Robert J. Shapiro, former Under Secretary of Commerce for Economic Affairs in the Clinton administration, argues in U.S. News and World Reports that we need to be mindful of geopolitics when considering energy policy because (1) the investor-controlled oil companies control a very small percentage of world oil reserves and (2) Russia will use oil and natural gas to achieve their geopolitical goals. Shapiro writes:
But if [Congress and Presidential candidates] are looking for the actual culprits for the gas prices that now ail most Americans, they’ll have to cast their eyes beyond our own shores. Most informed people and every energy economist know that in the $10 billion-a-day commodity market for crude oil, the only force that can move energy prices day to day beyond where the market dictates are the state-owned oil companies of Saudi Arabia, Russia, Iran, and a handful of other countries that control 80 percent of the world’s reserves and nearly as much of the world’s daily oil production. To put it in perspective, the three biggest U.S. oil companies—ExxonMobil, Chevron, and ConocoPhillips—account together for less than 4 percent of worldwide reserves.
The Russian invasion of Georgia underscored the influence of a few nations over the world’s most important economic commodity and once again made it an important geopolitical issue. While Georgia’s pipelines are only one of several sore spots for Vladimir Putin, effective influence over them fits nicely into his campaign to centralize the Kremlin’s control over Russia’s enormous oil and gas reserves and production—second in the world to only Saudi Arabia—and use them as geopolitical tools. With Putin’s confiscation of the Yukos oil conglomerate, the key institution for this strategy is Gazprom, the huge, state-owned natural gas conglomerate that today supplies nearly one third of the gas needs of France and Italy, more than 40 percent of Germany’s needs, 60 to 70 percent of gas consumption in Austria, Hungary, and Turkey, and virtually all the natural gas used in Greece, Finland, and most of Eastern Europe. Gazprom is not only also developing the vast Shtokman gas field in the Barents Sea to produce liquefied natural gas for the U.S. market, it also has absorbed Russia’s largest oil producing company, Sibneft, with more reserves than any nation except Saudi Arabia and Iran.
In this energy and geopolitical environment, and with Putin’s Kremlin watching closely, it surely makes little sense for the U.S. government to single out U.S oil producers for special taxes.
Failing to develop our oil and natural gas resources only gives more power to Vladimir Putin. As Ronald Reagan asked in his classic 1984 campaign commercial, isn’t it smart to be as strong as the bear?