Since the beginning of the Arab Spring, Saudi King Abdullah almost doubled his Kingdom’s budget, committing billions in subsidies, pensions and pay raises in an effort to keep his subjects from storming the palaces.
This expensive response effectively raised the price of oil needed for the Saudis to balance their budget from under $70 a barrel before 2011 to at least $110 a barrel by 2015.
Like it or not, the bill for keeping the Persian Gulf monarchies in power is now being footed by every American. Every time we fuel our car we send an extra 35 cents per gallon, or roughly $6 per fill up, to the Save the King Foundation. Since oil goes into everything we buy from food to plastics, this adds about $1,500 annually to the expenditures of the average American family.
Paradoxically, we are forced to fund social programs for other nations at the very same time we are engaged in a heated debate about cutting social services and entitlement programs at home. It is a sad state of affairs that in the 21st century the world’s most strategic commodity is still being controlled by a cartel.
Cartels, by definition, exist to maximize the profits of their members. OPEC members, which last year raked in $1 trillion in oil revenues, are doing that masterfully.
No amount of U.S. drilling or efficiency measures will change that. The cartel’s financial needs will drive it to respond to counter moves by its clients: When we drill more oil at home, OPEC can drill less to return to a tight supply-demand relationship. When we use less, OPEC can drill less.
To change this vexing dynamic, consumers must be able to substitute for petroleum by purchasing competing fuels, like alcohol fuels, biodiesel, natural gas or electricity, if they are less costly on a per mile basis. But as long as our vehicles are able to run on nothing but oil, keeping oil monarchs on their throne will remain our national side job.
Long, but important read. Why the high gas prices aren’t the fault of the President, and never will be.