Let’s drink more black Russian

Like water to the body, oil is essential to the functioning of the United States. Oil fuels our cars and planes; without it, our transportation-based modern-day society would literally grind to a halt.

Yet, unlike water, oil consumption presents significant problems for our environment. The scientific community is in concordance that oil consumption generates increased atmospheric CO2 levels that cause global warming through depletion of the ozone layer.

Furthermore, oil consumption causes a dilemma in terms of U.S. foreign policy. The Middle East produces the great majority of the world’s oil; the U.S. must make a disproportionate financial and military commitment to this region in order to ensure that the pumps keep flowing.

This leads to a wide variety of problems, the Sept. 11 terrorist attacks being the most prominent example. Osama bin Laden publicly stated that one of the primary goals of the attacks was the removal of American soldiers from Muslim holy lands. What brings U.S. troops to these holy lands? Not veneration of Allah, but American reverence for oil.

One day, America will stop gulping down oil; unfortunately, it appears that this day lies far in the future. The oil industry is a wealthy and powerful political force with a highly effective lobbying group and numerous connections to elected officials.

One need only look at President Bush and Vice President Cheney to find two prime examples of such connections; both are former high-level executives in companies involved with oil.

Moreover, current environmentally-friendly fuel alternatives, such as fuel cells and electric vehicles, are not yet sufficiently cost-effective to compete with oil-based fuels. Surely these technologies could be made cost-effective, but this would take substantial research and development on the part of energy companies. R&D is an expensive private undertaking that fails to promise guaranteed returns.

Therefore, in sectors like the computer industry that are important to the economy, the government usually provides a subsidy or tax incentives to encourage this dynamic risk-taking.

The oil companies’ unrivaled influence in national energy issues assures that, short of palpable and catastrophic consequences due to oil consumption, the government will not provide the requisite support needed to develop alternative fuel sources.

While many scientists would argue that we are causing irreparable environmental harm, the effects of our actions are long-term and will only be fully evident in future decades. I believe the American government will not push for a non-oil based economy until we come face-to-face with both environmental and foreign policy crises.

Thus, despite the Sept. 11 attacks, it seems likely that America will continue to chug oil by the billions of gallons until the Pacific Ocean starts to overrun L.A. and skin cancer reaches epidemic proportions.

With an oil-based economy, there’s nothing major we can do to counter the environmental damage (although substantial increases in fuel-efficiency requirements for cars would be a step in the right direction), but we just might be able to temper oil’s deleterious effects on our foreign policy.

As long as we are going to drink the black stuff in quantities unmatched by any country, we might as well drink Black Russian. Thanks largely to an increase in private investment made possible by a drop in corruption and firmer rule of law, Russia has led all other countries in growth of annual oil output rate with an increase of 0.5 millions of barrels per day (mbd) in each of the past two years.

Today, Russia is the leading world producer of oil with 8.3 mbd produced; this is substantially less than the 12.5 mbd produced by Russia before the Soviet Union’s collapse. However, Saudi Arabia retains the world’s largest production capacity, with production of around 7.4 mbd and 3 mbd spare capacity, contributing to the approximately 28 mbd produced by OPEC countries.

Russia is poised to overtake Saudi Arabia’s lead in production capacity within the next few years; let’s not forget that the 12.5 mbd was produced under the extremely inefficient state-run Soviet economy. While the Middle East contains 63 percent of the world’s proven oil reserves (25 percent in Saudi Arabia alone), the vast expanse of Mother Russia holds greater promise for discovery of untapped reserves.

Moreover, Russian oil companies are publicly traded firms that strive for high productivity; they are already much more efficient than the state-run Middle East oil companies and will only become more so. It is not difficult to picture a future scenario whereby Russian oil production surpasses it previous best of 12.5 mbd and begins to rival OPEC’s share of 28 mbd.

The United States should do everything in its power to aid Russia in its bid for primacy in world oil production. If Russia one day rivals OPEC, our foreign policy wouldn’t be held hostage by the need to ensure that oil flows continuously from the Middle East.

Furthermore, there have been valid concerns about Russian stability. Their economy is in shambles and average life expectancy actually decreased by six years from 1986-1994. Are those the conditions that we want for a country with the world’s second largest nuclear arsenal? Of course not, and as the world’s largest oil consumer, we have a chance to aid the Russian economy.

America currently consumes 10 mbd of oil; at 1.7 mbd, Saudi Arabia is our largest supplier. While the private sector ultimately chooses what country to buy oil from, the U.S. government has tools (incentive-laden tax breaks and subsidies) to influence corporate decisions. The U.S. government should employ these tools to encourage the private sector to increase its purchases of Russian oil and establish more oil refineries, create an efficient oil transport system and increase oil exploration in Russia.

These incentives should be formulated such that our Russian oil consumption increases relative to that of our OPEC oil consumption, but results in no overall increase in consumption. Until that happy day when we kick the black stuff altogether, America should do everything in its power to drink more Black Russian.

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