October 20, 2013

Possible environmental damage brought about by hydraulic fracking pales by comparison with inevitable economic chaos resulting from energy independence at home.

Disclaimer: I am Petroleum & Natural Gas Engineer who has worked for and with Conoco, Exxon, BP, Amoco and ELF (now TOTAL).

Some facts:

1. In 1973, President Nixon and Saudi king Faisal struck a deal: Saudi Arabia and its neighbors would price their oil in US dollars in exchange for a US pledge to protect Saudi Arabia from threats by the Soviets, Iran and Iraq. Both sides have kept the bargain. Saudi today is ringed with US military bases.
2. That agreement created the foundation for an incredibly strong US dollar. Every oil importing nation needed to buy dollars to pay for their oil. All of the world’s oil money started to flow through the US Federal Reserve, creating an ever-growing demand for US dollars and US debt. Oil exporting countries started spending their cash on US Treasury securities. Slowly but surely the petrodollar system spread beyond oil to encompass almost every facet of global trade.
3. Now Russia, China and the UAE have all begun selling and/or buying oil in their own currencies. Others, like Brazil, will follow, due largely to anger over US spying activity.

Some scary risks:

• Large, emerging economies like China, India and others no longer need to buy dollars.
• If that trend continues, much of the value in the dollar will evaporate. Massive inflation, high interest rates, and substantial increases in the cost of food, clothing, and gasoline will make our 2008 recession look like a speed bump in the road. The government will be unable to finance its debts. The house of cards, built on the assumption that the world would rely on US dollars forever, will come tumbling down.

If there was ever a time for leadership in Washington, this is it! The environmentalists will ultimately lose this fight to the laudable effort of disconnecting from Mid-East oil dependence, but efforts to fortify the dollar in that eventuality are not even on the table. Fear of US spying has even ticked off our friends. Thanks, Mr. Snowden.

Sadly, the feckless representatives of ‘the American People’ have, once again, got their fuzzy heads firmly implanted in the wrong orifice.