How to break the OPEC cartel
On Oct. 8, OPEC kicked America and Europe in the teeth with an oil price hike. The move will help Russia finance its war against Ukraine and the West, add to global inflation and further impair developing and indebted nations struggling with food and energy shortages.
President Biden has said “there will be consequences” for Saudi Arabia, an OPEC member, after the price hike, but he need not flirt with foreign tyrannical regimes like Venezuela to get more oil. All he needs to do is call Canada and Houston to encourage them to pump more oil, urge governments to approve more pipelines and liberate both from OPEC forever by creating an oil and gas self-sufficient powerhouse shielded from OPEC’s boom-and-bust, price-rigging cartel.
Saudi Arabia’s agreement to boost prices is most grating given that America provides generous military assistance to Saudi Arabia and other Gulf states. Senate Foreign Relations Committee Chairman Robert Menendez (D-N.J.) on Monday demanded a freeze of all cooperation with Saudi Arabia, citing the Middle Eastern country’s partnership with Russia over oil and the Kremlin’s missile strikes across Ukraine.
But the best long-term fix would be the creation of a binational fossil fuel arrangement, or grid, between the U.S. and Canada. Oil and natural gas now flow across the border, but politics has impeded the creation of a managed market that could become a cornerstone for economic growth and permanently liberate the two economies from OPEC.
This should have happened years ago, but environmentalists and certain local jurisdictions in both countries have impeded the construction of pipelines that would have resulted in energy independence. Without political interference, the two countries have more than enough oil to be energy independent.
Canada and the U.S. are oil and gas giants and already somewhat interdependent. In 2021, they produced a combined 16.3 million barrels of oil a day (4.7 million in Canada and 11.6 million in the U.S.), and the two imported a combined 9.6 million barrels a day. (Canada 1.6 million a day and the U.S. 8 million a day.)
But more than half of all U.S. imports were from Canada and two-thirds of all Canadian imports were from the United States. The rest was imported mostly from OPEC countries such as Saudi Arabia and even Russia (until the war).
The two countries are sitting on enormous reserves of natural gas too and are already self-sufficient. If more pipelines and liquefied natural gas projects were built, they could also permanently liberate Europe from dependence on Russian gas.
The creation of an energy-related “Fortress North America” should be a priority now more than ever since OPEC is run by foes of the West. It would also stop price-gouging and price-fixing that hurts consumers, industries and oil producers.
Environmentalists may respond by saying that the solution to OPEC is simply to ban oil and gas altogether, subsidize renewables and mandate the use of electricity in all vehicles and industries.
But renewables must be supplemented with fossil fuels because the wind doesn’t always blow, the sun doesn’t always shine and their surpluses cannot be stored efficiently. Fossil fuels will be around for decades because electrifying public transportation, agriculture, industrial operations, housing and the armed forces is staggeringly expensive. Fossil fuels are also essential to the production of petrochemicals, pharmaceuticals and plastics.
Reflecting this reality was the 2020 report by the U.S. Energy Information Administration, which forecasted that, even if aggressive emissions reduction policies were put in place by 2040, oil production in the U.S. would be slightly less than now, or 10 million barrels a day.
We’re going to need oil and natural gas for the foreseeable future, but we don’t have to be dependent on OPEC. The oil cartel has imposed a “tax” on the world for long enough. A new binational fossil fuel independence deal between the U.S. and Canada would enhance economic growth and provide permanent protection against the vagaries of oil tyrants.
Diane Francis is a non-resident senior fellow at the Atlantic Council in Washington at its Eurasia Center. She is editor at large at National Post in Canada, a columnist with Kyiv Post, author of 10 books and specializes in geopolitics, white-collar crime, technology and business. She writes a newsletter about America twice weekly on Substack.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.