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Search - Fiasco

Fiasco
Author: Jack Anderson, James Boyd

"A world-upending revolution, wholly triumphant because wholly unopposed and wholly acquiesced in, had placed in the hands of surprised OpEC regimes the power to reduce oil output below normal demand, which quickly became power to raise prices to whatever level the panicked bidding of a leaderless, oil-dependent West would bear." — The syndicated... more » columnist Jack Anderson and his colleague James Boyd point out in their book ''Fiasco'' that during the years since 1973 - the era of high-cost oil - inflation has been three times higher, the unemployment rate has been twice as great, and overall economic growth has been half as fast as in the preceding cheap-oil years. Even these disturbances must be considered mild, compared to the devastation expensive oil has inflicted on those third-world countries that happened to export tin or cocoa instead of oil.

Petroleum is a finite resource, and the Puritan strain in the American character has disposed many people to believe the price explosion was the inevitable paying-up after the party, and the Organization of Petroleum Exporting Countries (OPEC) was merely the vehicle through which Mother Nature squared accounts. ''Fiasco'' concedes that fossil fuels may someday be exhausted, but they demolish the idea that worldwide supply problems were to blame for what happened to the price of oil.

As they entered the 1970's, the oil-producing nations were, according to ''Fiasco,'' haunted by one grim reality - '' There was just too much oil. Too much oil in nature and too much oil-producing capacity installed by people.'' The international oil companies lived under the same shadow. Each of the sheikdoms from which they bought oil sought to increase its wealth by expanding its production, but the companies believed that the world market could not absorb much more oil. If ever they lost their rein on total production, the companies feared, they might see the price crash toward the true cost of production in the vast Arabian fields - about 10 cents per barrel.

How, under such circumstances, could the world face a ''shortage'' of oil? ''Fiasco'' argues that OPEC was able to transform the oil market only because of the convergence of two trends, each of them preventable. One was a sudden, though temporary, increase in America's demand for imported oil. Production from high-cost wells in Oklahoma and Texas began declining before Alaskan oil came came into production. As aresult, the United States was for the first time dependent on more than a trickle of oil from the Middle East.

Then, just as the United States was relying more heavily on foreign sources, a shift in the balance of bargaining power left the OPEC nations, not the oil companies, in a position to determine how much oil would be pumped and at what price.

Mr. Anderson and Mr. Boyd suggest that the impending disaster of soaring oil prices might have been averted at a dozen points in the early 70's, but each opportunity was missed. Domestic energy production was depressed not only by the seas of cheap Middle Eastern oil but also by a series of ill considered, sometimes accidental decisions. Federal regulations kept the price, and therefore the supply, of natural gas artificially low. Richard Nixon had for years relied on large political contributions from the oil companies, and for a while he defended their infamous tax break, known as the depletion allowance. This made the companies look like bandits but was structured so as to give no incentive for the development of new oil fields.

Had it been completed on schedule, the Trans Alaska Pipeline System could have provided the oil that had to be imported from the Persian Gulf. But Mr. Nixon's nominee for Secretary of the Interior, Walter Hickel, was such anathema to environmental groups that, in order to be confirmed by the Senate in early 1969, he had to make commitments that delayed completion of the pipeline for several years.

ISBN-13: 9780812909432
ISBN-10: 0812909437
Publication Date: 10/1983
Pages: 386
Rating:

Currently 4/5 Stars.

4 stars, based on 2 ratings

Publisher: Times Books
Book Type: Hardcover
Reviews: Amazon | Write a Review

Genres:

Business & Money >> Industries

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