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Oil Depletion: Obama Faces Hard Political Decisions

Ronald R. Cooke
The Cultural Economist
www.tce.name
November 12, 2008

Washington insiders are well aware of oil depletion. It has been the subject of at least four reports funded by the United States Government, more than a dozen books, and multiple independent reports. Congress has taken testimony. Key figures in Washington have made speeches. Although there are some differences in the details, they are trivial in comparison with the broader perspective.

It is highly probable that oil demand will exceed oil supply within the next 10 years.

If you buy heating oil, propane, gasoline, or diesel fuel, you have already become a victim of oil depletion. Fuel prices are up. And they are up because the supply of oil failed to keep up with the growing demand for oil. That led to greed driven speculation. Oil prices over $140 a barrel. Then speculators discovered recessionary forces were driving down the demand for oil. Fear immediately replaced greed. The price of oil declined. Fast.

But do not be fooled by this temporary decline in the price you pay for fuels. OPEC will curtail production until demand picks up again. The fundamental trends have not changed. The supply of oil will not keep up with the demand for oil. Higher prices and shortages are in your future.

The Washington establishment’s failure to acknowledge oil depletion is not one of ignorance. It has been a matter of political expediency. Politicians prefer to avoid bad news. Depletion means higher prices and possible shortages. Depletion adds confusion to the problems of global warming. Depletion lends support to America’s presence in Iraq. Acknowledging oil depletion creates additional stress for our political system.

Yes. Oil depletion creates a real political dilemma for Barack Obama. If he acknowledges oil depletion – Peak Oil – then he will be expected to do something about it. Barack will have to challenge embedded political philosophy. He will have to find a way to change public opinion without causing a political crisis for the Democrats.

It will not be easy. Acknowledging oil depletion means finding more oil resources to keep our economy going. Shortages must be avoided. Put a lid on prices. Drill everywhere. No sacred environmental cows such as ANWR or the Santa Barbra channel. Make deals for oil with whomever is in charge of the big oil nations. Control the political outcome in the Middle East. Stay in Iraq to protect America’s interests. Tough choices. High political risk.

But if Barack ignores oil depletion, then what? He runs the risk of cataclysmic failure . It is highly likely that sometime – during his administration - shortages and high prices will decimate America’s economy. That means high unemployment. Out of control inflation. Voters will be mad as hell. Why – they will ask – did you let this happen to us?

Would Barack be less popular than George Bush? More risk.

So. What to do? Barack faces hard political decisions. Oil depletion will force his hand. One way – or the other. In the spirit of being constructive, here are four suggestions:

1. Take an integrated approach to contemporary concerns about global warming and fossil fuel depletion. Global warming and fossil fuel depletion are in fact evil twins, and if we want to make intelligent choices, we need to deal with them as a package.
2. Persuade national leaders to form an oil and natural gas consumer’s union. Start with the United States, Canada, and the European Union. Invite China and India. This will give consuming nations the leverage needed to deal with supplier cartels, and – hopefully – lead to resource sharing agreements.
3. Find a way to deal with the Middle East. These nations have most of the world’s remaining deposits of cheap oil. For the sake of world peace, we must control the outcome.
4. Create a credible energy program. One with strong management, specific objectives, adequate funding, and a time line for accomplishment. Include public policy initiatives that promote conservation and the evolution of energy conscious life styles.

There is a very long list of potential initiatives Barack could implement. Sorting through them will test his wisdom and political courage. But try he must. Oil depletion is a challenge that will not go away.

Ronald R. Cooke
November 12, 2008
The Cultural Economist