Today’s Wall Street Journal has an eye opening op/ed by George Shultz, a giant of recent American history. Former Secretary of State Shultz has an unparalleled resume ---he is one of only two individuals in American history to have served in four different cabinet positions. He is presently a distinguished fellow at the Hoover Institution at Stanford. Shultz authored today’s op/ed with Fredrick Smith, the founder, CEO and chairman of FedEx.
Their article was occasioned by the 40th anniversary today of the commencement of the Arab oil embargo of 1973 and the emergence of OPEC as a major player in world economics and politics.
Shultz and Smith point out that OPEC, in the decades since 1973, have worked to keep oil expensive. In each of the past two years alone, OPEC’s annual export revenue has exceeded $1 trillion---“which ranks among the greatest wealth transfers in human history.”
But the authors give us reason to take heart, “America’s energy revolution—which is taking place on both the supply and demand sides—has the potential to disrupt the status quo to the nation’s considerable economic and foreign-policy advantage.”
They note that the “increase in U.S. crude oil production during the past five years equates to adding another Kuwait to the global oil system…..the U.S. will surpass Russia in total liquid fuels production (including biofuels) and become the second largest global producer by the end of the year. The U.S. even could surpass Saudi Arabia to become the leading global producer within the next decade.”
Simultaneously, the authors point out, “the rise of oil-displacement technologies is creating an unprecedented opportunity to reduce U.S. oil consumption in the transportation sector.” They point out the popularity of plug-in vehicles, natural gas trucks and buses and the increasing fuel efficiency of our internal combustion vehicles as a positive trend with huge implications in this new energy environment.
All that is good, even great, news. But Shultz and Smith warn that the potential benefits of these trends will only be fully realized if we have “strong leadership from Washington.”
To move forward, we suggest establishing oil displacement as a national goal. Such a target would advance the goals of robust economic growth, improved environmental protection and effective foreign policy. Best of all, a national consensus on reducing oil dependence should be possible without the resolution of the energy and environmental issues that will continue to be debated for some time.
OPEC operates as a cartel of governments, and the U.S. should not accept this condition as permanent. An American government policy response to counter OPEC's market manipulation would be in support of the free market. Preserving the current system only perpetuates a tax on American consumers imposed by foreign powers.
….the wide-scale adoption of alternative-fuel vehicles powered by natural gas, electricity and other fuels—or a flexible fuel combination—would represent a major environmental achievement.
Finally, as the U.S. confronts an increasingly complex foreign-policy landscape, meaningfully reducing oil dependence would allow the nation to set priorities with far less regard for the consequences of global supply interruptions…..
…. We urge the nation's leaders to embrace both the supply revolution now well under way and the emerging demand revolution in oil-displacement technology that, together, promise a more secure and prosperous future.
Shultz and Smith lay out the promise that is before us---energy independence, energy innovation and removal of OPEC’s sword of Damocles that has hung over us for four decades---the challenge to our leaders is to seize the staggering opportunities before us.