Breaking OPEC’s Grip

Robert Zubrin writes:
If something isn’t done to break the Organization of Petroleum Exporting Countries (OPEC) — the cartel that dominates and manipulates the global oil market — the situation is likely to get much worse: With China and India industrializing rapidly, world demand for fuel is going up. OPEC is positioned to exploit this new demand with radical price hikes that go well beyond the 50-percent increase it effected during 2007 alone. Venezuela’s Hugo Chávez and Iran’s Mahmoud Ahmadinejad are already calling for prices of $200 per barrel. In short, we Americans are financing a war against ourselves — and the way things are going, we may soon be paying the enemy more than we are paying our own military. The enemy’s unconstrained ability to loot us is also threatening our economy. Consider this: Congress is raiding the public purse to put $140 billion back in the pockets of American consumers, in the hope that this will provide an economic stimulus to prevent recession. Yet by paying $100 per barrel of oil, we are allowing OPEC to set oil prices high enough to take more than triple that amount out of Americans’ pockets. [...] In light of this, the top priority of U.S. national-security policy must be to break the oil cartel. This imperative has been apparent since the 1973 oil embargo, but no progress has been made. The only policy solution we’ve tried — domestic energy conservation — has failed, and will continue to fail for two reasons. First — putting aside the near-impossibility of getting American consumers to use less fuel — global demand will continue to grow, so it’s scarcely conceivable that domestic conservation efforts could affect the global oil price. Second, even if we could hypothetically create global conservation, OPEC could simply cut production to keep demand — and prices — high. However, there is now a way to break OPEC, a surprisingly simple one. What is needed is for Congress to pass a law requiring that all new cars sold (not just made, but sold) in the U.S. be flex-fueled — that is, be able to run on any combination of gasoline or alcohol fuels. Such cars already exist — two dozen different models of flex-fuel vehicles (FFVs) are being produced by Detroit’s Big Three this year — and they only cost about $100 more than identical models that can run on gasoline only. (The switch to FFV requires only two minor upgrades: in the materials used in the fuel line and in the software controlling the electronic fuel injector.) FFVs currently command only about 3 percent of the new-car market. After all, there is little upside for consumers to own one, with alcohol-fuel pumps being nearly as rare as unicorns. Little wonder: Why should gas-station owners dedicate one of their pumps to alcohol fuels (like E85 — a mix of 85-percent ethanol and 15-percent gasoline — or M50 — a mix of half methanol and half gasoline) when only a tiny percentage of cars can use them? But, within three years of the enactment of an FFV mandate, there would be 50 million cars on American roads capable of running on high-alcohol fuels. Under those conditions, fuel pumps dispensing E85 and M50 would be everywhere — creating, for the first time, an effectively open market in vehicle fuels, and competition for OPEC oil.

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