The Coming OPEC Doom

By

Sherman N. Miller

 8/26/2001

When the world experienced Organization of Petroleum Exporting Countries (OPEC) oil embargoes in 1973 and 1979 there was no doubt that the United State of America’s Presidency was in crisis. The late President Richard Nixon was engulfed in the Watergate scandal in 1973. Former President Jimmy Carter’s administration was in a leadership crisis in 1979.

OPEC recognized that they could say the hell with treating oil customers well in the midst of these leadership crises. The world learned to suffer through contrived OPEC crude oil shortages and the United States found it self with oil and gasoline price explosions. On the other hand, a basic tenet of business suggests that when a product is overly priced in the marketplace it draws in substitute products.

However, when these earlier oil crises died down there were no real substitute products that gained a foothold in the world energy market. The idea of long gasoline lines became fodder for the history books. America ignored the writing on the wall and we started producing gas-guzzlers once again that set the stage for OPEC to launch a third oil embargo. The Persian Gulf War in 1991 gave OPEC another opportunity to exploit their economic leverage on the world by contriving an oil shortage.

Finally the sex scandal that nearly brought down former President Bill Clinton’s Presidency was a contributor to OPEC launching its latest salvo in humbling the oil-starved world. Some sectors of the U.S. saw gasoline prices escalate to over two dollars a gallon. Excessively high energy cost for heating ones home became a national tax on every U.S. household. The debilitating energy shortages in California became a national disgrace. Clearly we set the stage for natural market forces to bring forth substitute products for crude oil.

This fourth time around the OPEC contrived oil shortage forced the automotive industry to announce paradigm shift in energy supplies for the future. The recent General Motors announcement of a breakthrough in the development of Fuel Cell technology looks like the long awaited substitute product for crude oil. What is good about the GM prospective product is it will not put a strain on the environment because water is the waste product. However, General Motors’ announcement must have OPEC leaders worrying about long-term further losses in leverage over the world crude oil marketplace.

The tragedy in the above scenario is non-OPEC oil producing nations as Russia may find demand diminishing for their product just whey they start to enjoy significant leverage on the world markets. Oil will no doubt suffer a fate similar to the out-of-vogue coal producers with fuel cells portending a new era of unlimited clean energy sources. Will oil burning oil products escalate their vilification as dirty and harmful for the environment beyond lip service?  Surely General Motors championing fuel cell technology suggests that tomorrow’s automobile engines will exploit its benefits.

General Motors is also forcing a paradigm shift in the electric power industry. If fuel cell technology becomes cost competitive with the electric power industry, we might expect to see a serious overcapacity in that electrical energy industry in the next thirty years that will drive down the cost of electricity. Perhaps fuel cells start out as backups electrically home generating systems and evolve into primary energy systems as this technology matures.

Does General Motors championing fuel cell usage tomorrow really mean that many future senior citizens, who would be afraid today to cut on their air conditioners or fans in the midst of heat waves, will get a few more years of life because of the rebirth of the United States of America as limitless energy rich nation?