How low will it go?

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mike youngOil prices have been dropping for the last couple of years as the American oil boom has been expanding production. The estimated oil reserves within the United States have increased almost 10% since 1975. After almost 40 years of production, we have about 10% more oil than we started with and remember when the predictions were that we would have run out of oil by now?

The good news is that with our technology we will most likely expand our known oil reserves and greatly expand production. With our expanded production we will need less and less of foreign oil. That coupled with the amazing increase in vehicle fuel millage could put us in the place of an oil exporter.

This good news is offset by the losers, the oil Cartel which has been raising prices for years while making its’ countries richer and America poorer. Now the tables are being reversed. Instead of sending billions overseas the situation would be an inflow of dollars into our country. The losers; Saudi Arabia, Venezuela, Iraq and Iran will see their incomes fall.

The recipe for keeping prices high has been to control production which the Cartel did so well for years. Now with American production, the Cartel normally would cut production but no one wants to because they have become addicted to the money inflow, just as we were addicted to the oil inflow.

Instead of cutting production, the Saudis have chosen to cut prices. They won’t surrender their market share because they know that their very existence depends on it. If the money spigot slows or maybe even stops, many of these countries government may also be gone. I heard a song that best describes it “when your money’s gone, your baby is gone”. So to win, the Saudi’s will lower prices until it forces out the small oil producers in America that way cutting our production and forcing out the new technology. After they break the small producer financially they will raise prices again.

The Saudis realize that our oil recover technology will continue to allow us to increase the amount of oil that we can recover, and if they don’t make that economically much more difficult, they will lose their monopoly on oil sales to the West and America. Oil prices on the world market continue to fall as the Saudis continue to undercut our producers and our small producers are in for a rough ride.

The oil Cartel fears is becoming more acute as the U.S. moves into a surplus position and the possibility of lifting the ban on oil exports. The ban dates from the days of the oil embargo. Lifting the ban would allow U.S. oil producers to sell oil in global markets where they would directly compete with the oil Cartel.

The U.S. State Department has now appointed Amos Hochstein to a new position of “top diplomat for energy affairs”. He will try to manage our new position as a potential oil exporter. This will be attacked by the environmental lobby but it does make you wonder who is financing them to oppose expanding of our oil production. Bet you can guess.

The price war is on and for now, we are the winners, the driving public, the transportation industry and the small oil producer. Let’s hope we continue to all win, as I am tired of sending our money to people who hate our life style and us.

Mike Young is a retired water and power executive who resides in Mesquite. Graduated from the University of LaVerne he has taught communications skills and technical subjects throughout the Western Hemisphere. In addition to writing and editing technical manuals he has a book titled “Speaking for Effect”. He has received some of the highest awards and recognition from both professional and public organizations.

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