There is another way to rapidly pay off the national debt. Unfortunately the last time someone with this idea got anywhere close to the oval office was Newt Gingrich when he was running for president in the primaries in 2012 and we know how that turned out. Due to our collective lack of knowledge of geopolitics we put our country in danger and did so just so we could re-elect a “cool” guy even though we already had witnessed four years of his constant failures. Fool me once, shame on me – fool me twice, shame on you!
This will take some background to set up but consider the following:
There is one reason we go to war and one reason only and that is because it is in our national security interest to do so. Intelligent people can debate what constitutes a national security concern but there is no other legitimate reason to go to war. That said we went to war in Libya for reasons other than our national security and that, in my opinion was an illegal war with dire consequences.
Syria, under Obama would have been the same in the concept of an illegal war although much worse with deadly unintended consequences. I have written extensively on this site about the Libya and the Syria debacles in the “International” category, specifically in the thread “Al Qaeda threatens, Obama closes Embassies. Putin ignores Obama threats!”
Real quick on Libya and Syria. Killing the enemy is considered an act of war but killing people when it is not required to do so in the defense our national security, some would say is not an act of war but murder.
Libya was a “humanitarian” mission. A humanitarian mission is not a mission to defend our country. How many bombs did we drop in Libya in the name of humanity? How many Libyans, who were not our enemy, did we kill with our humanitarian bombs? God help us if we do the same in Syria because someone will eventually figure out that we are killing people for reasons other than defense and we will wind up in court over that and it will get ugly.
The fact that congress only halfheartedly disapproved the Libya thing is probably the only thing that will save President Obama from impeachment proceedings over that issue. You might remember that congress disapproved the action but allowed the funding, Obama out-smarted congress on that one. If you want to impeach Obama over that, which you easily could do, you would also have to impeach everyone in congress who even half-heartedly approved the funding. Obama recklessly endangered our country over Libya and Congress sold us out.
Throughout history there have been many issues that threaten our national security that have caused and will cause us to make war to defend ourselves. One historical yet current example is curbing the spread of communism. Today, although checking the spread of communism is still on the list it is not on top of the list. So what is currently on the top of the list? How about this: 1) terrorism and 2) ensuring the free flow of oil on the international market.
We ensure the free flow of oil on the international market not only for ourselves so that we can have an uninterrupted supply (upon which our economy depends), but we also ensure the free flow of oil so that our trading partners, who also depend on foreign oil, can keep their economies going so that we may conduct trade with them.
In short, this means that if we produced all the oil we needed, and forbid the export of oil produced here at home as many would have us do, we would still consider the free flow of oil on the international market to be in our national security interest and we would still go to war to maintain that free flow.
Here is a solution and Obama is dead-set against this solution for reasons neither the common man nor the highly educated man can comprehend. First let me say that I intend to go to the extreme to illustrate my point and then I will offer a more practical means of accomplishing the same thing.
Many people, including the talking heads in the media will tell you that there are several factors causing the high price of gas at the pump. They cite the international market as being the largest single cause and I believe that is correct. This, in a nutshell means that OPEC is the single largest price setting agency on the international market.
Then you add to that the potential for the Iranians to, for example, block the Strait of Hormuz through which some 20% of the world’s oil travels, and now all of a sudden you have the potential for a massive supply/demand problem that today does not exist. It could exist by this time tomorrow – all it would take is for the Iranians (or al Qaeda or any other terrorist organization) to explode one of their own ships in the narrowest part of the channel.
Sinking one of our ships in the channel would be an act of war whereas an accidental explosion of one of their ships would be just that, an accident, something the United States Military cannot prevent short of denying Iran passage through international waters and that is also an act of war.
The world is estimated to use some 90 million barrels of oil every day. If the United States produced 90 million barrels of oil per day that would put OPEC out of business. As of just four or five years ago (I am sure things have changed since), it cost Saudi Arabia about 12 dollars to extract one barrel of oil from the ground. They sell that barrel of oil today for around $100 dollars. That is one heck of a profit even if you consider the cost to pump oil may have increased by 100% to $24 per barrel in that short time.
Using this example of $24 dollars (100% increase) cost to extract oil from the ground, the United States oil companies could then sell that oil on the international market for a tidy sum of say $36 dollars per barrel. A 50% markup from $24 to $36 might be nice for the oil companies, and it would be great for the consumer to pay $36 per barrel instead of $100.
We have far surpassed the limits of what I believe the Republicans have put into this as far as rational thought (notwithstanding the extreme case I made which I will deal with later), and unfortunately that means that we have left the Democrats in the dust somewhere back at the starting line. Newt Gingrich seems to be one of the few Republicans who both understood this and was willing to do something about it, like run for president. I think the others understood this to an extent but not as well as Gingrich. But that is water under the bridge.
Let’s take a look at what we have done so far just by producing and exporting our own oil. We have dramatically increased the production of our oil. This will put many unemployed Americans back to work but we need to cut a bunch of red tape regarding permits and other things that slow the process.
Oil companies pay royalties for oil they extract from public lands and waters. These increased royalties will dramatically increase revenue to the government and we could use that to ONLY pay down the national debt (another good thing).
Speaking of revenue to the government, all those unemployed workers who now work in the oil field and make very good money are now paying income tax (a good thing) instead of being on taxpayer funded unemployment or welfare (ending this is another good thing, in fact a good thing times two).
Please keep in mind that I am going to reduce my extreme example to a more practical solution in a minute but I have to make a point first.
All that is on the national level. What have we done on the international level? Well, we have made oil cheaper for our trading partners so the goods they export to the United States cost less for them to produce and less for us less to buy (that is a good thing). We have ensured the free flow of oil on the international market (that is a good thing).
Since we now have ensured the free flow of oil on the international market for not only us but for our trading partners as well, we are no longer hostage to people like Iran and their constant threats to block the Strait of Hormuz (that is a good thing). But there are yet more “good” things.
We can now bring one of the two carrier groups home from standing guard in the Persian Gulf area to ensure the free flow of oil. Yes, in a nutshell we have just taken one of the major reasons to go to war off the list (still another good thing, in fact a very good thing). Removing one major reason to go to war saves money and this is a good thing, it also saves lives which is another good thing, and the benefits of not having to fight a war are limitless. The good things keep adding up.
Now, what about the other thing on that list of reasons to go to war, which is international terrorism? What have we done here by exporting all this oil? First, what is it that makes terrorism work? Fear to be sure (this is the definition of the word “terrorism”), but fear of what? Fear of someone taking from us something we cherish, or need to survive, like oil. Oil = energy, energy = production, production = a vibrant economy.
Other than coming to America to kill us, or producing WMDs to kill us, what is the most powerful thing the terrorists have? The ability to, with a few sticks of dynamite or a few well placed IEDs, severely damage and interrupt the free flow of oil on the international market. And they know that as long as they threaten us with that they will have our undivided attention and we will fight to secure this. Think about why we even care about the Middle East. That’s where the world’s oil comes from – stop the oil and you stop the world! It’s that simple but Obama and the liberals can’t understand that.
If we solve the oil problem, as outlined above, we have just taken a big bite out of the effectiveness of international terrorism and the second reason for going to war. Please note, as long as there is the possibility of terrorists controlling WMDs we will always be engaged but at a different level (and a much less expensive level). Is this not another good thing?
By exporting all the oil the world can use we have just eliminated one of the two main reasons to go to war, the free-flow of oil on the international market, and significantly reduced the other which is terrorist’s ability to threaten that free-flow. At the risk of sounding repetitive, I think that is a very good thing.
I said I would go to extreme to illustrate my point and I did. My example included the United States producing all of the world’s oil and putting OPEC out of business. While it may be physically possible to produce that much oil, the reality is that it is not necessary to put OPEC out of business, nor would we want to do that.
Some people say that if we produced and exported 10,000 barrels more oil tomorrow, OPEC would just cut their production by 10,000 barrels to make up the difference and it would be a zero-sum game. That is probably true.
At $100 per barrel that Saudi Arabia gets for oil (slightly less today but tomorrow it could be $100 again), they live a luxurious life, at least the Royal Family does. I use Saudi Arabia as an example because they are the largest exporter of oil and I believe they are the richest member of OPEC. My point is that if Saudi Arabia cut back their production by 10,000 barrels per day to make up for the increase in U.S. oil exports (per the above example), the Saudi’s would still live a very luxurious lifestyle (again, the Royal Family, those who control the price).
However (this is the more practical approach I promised) if we exported enough oil that the price per barrel on the international scene dropped to $36 per barrel as in the above example, the Royal Family would not be able to maintain that luxurious lifestyle and at that point there is no way they would even consider cutting their oil production by even one barrel per day because that means even less money to live on. In fact, they would be looking to increase their oil production.
I see price competition (free-market principles) coming into play here and I am pretty sure that is another good thing because price-competition drives the price down which is good for the consumer. Have you noticed that the good things are starting to add up fast? The reality is that we would not have to produce 90 million barrels per day, maybe only a quarter of that will result in these benefits.
What about the oil-speculators, one might ask? The astute person who understands markets understands this – the thing that moves the futures market is supply/demand, or perhaps the perceived future supply/demand. If we drastically increase supply, the speculators will bail out, or perhaps even go short. For the non-market-wise, when people “go short” or sell short it drives the price down and who doesn’t love cheaper gasoline? As all speculators know, there is an endpoint to the short game so eventually the speculators would get out completely and it will be market forces that drive them out, not anti-capitalist government interference in the market-place.
One thing has held true on all free markets and will always hold true and that is that in a rising market, the first investor to get in stands to make the most money. This is like “getting in on the bottom floor.” The opposite side of that is in a down market the first person to sell out of his “long” positions stands to lose the least amount of money.
This means that if we make a serious move toward drastically increasing the supply of oil, those speculators will be tripping over each other to be the first to liquidate or sell their long positions. We all know what massive selling pressure does to the price of the underlying security, in this case oil. It drives the price down and can do it rapidly if the move is bold enough. This benefit would be almost immediate. Can I say it one more time, please? That is a good thing!
Need a relatively current example of how a market moves when drastic measures are made to alter supply/demand or the future supply/demand? Remember what happened to the price of gasoline when President Bush and congress removed the moratoriums on drilling? The price of crude and therefore gasoline came down quickly and that wasn’t even a bold move.
That was only a small increase (off shore drilling only) in the future supply of oil. What would happen if we had a huge increase in the future supply of oil? Some say there were other market forces at work, such as seasonal demand, and that might be true but it is undeniable that this was a huge factor.
One negative consequence of dragging our feet on doing this: Oil has a shelf life in that eventually green energy will replace most (not all) oil products. This may not be for fifty years, nobody really knows although Obama thinks it happened when he took office in 2009 but the reality is that he didn’t think this through. The real world caught up with him and instead of changing his agenda, we pay extremely high prices for energy and will continue to do so for a long time, especially now that the free-flow of oil is susceptible to serious threats by terrorists.
The thing to know here is that we have a chance to reduce much of our national debt, possibly even eradicate it, with increased revenue from royalties oil companies pay to the government on each barrel of oil they extract from public lands.
When green energy comes online, there goes our chance to reduce our national debt with drilling royalties. And there goes our chance to employ many people with good paying jobs too. If we want to take advantage of this opportunity, and we would be fools not to, we need to act now. The administration is fully aware of this so why are they not acting? Possibly a hidden agenda.
So, to come full circle (you probably didn’t think I could do it) we need a president who has thought deeply and thoroughly about this. We need a president who will get out of the way and get government out of the way and let the free market do what it does best and that is provide a good product at a fair price.
Until government realizes that they cannot force a market to function, commerce will continue to fail. If you want proof just look at how long Obama has been improperly using government influence to advance green energy by forcing it on us before the technology is ready. Think about how that is destroying the lives of the American people and will destroy this country. Sorry, the kids can’t go to college because we spent their college fund on unreasonably high priced gas that our government is trying hard to make even more expensive.
No, Obama has very little control over OPEC. He has considerable control over terrorism or our reaction to terrorism (which raises the cost of gasoline considerably) but he chooses to wait and watch while rogue nations build nukes which will increase tension which increases gas prices even more. He has control over oil companies but he only exercises that control in ways that further increase the price of gas.
This country has considerable control over supply/demand and at the end of the day supply/demand is the only true reason for high price gas. The government can control demand only by using dictatorial powers. How else can they tell you what YOU want? They can control supply through regulation (EPA, executive orders, etc). Yet our leadership either cannot correctly apply the concept of supply/demand or they have an agenda they are keeping from the public. I suspect that is intentional.
Two different games to play with energy hanging in the balance. One results in cheap energy and greatly enhanced national security, less cause to fight wars, and a chance to substantially reduce our national debt.
The other game results in high prices, increased leverage that terrorism has over us, and the slow but steady loss of our freedoms. It is obvious which game our leaders have chosen to force us to play. The question is will Americans vote to sustain the misery or will they use their voting power to change the course we are on?