The 2000-01 Contrived Energy Crisis - We Can Beat The Oil Cartels!

By CAFRman,
Lieutenant Colonel, USAF, Retired

Over a year ago oil was around $9-10 a barrel and gasoline prices were $.90 to $1.00 a gallon. Now (January 26, 2001) it is around $34 a barrel and got as high as $37 a barrel. Gasoline prices are over $1.40 a gallon. What about heating oil prices this winter, energy costs in California. What happened? American and OPEC oil cartels and EPA.

Now on TV you hear that gasoline prices will be the highest in the Midwest this summer, California may have problems in energy this summer, and we all will be affected with an economic slowdown/recession. These news items are to condition you to the fact the American and OPEC oil cartels are going to continue bleeding hard earned dollars from you.

First, the Organization of Petroleum Exporting Countries (OPEC) decided to lower production in order to raise prices. That started oil and gasoline prices soaring. What did our government do? Nothing. They insist we have to wait and see what OPEC plans to do. My first response is that if OPEC is deciding our national energy policy and what Americans must pay for our survival, then we should immediately disband the Department of Energy and save the American taxpayer a whole lot of money. All we need is one person to call OPEC once a week and ask them what our energy policy will be and prices Americans are required to pay for the week.

Don't allow anyone to scream “free trade”. A cartel is not free trade. If OPEC was operating in the U.S. as an organization, it could be charged with violations of our anti-trust laws. It is illegal in the U.S. to openly do what OPEC does overseas. Then why do we have to follow "free trade" agreements with them when what they are doing is illegal in this country? Also consider the following:

MEXICO: What have we done for Mexico in the last ten years? We gave them $50 billion; NAFTA and the loss of U.S. jobs; and we allow their citizens to illegally enter the U.S. and send their earnings back to Mexico to help the Mexican economy at the expense of the U.S. economy. In return, they charge us high oil prices for our generosity. Also, their military are shooting at our Border Patrol in order to receive a $200,000 bounty for every dead U.S. Border Patrol agent. In the before-Clinton-days, these were considered acts of war.

Americans Died for these OPEC Countries

KUWAIT: Didn't we send our troops to Kuwait and many died to get their country back for them? There are over 60,000 men and women and their families affected with something called Gulf War Syndrome? That is more than the number of Americans killed in the Vietnam conflict. American blood saved their country for them! Kuwait is part of the OPEC now charging Americans exorbitant oil prices.

SAUDI ARABIA: Didn't we have troops in Saudi Arabia to protect that country and weren't some of them killed in a terrorist bombing raid? American blood was spilled protecting their country. Saudi Arabia is the main OPEC country.

With friends like these who needs enemies. I do not consider the above countries to be friends of the American people and we would expect our elected officials to not treat them as friends until such time as they have proved themselves worthy of our friendship. Of course, we all know why our leaders,  and Congress do nothing. There are two principles that we continually use because most Americans do not believe these principles are true. They are (1) He who owns the gold rules; and (2) He who writes the rules wins. The average Americans neither have the gold nor write the rules. We lose every time.

The second reason gasoline prices are so high is that the Environmental Protection Agency (EPA) put in place requirements for a new cleaner gasoline to be used. When was the EPA requirements to take effect last year? June 1, 2000. When does the summer driving season start? June 1. Did the EPA know that there would be an insufficient supply of the new gasoline for the increased summer demand? Absolutely! Now they are predicting the same thing this summer. Why not, the American people did not do anything last summer. Let's try it again this summer.

Who benefits from this contrived supply/demand squeeze? The American and OPEC oil cartel. The profit margins on gasoline now for the American oil cartel are huge. Do you believe for one moment that the Department of Energy, the current administration, and/or Congress are going to go up against those who control the American oil cartel. As usual there will be those members of Congress who will be allowed to complain to the public and saber rattle. This is just to preserve the allusion that we have a free society and that members of Congress are independent individuals representing the people.

Anyone holding four aces does not ask for a new deal.

I am old enough to vividly remember the fabricated energy crisis in the early 70’s. I was in Charleston, South Carolina. There are large gasoline tanks in Charleston because it is a port of entry for all kinds of goods shipped from overseas including gasoline.

One Friday evening the local TV station, that obviously had worked out the show in advance, had a representative of the South Carolina's independent dealers (gas station owners) association that they interviewed. The representative stated their association was fed up with having to fight with their customers about the shortage of gasoline and that they had to carry guns to protect themselves.

He stated all the tanks in Charleston were full of gasoline and that there were 13 tankers waiting offshore for over a week to unload their gasoline. He named each tanker, size, and country of origin.

He further added that the association members had decided that if they did not get the gasoline for their customers, the owners of the gasoline in the tanks were not going to profit from this squeeze. The TV announcer stated to the viewers that the representative speaking was a retired Marine. The TV announcer asked the retired Marine what he did in the Marines. He stated "demolition expert."

The next individual interviewed showed leaflets that the association was going to start passing out to residents and businesses near the gasoline tanks. The leaflets were advising residents to evacuate the area by a certain date.

The following Monday when I went to wait in line to get gasoline, there was no line. I could fill it up, not just 10 gallons. In fact, there were no more lines in South Carolina. The national news media never said one word to the American people about what took place in South Carolina.

We have the same type of situation today. These things are planned not just happen as the controlled news media and politicians would lead you to believe.

First, the millions, billions and trillions should be properly translated into people terms, not the news media half-truths. For example, some estimates are that at the current price of oil costs to Americans will increase by $100 billion. This is the first loss.

This is very important! When dollars flow out of the U.S. into OPEC pockets and economies, the economic impact of this outflow from the U.S. economy is tremendous. Here is the complete story when not only the cost but economic impact of those costs are applied to the $100 billion. This is the second loss.

The above represents $804 for every man, women, and child in the U.S. (2000 Census) , $3,216 for a family of 4. This is not just the cost, but the total economic impact to Americans. Do we really need this kind of bleeding every time the American oil and OPEC oil cartels decide to arbitrarily raise the cost of oil by reducing production and shipments to the U.S.?

What happens if we have to fight a war somewhere in the world? Will OPEC continue to supply the oil at cheap prices? Probably not. What if we had to militarily support a country that OPEC did not like? Or to be prepared to fight a country that OPEC was friendly with? We must break our dependency on OPEC for the survival of our independence and retain the few freedoms we currently have.

The current energy crisis is a great opportunity for all Americans if the Federal government is forced to take the proper action. The news media and many web sites discuss this issue; however, they are missing the boat on presenting the problem. That is because the controlled national news media is not allowed to tell the people the "whole truth" on about anything.

Here are the steps necessary to beat OPEC and bring gasoline prices back into reality with energy self sufficiency for our country.

1. Force the EPA to relax their requirements until the energy crisis is over.

This would immediately release for consumption a tremendous amount of gasoline currently in storage that does not meet the NEW EPA requirements. Refiners could continue supplying gasoline that they have been to meet demand. And some overseas countries that ship gasoline here could increase their production. This is gasoline that does not currently meet the new EPA requirements. Hence, more gasoline/oil now to meet demand and lower prices.

2. Elimination of all Federal, State, and local taxes.

All taxes on gasoline, diesel fuel, aviation fuel, heating oil, etc. should be eliminated. The Federal government would receive more than enough revenues because of the $10.00 per barrel tariff outlined in item 3 below.

The Federal, State and local governments would receive increased revenues from the reduction in these taxes because these taxes would not revert to governments but used in the economy. As has been proven many times in the past and is now almost considered an axiom is that when governments lower taxes, their revenues increase because of the increase in economic activity.

Alan Greenspan, Chairman of the Federal Reserve, stated this fact in his testimony before the Senate Humphrey-Hawkins Committee, in late July 1999 when he said "...My experience is that private rates of return are significant higher than the governments rates of return.” Reversing the economic impact analysis computed above (i.e., inflows to the economy) supports what Mr. Greenspan said.

For those who are skeptics of how this works, here is the economic summary of what was said above. The U.S. Department of Energy has stated that the repeal of the 4.3 cents tax on gasoline will result in $39 billion loss for highway programs over five years. This amounts to $1.814 billion for every one cent in taxes annually.

Currently the Federal government receives 18 cents per gallon on gasoline or approximately $32.65 billion annually based on the analysis above.

Eliminating this tax would mean an additional $32.65 billion would be available to the people for them to do their thing (the economy). This creates $65.30 billion in increased economic activity (Economic Output Multiplier). Because of this increased in economic activity the Federal government would receive $13.06 billion in revenue (Government Revenue Ratio). Now adding the $32.47 billion from the tariff in item #3 from OPEC, the Federal government would receive a total of $45.53 billion.

The $32.65 billion lost because of eliminating the 18 cent gasoline tax could be replaced to the Highway Trust Fund, not from the American people but from OPEC, leaving a surplus of $12.88 billion the first year. This surplus could be used to implement the actions outlined in this section and probably there still would be a surplus. Every year thereafter, OPEC pays the $32.47 billion for the Highway Trust Fund and the Federal government has a surplus of $12.88 billion. Every year thereafter the economic principles used above start all over again, but with reduced amounts. A win-win for Americans.

You say but what about the States, counties and cities? First, they too would receive additional revenues because of the elimination of their gasoline taxes because of the increase in economic activity, plus there would be increased economic activity from the elimination of the Federal gasoline tax. The $65.30 billion of increased economic activity from the Federal elimination of the tax would result in the States receiving an additional $6.5 billion and the counties and cities an additional $5.22 billion.

As far as the California energy situation ($60.94 billion surplus) you don't have to believe me, but will you believe a Former Energy Secretary? On January 23, 2001, 11:09pm Mountain Time, on CNN TV-Headline News, John Herrington, Former Energy Secretary in the Reagan Administration said:

"They (Federal Government) have no obligation to bail out the State of California. California has 34-35 million people, a very wealthy State, with HUGE, and I emphasize HUGE, tax surpluses. There is plenty of electricity out there, it just is too expensive and no one wants to pay the bill." (Emphasis added)

But the main point here is that it has been demonstrated that State and local governments have huge potential surpluses of the taxpayers money, so the States and local governments don't really need this tax. In fact existing surpluses should be returned to the people. You can read about this on http://www.cafrman.com .

3. Institute a $10.00 Per Barrel Tariff on Imported Oil.

The hell with free trade. With a cartel free trade does not exist. Using Department of Energy data on domestic production and imports for 11 months of 2000, this will generate approximately $32.47 billion in Federal revenue and let OPEC pay the taxes this time. Naturally we would expect that OPEC would immediately threaten to raise prices $10.00 per barrel. This attempt will fail and will cause tremendous problems for OPEC.

First, any attempt to raise prices would have little impact on most Americans because the reduction in taxes outlined above would offset most of the price increases. I would also insist that every major oil company operating in the U.S. would immediately lower their prices for the full amount of the taxes eliminated. The American people should demand that price gouging by the American oil cartel be immediately investigated to the full extent of the law.

Second, OPEC cannot afford to let the price increase above $35.00 per barrel for too long because alternative fuels and energy technologies become economically feasible and they definitely do not want that. They like the price between $22.00 to $26.00 a barrel. A little over a year ago it was $9-10 a barrel.

Third, OPEC cannot refuse to sell oil to the U.S. We are their largest customer and they are so far in debt that the oil money must continue to flow. A March 2000 article in the Wall Street Journal stated: "Despite, the congressional outcry against OPEC, the cartel's share of oil imports to the U.S. has plunged since 1975, from 60% to 45.3% in 1997, according to U.S. Energy Department data." We are still a 45.3% customer. In addition, some OPEC countries are also in a state of unrest with their people because their leaders are keeping most of the oil money and providing little to the people.

4. Open up the Alaskan oil to production with strict environmental controls.

From a January 2001 article in the Wall Street Journal we read:

"If Louisiana can do it, why can't Alaska? We already have experience in Alaska. A good example is Prudhoe Bay, which has produced 20% of our domestic oil since it was developed more than 26 years ago. It has done so in a way that is both economically viable and environmentally safe.

The Arctic Refuge is estimated to have even larger reserves than Purdhoe Bay and it could replace our oil imports from Saudi Arabia for the next 30 years. The Arctic Refuge could produce up to 1.5 million barrels a day for at least 25 years, a figure equal to nearly 25% of our current daily oil consumption.

In 1987, after studying the area for five years and finding there would be no significant adverse environmental effects on the region, the Department of Interior recommended the Arctic Refuge be developed. In a poll conducted just last April, nearly 71% of Alaskans support exploration on the refuge.

We also know that, thanks to advances in technology, fewer than 2,000 of the refuge's 19.6 million acres would be affected by oil development. The area would only be explored during the winter months..."

5. Provide subsidies for the thousands of capped wells in this country. Did you know that a $5.00 per barrel subsidy only costs the taxpayer's $1.50. This again is because economically it is better for the $5.00 to stay in the U.S. than going to OPEC coffers.

6. Be prepared and state to the world that, if necessary, all strategic oil reserves will be used to assist in any disruptions by OPEC. The world and especially OPEC needs to know that the U.S. is firm in its commitment to have energy independence and prevent price gouging. Every time OPEC raises prices, start pumping from the reserve. Every time OPEC lowers prices sufficiently, add to the reserves. A very simple strategy.

7. Change building codes. Change existing building codes at all levels of government to require all new construction and all existing buildings to have one simple, inexpensive item that can be purchased at most hardware stores, such as Ace Hardware, Home Depot, Payless, Builders Square, etc. The item is called "Electrical Outlet Sealers". These are small pads that fit behind your electrical outlets and form a seal between the wall and the electrical outlet plate. This is what they look like.

Electrical Outlet Sealers

These sealers were developed during the energy crisis of the 70's. A few States made them mandatory for all new construction. In fact in a couple States the manufacturers of electrical outlet plates included the sealers as part of the plate. They were proven in 1970's energy studies to save between 5% and 15% in energy costs depending on the original construction of thebuilding. In 1999 these sealers were presented on Home and Garden TV as saving 10% in energy costs.

But these sealers also serve two other important tasks. First, they drastically reduce the amount of dirt and pollution that is drawn in when forced air heating or air conditioning units are running. Second, they almost eliminate one way that bugs and insects can enter a building. They just following the wires throughout the building till they come to an electrical outlet and then work their way in. These sealers prevent their entering the living or work area of the building.

During the first contrived energy crisis I was on local TV (Atlanta) and national TV with a short pitch on these sealers. I was a Federal employee at the time. I got about 3,000 of the 3,500 Federal employees in our building to buy and install these sealers in their residence. Because of my interest, I (an accountant) was designated as the private purchasing agent for all Federal employees in Atlanta that wanted to purchase these sealers. You know the "Other Duties As Assigned". I was buying and delivering thousands each week for about 6 months.

I have put these sealers in every residence we have lived in since the 1970's. The last time in 1997, I purchased 57 of these sealers and the cost at Ace Hardware was $12.59. I usually purchase from Ace Hardware stores because they have different packaging that facilitates purchasing the amount of plug and switch sealers needed. It took less than an hour to take off the electrical outlet plate, place the sealer over the outlet and replace the plate. A very simple operation.

Think of every outlet without sealers to have an opening the size of a reference marker. Now take 57 (our current residence) of those markers and hold them together. This is the size of the opening that the electrical outlets provide to the outside, dirt, and insects. It would probably be equivalent to a 12 inch diameter pipe opening to the outside.

Just think of what this one simple and very inexpensive item could do to help the overall energy consumption in the U.S., a 5-10% reduction in energy consumption. The average residence, apartment and business will probably recover their initial cost in about one to two months. The rest of the time it is just pure savings. So no matter if you own a residence or business or just renting, these sealers are a worthwhile investment. The returns beat the stock market, even the high tech stocks.

This undertaking to change building codes does not need to be initiated at the Federal level. City, county and State building codes can be changed immediately. Now is the time to start because energy (primarily gasoline) is now high priority in the hearts, minds and pocket books of the American people.

[ NOTE: CAFRman has no financial interest or any other interest of any kind in these electrical outlet sealers either directly or indirectly.]

8. The 87 Miles Per Gallon Carburetor

I am old enough to remember that during the first energy crisis in the 1970s two race car drivers from Florida developed and patented a carburetor that got 87 miles per gallon (mpg) on a medium sized vehicle, which would be a large vehicle today. The Department of Energy tested the carburetor and stated it only obtained approximately 57 mpg. The American people never got the opportunity to save hundreds of billions of dollars (maybe more) because the patent was bought by certain unknown individuals/group/country and never developed, marketed, or mentioned in the national news media again.

Since only a couple small vehicles produced today for use in the U.S. can claim 57 mpg none can claim 87 mpg to my knowledge, the U.S. Patent Office should be researched to locate the original patent and similar newer technology patents.

If not already available in the public domain, why don't we find that patent on this carburetor or newer models which we understand are available today and put them in the public domain. Let's insist on a Priority 1 type project to have the carburetor(s) updated and adapted for use on all vehicles immediately, required on all new vehicles and give tremendous incentives for individuals and companies to replace their existing carburetors with the new carburetors.

We should also expect to pay "reasonable" royalties to the current owner(s) of the patent(s).

If we can go to the moon, then making this carburetor ready for today's vehicles should be a piece of cake. This one item would reduce vehicle gasoline and diesel use by 50% and probably make the U.S. energy independent. The money saved would create an economic explosion, reduction in taxes, job creation, increased wages, and stop the transferring of our wealth to other countries.

Note: Did you know Steven Seagal mentioned this carburetor and the internal combustion engine at the end of one of his movies that dealt with the dumping of waste materials and the energy cartel in this country?

CLEANER AIR:

If the above carburetor(s) were mandatory on all vehicles, just think of the reduction of air pollution that would take place and the economic impact of this cleaner air. If vehicles use 50% less gasoline (hydrocarbons) to get people from one place to another, then there would be a maximum of 50% reduction of hydrocarbon pollution. It may be not exactly 50%, but it would be substantial, considerably more than the reduction the EPA is trying to achieve with the reformatted gasoline requirement.

Environmental Protection Agency (EPA) personnel would probably have immediate withdrawal symptoms. It would costs us a little more for the psychologists and psychiatrist for EPA employees, but we can bear that cost.

There is also a benefit for all those companies and individuals who are currently controlled by EPA - they will not have to say "Yes Comrade" with a smile any more when addressing EPA personnel.

This one item, the carburetor, could accomplish two things at the same time. Where are the environmentalists? Congress knows this, but they act stupid and pretend what has been said is all new to them. Where is the national news media on this issue? When are Americans going to realize that they are being taken big time and do something about it.

If items 1 through 8 above were initiated immediately OPEC would want to negotiate immediately with their friends in the Federal government. The American people should not allow a negotiated settlement. Remember what was said above, "He who writes the rules wins." No compromises, or the American people will lose again.

California Governor suggestions spending $1 billion on programs that will require huge amounts of regulations, paperwork, more employees, and a mountain of lawyers to sue on about anything dealing with these issues. Also, some will take considerable time to implement. Here are the Governor's proposals:

WOW! Except for item e above, think of the paperwork, time to implement and time to make an impact such an extensive set of rules entail. Probably one-third of the money will be spent in creation and administration. The time to start to make an impact on the current crisis is in years, not months.

The above steps are great, except for item e, and should be included in any long-term strategy, but the California energy crisis which is spilling over into and will accelerate the U.S. energy crisis already in process in many parts of the country needs immediate, short-term and long-term action. High prices for gasoline are planned for this summer. Why not start to stop it now.

Item e, bonds to buy energy at enormous prices over a long period of time should not be necessary. The State of California has $60.94 billion in potential surpluses of the taxpayers money it is not using. It is more economical for the people to have the State return the surpluses to the people and have the revenue from this increased economic activity pay for the higher energy costs now instead of paying $69 per megawatt hour over a long period of time. In most States the rates are in the $25 to $35 per megawatt hour.

This bond issuance to buy energy at high prices is nothing more than an indirect tax on the people.

The reason California is covered here is because if Californians approve of this arrangement, then you better believe that other States will want to do the same thing if and when the energy crisis hits their State. That is you.

Now the CAFRman solutions are as follows:

Our new President should understand that Americans do not want to wait until the next OPEC meeting to see what “our friends” decide to do about “their” gouging of Americans. Our representatives and future representatives are being told what rules to write. As has been said before “He who writes the rules wins.” Our current President and Vice President have been friends of American oil and OPEC for many years. You should expect this friendship to continue no matter how high heating oil or gasoline prices go.

So what can you do about all of this. Not much. You can try complaining to all your representatives in city, county, State and Federal governments. But they probably won't do anything. And there are not enough concerned Americans that will do anything about anything. History says that 95% of the people only do something when it is too late. Such will be the case here.

But at least you know more about the energy problem than you did before. And I lowered my blood pressure by telling you this. So we both benefit.