"Energy independence" has crept back into the national conversation, which is too bad, because it's a silly idea. Without some miracle breakthrough like controlled fusion, energy independence is unattainable, probably undesirable and discussion of it avoids the real question of why the world continues to let the price of a crucial commodity be set at artificially high levels by a notorious cartel.
Ironically, at this moment of $54-a-barrel oil, OPEC is no longer in control. Given the current realities of supply and demand -- and the panic and speculation driving oil traders -- it is the market that is setting prices.
Transcript: Steven Pearlstein was online to discuss this column.
But let's not let that distract us from the underlying reality: The reason supply is short is because OPEC members have set things up that way, aided and abetted by cooperating nonmembers and major oil companies who have become rich taking a free ride on the price-fixing gravy train. Even if oil prices returned to OPEC's target of $30 a barrel, that is still three times the price that would be generated by a truly competitive oil market open to free trade and investment, according to energy analyst Edward L. Morse and others.
Or put it this way: Even at $30 a barrel, we allow foreigners to impose an energy tax on Americans of at least $140 billion a year -- the equivalent of $1,400 for each household.
Now when I last checked, price fixing violates the criminal laws. We put people in jail for doing it and fine companies millions of dollars when they get caught. But because OPEC is made up of governments that control their oil industries, U.S. courts have decided that its price fixing is immune from prosecution.
Unfortunately, our tolerance of this conspiracy doesn't stop there.
NAFTA grants an exception to Mexico so it can continue to shield its state-owned oil monopoly from competition.
And consider that the U.S. has twice invested blood and treasure to protect the economic interests of Kuwait and Saudi Arabia without ever winning a promise that they would stop picking the pockets of American businesses and consumers.
Can anyone explain why the U.S. government gave the green light for OPEC member Venezuela to buy its way into the American downstream market with its purchase of Citgo? Or why the Federal Reserve saw nothing wrong with allowing a Saudi prince to use his ill-gotten oil gains to buy a big chunk of Citicorp?
It doesn't have to be this way. The Senate Judiciary Committee has twice reported out legislation by Mike DeWine (R-Ohio) and Herb Kohl (D-Wis.) that would extend the reach of antitrust laws to government-owned commercial activities. But thanks to the "hold" put on the bill by oil-state senators, the full Senate will never get to consider it.
Why? Because the business model on which big oil companies operate is built around tight supply and monopoly prices. These companies now get most of their record-breaking profits from "upstream" operations -- drilling for oil and selling it at inflated OPEC prices. At the same time, they have systematically retreated from refining and marketing in submarkets that are too competitive, contributing to the recent shortages in gasoline and heating oil. Exploration and drilling budgets, meanwhile, have declined as companies refuse to invest in new projects that won't work if crude prices fall below $20 a barrel. Less drilling today, less supply tomorrow.
There is an alternative to this strategy of kowtowing to OPEC.
For starters, our European friends could let OPEC ministers know that they are no longer welcome in Vienna if their purpose is price fixing. And with Congress's approval, the Justice Department could open a criminal investigation not only of OPEC, but also of private companies that aid and abet its price fixing. Oil-consuming nations could form an oil-buying cartel to build up oil reserves when prices are low and noisily dump them on markets when prices get too high. Countries that prevent private investment in their oil industries could be barred from making similar investments here.
Is there are risk to such a strategy? Sure. But with $54-a-barrel oil, it may be a risk worth taking.
Steven Pearlstein will host a Web discussion at 11 a.m. today at www.washingtonpost.com. He can be reached at email@example.com.