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How OPEC is taxing us into a depression

This Web only Speakout has not been edited.

Robert Zubrin

Published July 31, 2008 at 6 a.m.

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In June 2006, a group of government officials met and decided to raise the taxes on all Americans by 20 percent. None of officials involved were elected by us, however, or appointed by our elected representatives, and the meeting was not held in Washington. Rather, those who gathered in Caracas Venezuela to deliberate on our taxes were representatives of a group of foreign theocracies, tyrannies, and kleptocracies known as the Organization of Petroleum Exporting Countries, or OPEC. OPEC’s June 2006 imposition added to an earlier tax increase of 10% agreed to by the cartel at its meeting in Cairo Egypt in December 2004, and several prior imposts totaling another 10% levy decided upon at a variety of meetings between 1999 and 2003.

That’s right. With no voice in the matter allowed to anyone elected by you (or anyone else) OPEC is increasing your taxes - and by no small amount.

Consider: This year, with OPEC-rigged oil prices exceeding $120/barrel, Americans will pay $1000 billion for their oil supply, and the world as a whole will pay $4 trillion. These petroleum costs are up more than a factor of ten from what they were in 1999, and represent a huge highly-regressive tax on the world economy. For Americans, the $1000 billion oil levy is equivalent to a 40% increase in income taxes across the board - with sixty percent the sum being paid over in tribute to foreign governments.

Averaged over the US population of 300 million people, the $1000 billion OPEC tax levies a tribute amounting to $3300 per head - for every man, woman, and child in the country, or $13,200 for a family of four. The average American worker makes about $45,000 per year, or $35,000 after taxes paid to Uncle Sam. In 1999, such a worker supporting a family of four had to pay 3% of his disposable income for oil. Now Uncle Saud and Uncle Hugo are taxing him for over 35% of his take-home pay. Is it any wonder that such people are not buying houses? Such a massive drain of cash from the pockets of consumers must perforce collapse the real estate market - as well as that for many other kinds of consumer goods.

So, as a result of this massive tax increase - by far the largest in American history - the United States is being driven into a recession. But for poor countries, which can afford it even less, the effect of the brutal OPEC global taxation program is much worse. It is one thing to pay $120/barrel when you live in a country where the average person makes $45,000 per year. It is quite another if you are an African or Haitian making $1000 per year. The oil cartel is already starving many of these people by both driving up transport, growing, and fishing costs, as well as by using its petrodollar funds to engage in speculation which has driven farm commodity prices up by a factor of two - even in the face of massive increases of US corn production (up 45% since 2002, leaving a 34% increase in available food and feed grain after the part used for ethanol is taken out.)

And this is just the beginning. OPEC leaders including Venezuela’s Hugo Chávez and Iran’s Mahmoud Ahmadinejad are already openly discussing raising the price of oil to $200/barrel. In that case, Americans’ oil tribute rise to $2 trillion per year, to an evil cartel whose total worldwide extortions will top $7 trillion.

If we want to avoid complete economic defeat, we need to destroy the oil cartel. This cannot be done through conservation, because (putting aside the difficulty of getting to whole world to agree to conserve) so long as they are the only game in town, the cartel can always counter any conservation program by cutting production to match. Rather, the only way to beat them is to break their vertical monopoly by creating fuel choice on a global scale. The US Congress can make this happen with a stroke of the pen, by passing a law requiring that all new cars sold in the United States be flex fuel vehicles that can run on any combination of gasoline, ethanol or methanol. The technology is readily available and it only costs about $100 per vehicle.

By making America a flex-fuel vehicle market, we will effectively make flex-fuel the international standard, as all significant foreign car makers would be impelled to convert their lines over as well. Around the world, gasoline would be forced to compete at the pump against alcohol fuels made from any number of sources, including not only current commercial crops like corn and sugar, but cellulosic ethanol made from crop residues and weeds, as well as methanol, which can be made from any kind of biomass without exception, as well as coal, natural gas, and recycled urban trash. By creating such an open-source fuel market, we can enormously expand and diversify humanity’s fuel resource base, protecting all nations from continued blackmail, robbery, and indeed, in some cases, starvation, induced by the oil cartel.

Taxation without representation is tyranny. It’s time to overthrow OPEC.

Robert Zubrin, a senior fellow at the Foundation for Defense of Democracies is an astronautical engineer and author of Energy Victory: Winning the War on Terror by Breaking Free of Oil.

Comments

  • July 31, 2008

    6:39 a.m.

    Suggest removal

    Mike_In_Hartsel writes:

    Robert Zubrin, please tell us how the OPEC members rig oil prices? They don't set the price of oil you idiot, they set the quantity to be pumped from the ground. The market sets prices after that.

    And this "tax increase" you claim? On what? You don't say! Because your rant is aimed at more fuel-efficient cars.

    Unfortunately some people might believe your rant and think OPEC is the problem when it is congress and the environmentalist extremists.

  • July 31, 2008

    8:28 a.m.

    Suggest removal

    mrfxx writes:

    Both the author and Mike_In_Hartsel havw ignored some minor details about Big Oil in this country:
    1) after the shale oil bust in the 80s, Big Oil walked away from Grand County (leaving a mess which had to be cleaned up by the county) and dropped all investigation into how to make shale oil extraction work cost-effectively. Today, only Shell is investigating that & they announced they are 2 years into a 7 year R&D project. If they come up with something, it will be another 5-10 years before the first drop of gasoline from the exercise hits a gas tank.
    2) A large oil find was made in Montana and the Dakotas - and at least Montana is more than willing to allow drilling; however, Big Oil has opted to buy from dictatorships in the Middle East & Africa (there was a very interesting conversation on radio with the Gov of Montana who apparently called the head of Chevron on the carpet for that)
    3) Big US oil capped wells when it was cheaper to import crude - why haven't they uncapped and started extracting where not only is there known oil (as opposed to best guesses based on geological surveys) but also infrastructure to support moving it? Why are they not acting on the virtual "fistfuls" of leases that they already have - instead moving to get ever more (locking up as much of public lands as they can)? And if they are truly extracting cleaner than ever before, why are they so adamantly opposed to any "clean drilling laws"? Heck - I'd say they could drill anywhere they wanted PROVIDED they put down a "security deposit" for cleanup (some articles indicate it is not a matter of if but when - the "security deposit" would be returned after any cleanups when drilling in each area is completed - like a renter's security deposit).
    4) The constant arguement about the cost of crude (which impacts the cost of virtually everything else) is the "supply and demand" song - so - what makes anyone think that the oil companies won't sell US-drilled crude to the highest bidder (just as Xcel is selling CO-based natural gas to the "highest bidder states" since PUC mandated that we consumers build them a pipeline to move it out of state)? The only way to bring down the cost of crude is to come up with viable alternatives making it "less necessary" to daily life.

  • July 31, 2008

    8:45 a.m.

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    P_Denver writes:

    A couple of thoughts:

    . . . We do not get the majority of our oil from OPEC members. We get it from Canada and Mexico. Yes, OPEC influences prices by adjusting production from their end - but we can and should (if we're not already) negotiate with our neighbors for more reasonably-priced oil
    . . . "$100" per car increase for flex-fuel? Yeah, right. They can't change the style of lightbulbs in a car for $100. It would be several thousand. Plus, all gas stations would have to convert - adding to their overhead. Eth and meth take OIL to produce, so their prices would not be stable.
    . . . And, in the end, let's face it -- oil is the only thing some of these countries have. They see their lifeblood being pumped out of the sand and shipped overseas - gone forever. It's finally occured to some of their leaders that they better make as much as they can - while they can - before it's gone for good.

  • July 31, 2008

    1:01 p.m.

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    Ziggyzap writes:

    This article has to be a joke. The USA has taxed the entire planet ever since it abrogated the Bretton Woods agreement in 1971 and cut the cosy deal with the Saudis to force the denomination of all oil sales in US dollars.

    From that time, every nation had to acquire US dollars and US debt to buy oil, while the USA merely printed Monopoly money dollars and foisted its debt on the rest of the world and also bought its oil with this same fiat currency. But the scam is coming to an end.

    Iraq was invaded, not because Saddam Hussein had WMD or that he was any threat to the USA, but because he bypassed the cosy US dollar scam and sold oil for Euro, thus showing the world that it did not have to hold US dollars and buy US debt to purchase oil.

    Iran is in the US crosshairs because it dares to sell its oil for every currency EXCEPT US dollars, breaking the scam. The CIA tried twice to depose Hugo Chavez of Venezuela because he started selling oil for other currencies.

    That's what it's about. OPEC isn't taxing anybody - the USA is being hoist by its own petard now because its 35 year long scam is unravelling and the rest of the world is not accepting the US dollar, the value of which was only sustained because other nations had to buy dollars to buy oil. But Europeans can now buy oil for Euro, Japan can now buy oil for Yen and the Russians are now selling oil and gas for Rouble. More OPEC nations are looking at denominating oil sales for other currencies.

    So the world's oil-buying nations are slowly dumping the US dollar, not quickly, because that will reduce its value and those nations will lose out. Nevertheless, this is causing the US dollar to decline and if you don't believe me, just look at the dollar-euro rate over the past ten years and see it for yourselves. Once the world adopts the Euro as the reseve currency, the US economy, no longer sustained by the artificially high dollar, will collapse.

    The USA cannot keep invading nations or overthrowing governments any more to force them to play its game of dollar hegemony. Short of fomenting another world war, the US economy will go into severe depression. But that's what the USA is trying to do with Iran, but even that has unravelled of late.

    It's a shame that the American people are kept in the dark about the real reasons why this is happening. The media, in the hands of White House sycophants, keep feeding the American public with garbage and lies about why Iraq was invaded, why Iran needs to be invaded when it is no threat to anybody and why Chavez is Dr Evil, when all he has done is stop the Americans pillaging his nation.

    The American Empire, like the Roman Empire, is finally collapsing because the rest of the world is refusing to be taxed by the US dollar scam any more. That's the truth, not this garbage about OPEC taxing the USA.

  • July 31, 2008

    8 p.m.

    Suggest removal

    Castle writes:

    DRILL HERE, DRILL NOW, PAY LESS>

  • August 4, 2008

    8:47 p.m.

    Suggest removal

    kabud writes:

    Thank you Robert for you strong position to protect our nation

    Your stand in the war is the only way we can win it.

    Well, some people need to read your works more attentively and make an intellectual effort to understand what is going on

    If we can find a relatively small recourse :
    we can become totally oil independent in less then a year.
    --------
    METHANOL PLAN: IN 1 YEAR USA CAN STOP USING OIL FOR TRANSPORTATION
    I hope you read this AND START ACTING FAST despite the ignorance and institutional dumbness. Our nation faces a death threat as we speak.

    I am writing this and praying that God will make me wrong

    but RATIONAL analysis makes me continue.

    Oil just hit a record on JUNE 30, 2008: $143.67

    Ben Laden in 2001 announced that HIS TARGET PRICE FOR OIL IS $144.

    We all heard that this is a time of WAR (with terrorism).

    It is also a war against us in terms of making all of us pay a regressive tax on EVERYTHING by making us pay an enormous amount for transportation fuels.

    Today we pay for imported oil MORE than we pay for our DEFENSE BUDGET!!!!!!!!!!!!!!!!!!

    If you think that enemy will be just collecting the pay and get rich:
    YOU ARE DANGEROUSLY AND UNFORGIVABLY WRONG!!!!!

    They will use this unique opportunity to destroy us with a devastating
    strike. It is so simple. It is going to be THE BEST TIME TO ATTACK USA
    when everyone is SO MUCH demoralized by economy going fast into decline.

    There is only one way out and it is DOABLE:

    METHANOL ECONOMY.

    Just think about it. If McCain camp aggressively promotes it-

    Johnny will win and Country may get saved, at least for some time, from economic depression and
    enemy attacks.

    Methanol is like ethanol in terms of been liquid transportation fuel.

    But it is NOT depending on agriculture AT ALL. Meaning: floods are not effecting its price, food shortages are not the issue and so on.

    Do yourselves a favor- RESEARCH IT. It is so simple you can get all
    answers in 1 hour.

    (1)
    in order to completely substitute petroleum in transportation needs in this country we need :
    a total capacity to produce methanol at the level of 500 billion gallons a year

    Right now we produce around 1% of the above amount.

    So here is a plan:

    we need either 2000 big METHANOL plants producing 250 million gallons
    of METHANOL each.

    Cost to construct 1 big METHANOL plant is around $100 million if money
    is not wasted of course.

    It is a typical capacity for any existing big methanol factory that could be
    constructed in the near proximity to substantial coal mine.

    Because coal is a highly concentrated feedstock for METHANOL production

    Or we can solve it by constructing many more smaller METHANOL plants
    next to
    -garbage landfills,
    -lumber plants,
    -crop fields:
    because all mentioned is a good feedstock for METHANOL production including but not limited to:

    continued here
    http://xyu.livejournal.com/643852.html