore. It is, single handedly, the most dominant force in the market.

Apparently, the Saudis have learned from Wal Mart.

Saudi Arabia and OPEC (but mostly Saudi Arabia) have decided they don't want us in their business. In the past, there was always a pattern that allowed our government, oil billionaires and speculators appear to have some control on energy prices. If the price went too high, the Saudis would increase production. If the price of a barrel of oil got too low, they would turn off the oil faucet, temporarily, to stabilize the price. Now, they have decided that they have had enough. And thus, have broken the old pattern we had come to rely on.

So instead of slowing production, the Saudis are keeping production high, for the sole purpose of driving us out of the energy business and going back to being their oil junkie customer. Because in case you didn't notice, under the last 6 years, our energy dependence has plummeted to levels never seen before. And they don't like it. Not one bit.

The fact is, that despite not having the reserves that they do, we do have enough to steal enough market share (especially in natural gas) now to make them notice, unlike the past, where our production was so miniscule comparatively, that they didn't. This is a result of, in large part, to the fracking industry and other innovations we have come up with to get oil and natural gas. The threat of things like the infamous Keystone Pipeline is scary to them as well.  Much scarier than it is to a liberal.




And if we handle things right, can be a key to both weaning ourselves off Saudi and other foreign oil and fossil fuels altogether. But we need to, for once, think long term and big picture. We must think beyond the promise of a job gained here or job lost there in the short term. We must get beyond using a low gas price today being an excuse to buy that huge SUV or a high one making us pretend we give a damn by doing symbolic gestures of conservation that don't really impact anything.

"Alternative fuels" as they are often called are not ready to take over the market from fossil fuels today, that's a fact. It will also be a fact for the short term (yep, again) future. We are not gonna convert our cars to electric on a dime, and even if we did, the electricity generated would still be generated by fossil fuels in large parts, and exclusively in some areas. Our houses will not be having solar panels installed next week or anything of the sort. But that doesn't mean we are helpless kittens either.

What we can do is start. And when I say start, I mean seriously start. I mean let's put the politics aside and deal with the realities. The only way we will cease to be Saudi Arabia's junkie bitch (and we are) is to put serious efforts into not just alternative fuels, but a total revamp of our energy system. It means finally investing in overhauling our energy infrastructure for the next century (long term). Yes, we will lose jobs short term if the instability in gas prices continues, but those jobs can be made up in spades with new careers in the new energy sector. And the ultimate outcome will be that we as Americans will no longer be led by the nose by Saudi Arabia and OPEC as we have been for decades upon decades.

Our other alternative is to do it like we always have. As prices fluctuate, cast blame on the President or Congress or the oil billionaires or the speculators or some boogeyman. We then can entrench ourselves in partisan bickering and cries of the other side inflicting tyranny and oppression upon us when none of that is really true. And while we sit paranoid over some rumor of "sharia law" being implemented or a mosque being built, the real "takeover" will continue with our junkie selves being led by the nose by our Saudi dealers as we continue to be their junkie bitch for oil and gas.

The choice is ours. For once, let's collectively make a decent one.