Posted By Michael Bastasch On 3:35 PM 04/26/2013 In Daily Caller News Foundation | No Comments
Depending on oil from nations in the oil cartel OPEC is costing Americans hundreds of billions of dollars every year, according to a new report that claims domestic consumers paid a $335 billion premium for OPEC oil in 2011.
“The average price of a barrel of oil in 2011 was a bit over $90.46. Taking the IEA’s break even cost of $40 a barrel as likely profitable for all producers, then one can impute a $50 a barrel transfer payment, which is about a third of a trillion dollars since the U.S. consumed a little less than seven billion barrels,” reads a report by the group Securing America’s Future Energy, which aims to reduce America’s dependence on foreign oil.
“If we presume oil could have been $40 a barrel, rather than $90, then the $50 premium was paid. Consumption in the U.S. averaged 18.4 million barrels a day or 6.7 billion barrels in 2011, then the premium paid was $335 billion,” the report continues.
The report notes that OPEC’s activities cost U.S. households $115 billion in 2007 alone, and were estimated to have cost Americans more than $500 billion in 2008 due to higher gasoline prices.
“At times, this means a transfer of wealth from oil consuming nations to oil-producing nations totaling hundreds of billions of dollars more than what the competitive-market price of oil would suggest,” Securing America’s Future Energy claims in the document. “That is, the international market for oil is not a free market.”
“The OPEC cartel has affected the oil market for four decades. An unstable cartel representing the interests of the major oil exporting nations, OPEC has at times been effective in forcing up the price of oil and, thereby, allowing the export nations to obtain a significant premium captured by national oil companies on behalf of their sovereigns,” the report continues.
According to Securing America’s Future Energy, OPEC’s state-owned national oil companies hold the majority of the world’s proven oil reserves, which gives them significant influence over the price of oil. They use their influence to impose artificial scarcity on the market, which causes oil prices to rise and results in more money being sent from U.S. customers to foreign state-owned oil companies.
For decades the U.S. has been promoting policies to bring it closer towards greater energy security, after a costly oil embargo by the OPEC wreaked havoc on the country during the 1970s. Recently, hydraulic fracturing and horizontal drilling have led to an oil and gas boom that could allow the U.S. to surpass Saudi Arabia — an OPEC leader — as the world’s top oil producer.
In fact, the U.S. became a net exporter of oil in 2011, thanks to increased oil production on state and private lands. Production on federal lands has fallen two years in a row, while total U.S. oil production has risen dramatically.
However, an oil boom in the U.S. does not mean consumers and businesses here will be free from OPEC’s influence, according to the report, as the price of oil will still be set on a global market.
“Whether oil is produced in the U.S. or in another country, it is part of a world market,” reads the report. “So increased production in the United States need not mean that oil will be cheaper in the United States, just that revenues will be captured domestically.”
The internal politics of OPEC also make it harder to accurately predict the price of oil than it would be if the market were free of the cartel. Furthermore, corruption within OPEC also affects oil prices.
“Many OPEC nations that determine if oil will flow are deeply corrupt regimes. Since their decisions are political, and not strictly based on business considerations, corruption affects their impact on the market, “according to the study. “[T]he existence of corruption in major oil producers further removes decision making from market forces.”
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