OPEC has taken control

Sept. 17, 2001
OPEC has once again taken control over the global oil supply, and natural gas production and distribution cannot meet rising demand at traditional prices.

OPEC has once again taken control over the global oil supply, and natural gas production and distribution cannot meet rising demand at traditional prices. We're in this predicament because decades ago large areas of the US were put off limits to production of oil, gas, and coal for aesthetic, environmental, and economic reasons. Moreover, it was theorized that these reserves should be held for the future when they would be needed more. The reserves are needed now, but the production is not there, and won't be anytime soon.

We have not built any new oil refineries in a quarter-century because there is inadequate domestic production of oil reserves. And without end-users to supply, commodity and product pipelines also were not built. We became complacent, because cheap electrical power and fuels were easily imported from elsewhere.

There simply was no impetus to produce fuel locally or build power generation facilities. We simply lost sight of our fuel and power needs and limited our options for aging fuel and power generation capacity and future demand growth. It's a pattern that developed nationwide whereby we became reliant on fuel and power from foreign sources for 4 decades.

We thought that imports would forever feed our nation's economic engine. Regulations and permitting restricted oil and gas exploration and development across the US; only a tiny segment of offshore and onshore acreage was allowed. Moreover, government and the environmentalists forced the production of 50 or more different gasoline formulations, all of which lack convertibility. This created single-source refining and wrecked competition on product level.

This deplorable regulatory control resulted in fewer refineries, complex fuel requirements, and environmental regulation. This also discouraged the building of product pipelines to areas that needed the fuels. This stagnation stimulated the permitting of nuclear and coal-fired generation capacity, but unfortunately, that capacity won't be ready for another 3 to 7 years, providing nothing in the near future. And when this additional capacity comes onstream, a power surplus will materialize, triggering destabilizing energy prices.

In the interim, high gas and power prices are curtailing consumption while our government argues over short-term fixes. They haven't learned yet that price caps on power and fuel always results in greater consumption and discourages new supply, which is exactly the opposite of what is intended.

The reality of the situation is that excess profits are what stimulate new competition in free markets. Market prices and supply work quickly when competition among fuel and power suppliers exists. The only role for government should be to ensure there is fair competition and access for new competitors. Free markets are mean, but worth every iota of its meanness. Our national energy policy is mired in political obfuscation! High-energy costs stymie economic growth.

We must increase energy supplies from diverse sources: from oil and gas, renewables, coal, hydro, and nuclear. This is the balanced approach that's essential if we're going to meet our nation's energy needs down the road and take care of many other concerns, especially with respect to the environment.

We must become more efficient in our energy use as well. Developing new technology will allow us to do this.

The world cannot operate without oil and gas. We are totally dependent on fossil fuels. In America, fossil fuels provide 85% of our energy. Oil and gas provide 65 to 85%. With 58% oil imports, our national and economic security is in jeopardy. There's no alternative but to develop our domestic oil and gas resources.

Dailey J. Berard
Chairman
Universal Fabricators LLC
New Iberia, La.