PrintApril 10, 2011
Import Brazil's Oil Policy, Not Brazil's Oil
In 1980, Brazil imported 77 percent of its oil. Now it imports 0.0 percent. During that same time period, America increased its oil imports from roughly 30 percent to 70 percent. If Brazil can become completely self-sufficient in oil, why can't America start becoming more self-sufficient?
Brazil is one of the BRICs, an acronym that refers to the nations of Brazil, Russia, India, and China, the rising powers. The BRICs have been increasing their global economic power at such a fast pace that Goldman Sachs predicts they will become the four most dominant economies by the year 2050.
It's no surprise that Brazil is among the nations with the biggest and fastest growing emerging markets. They have been making smart economic decisions.
Among those decisions was to stop depending on foreign energy sources. Since 1980, Brazil has increased its oil production by 876 percent. Now it actually has a surplus.
President Obama has expressed his eagerness for Brazil to expand offshore oil drilling and export more oil. He recently said:
"With the new oil finds off Brazil, President (Dilma) Rousseff has said that Brazil wants to be a major supplier of new stable sources of energy, and I've told her that the United States wants to be a major customer, which would be a win-win for both our countries."
However, Obama does not share the same eagerness for America's oil exploration. He would rather borrow more billions to purchase oil from Brazil.
Why would a president help a foreign nation while hindering his own? Some argue that it's deliberate sabotage.
A Human Events editorial observes:
"This dependence is the predictable result of deliberate policies, from locking private industry out of Alaskan oil fields, to hounding oil rigs away from the Gulf of Mexico...The Obama Administration is intentionally choking the life out of America's dynamic, highly mobile economy... Everything becomes more valuable when its supply is limited. Rationing a limited supply of motion would bring great power to the masters of Big Government. Increasing the price of everything limits the consumption of everything."
Columnist Victor Davis Hanson explains:
"Apparently the common denominator here is a deductive view that high energy prices will force Americans to emulate European centrally planned and state-run transportation. That conclusion is not wild conspiracy theory, but simply the logical manifestation of many of the Obama administration's earlier campaign promises."
Already, gasoline prices have doubled under Obama. When Obama took office, the national average price of a gallon of regular gas was $1.79. Now it's $3.58.
Under increasing pressure, Obama recently announced that he wanted a one-third reduction of oil imports within a decade. But what Obama says and what he actually does have historically differed.
Energy policies that fail to put America first did not begin with the Obama administration. They have been around for decades.
For example, environmental concerns have made it nearly impossible to expand drilling, extraction, and refining of oil in America. Ironically, these restraints have caused more harm to the environment than if they had never been put into place.
Over the last four decades, roughly 60 percent of all oil spilled in American waters came from tankers and barges, while only 2 percent came from pipelines. There would have been much less spillage had we been allowed to get our oil by drilling domestically and transporting it via pipeline instead of having it delivered from other nations via tankers and barges.
And because America has increased its oil imports, other nations have increased their drilling. Included among the top ten sources of U.S. crude oil imports are Saudi Arabia, Venezuela, and Iraq. Human rights in these nations are not very good. So how much concern do you think they have for the environment when drilling for oil? Is it more or less concern than America would have?
Not only have environmentalists suffered from these policies, but so have consumers. Drilling for our own oil is cheaper than importing it.
Environmentalists and consumers have also suffered from ethanol policies. Making corn ethanol requires more energy than other fuels, which defeats the environmentalists' goal of getting away from fossil fuels. And the consumer has to pay more for food when crops are used for ethanol production instead of food production.
Despite corn ethanol's shortcomings, the federal government has been subsidizing its production in response to the lobbying efforts of environmental groups and agricultural corporations. That it has to be subsidized is evidence that market forces have not responded positively to it. If corn ethanol were economical and efficient, consumers would demand it and producers would supply it.
President Reagan best summed up the government's view of economics: "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
Subsidies to promote uneconomical and inefficient sources of energy waste taxpayer dollars. The free market will embrace any viable energy alternatives to fossil fuels that are clean, economical, and efficient. But until those alternatives are developed, fossil fuels are the lifeblood of our economy.
Despite failed energy policies, those in government still blame the oil industry for high prices. There have been federal investigations to denounce and indict "greedy" oil executives. But the investigations consistently clear the defendants of any wrongdoing.
Blaming the oil industry is an easier sell to the public than reality.
First, global demand for oil has been increasing, especially in China and India. When demand rises, prices increase.
Second, Obama's anti-drilling policies have driven down the production of domestic crude oil and gasoline. When supply decreases, prices increase.
Third, the government has been taxing oil companies at every level of production. When oil companies have higher costs, prices increase.
Taxes contribute more to the price of gasoline than oil company profits. The government profits more from oil than the oil industry. So who is the "greedy" one?
Oil companies have made record profits in the last few years because of the record amount of oil they have been selling, not because of how much they have been charging for it. Oil companies have a profit margin of about 9 percent on gasoline. So they make about 9¢ in profit for every dollar of revenue. That's lower than the 13¢ average of companies in the S&P 500 index.
America needs to make a change. What we should be importing from Brazil is its oil policy, not its oil.
Bill Costello, M.Ed., is the president of U.S.-based Making Minds Matter, LLC and the author of Awaken Your Birdbrain: Using Creativity to Get What You Want. He can be reached at www.makingmindsmatter.com.
