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Kilgore to Baghdad
From: Dave Farber <dave () farber net>
Date: Fri, 24 Jan 2003 10:12:07 -0500
------ Forwarded Message From: Robert Bryce <rbryce () swbell net> Reply-To: rbryce () swbell net Date: Fri, 24 Jan 2003 09:08:16 -0800 To: dave () farber net Subject: Kilgore to Baghdad Hi Dave, I wrote this oped for the Dallas Morning News. Given some of the recent energy-focused comments on IP, I thought it might be of interest. best rb http://www.dallasnews.com/opinion/viewpoints/stories/011903dnedibryce.9963.h tml Robert Bryce: Texas history repeats itself in new oil fields 01/19/2003 By ROBERT BRYCE The Texas governor, an oil man, was frustrated. A worldwide recession had begun a few months earlier, and it was being made worse by doubts about the world's oil supply. The governor had threatened, and he had cajoled. But the rogue oil producers, who controlled a huge share of the world's known oil reserves, wouldn't cooperate. So, the governor took the law into his own hands. He declared the producers to be "in a state of insurrection." Their actions, he said, "openly, flagrantly and rebelliously violate the laws." With that, the governor sent thousands of armed soldiers to overwhelm the rogues and take control of the oil fields. The scenario sounds familiar, doesn't it? Indeed, President Bush's desire to rush U.S. troops into the deserts and oil fields of Iraq is eerily similar to the decision made seven decades ago by one of his predecessors in Austin Texas Gov. Ross Sterling. On Aug. 16, 1931, Mr. Sterling signed a proclamation ordering National Guard troops and the Texas Rangers into four East Texas counties that sat atop the Kilgore Field. Discovered in 1930, the field was, at the time, the biggest oil deposit ever discovered. Within months of its discovery, it was producing more than 1 million barrels per day half of all the oil consumed in America at the time. The problem in 1931 and the problem today is that oil production is difficult to control. The entire history of the oil business has been marked by swings between too much production, which leads to low prices, and too little production, which leads to high prices. And while cynics might believe the oil industry always wants high prices, that isn't necessarily true. The best price for the oil industry is a stable, mid-level price, one that assures oil consumers, oil producers and oil refiners that they won't be hit with a shortage or a surplus. That was the predicament faced by Mr. Sterling, who was the first president of Humble Oil & Refining, a company now known as ExxonMobil. But Mr. Sterling's problem in 1931 was far different from the one facing Mr. Bush today. Mr. Sterling was dealing with a world in which there was too much oil. Mr. Bush faces a world where there is too little oil or at least too little of it in places where voracious American consumers can be assured of its availability. In early 1930, before the Kilgore Field was discovered, oil was selling for $1.30 per barrel. By August 1931, it was selling for as little as 3 cents. The problem was "hot oil" the name given to petroleum that was either produced illegally or stolen and then sold at a low price. Although the Texas Railroad Commission had, on paper, the authority to regulate the oil industry and prevent the waste of oil, it couldn't stem the flow of hot oil. And the courts hadn't allowed the agency to exercise the power needed to actually restrict production. By putting troops in the field, Mr. Sterling forced the producers to comply with his wishes. And while there were several subsequent years of wrangling in the courts, the Texas Legislature and Congress over how to control production, Mr. Sterling's show of force worked. By 1934, the price of oil was stable and back over $1 per barrel. Of course, Mr. Bush, who spent several years searching for oil riches in West Texas, faces far stickier problems than those faced by Mr. Sterling. But the issue is the same: control of the oil fields. The rogues of the Kilgore Field have been replaced by Saddam Hussein, who sits atop 100 billion barrels of oil. And he continues to be a threat to his neighbors, who are responsible for exporting nearly half of the oil now hitting the world market. Just as Mr. Sterling worried that further instability in the price of oil could worsen the recession of 1931, Mr. Bush has reason to worry that higher oil prices brought about by a belligerent Saddam Hussein might further weaken an economy that is increasingly dependent on Middle East oil. Between 1995 and 2001, U.S. imports of Middle East oil rose from 1.5 million barrels to more than 2.7 million barrels per day. Nearly 30 percent of the crude oil now imported by the United States comes from Saddam Hussein's neighborhood. Tommy Merritt, a Republican member of the Texas House of Representatives who grew up in Kilgore and has spent his entire life working in and around the oil industry, says no one should be surprised that America is planning to impose its will. Residents of Iraq and the Middle East "have to understand we are going to regulate production in that region just like the National Guard did in Kilgore." While history may be repeating itself, it must be noted that Mr. Sterling's success in Kilgore has had long-term and unintended consequences. By making the Railroad Commission viable, he unwittingly gave the world's biggest oil-producing countries a lesson in how to control oil supplies and, therefore, prices. And that lesson continues to haunt every SUV-driving American. In 1959, the production rationing system created by the Railroad Commission was copied by a fledgling entity known as OPEC, the Organization of Petroleum Exporting Countries. Iraq and, of course, our dear friends and allies, the Saudis, were charter members. Robert Bryce of Austin is the author of Pipe Dreams: Greed, Ego and the Death of Enron. Robert Bryce www.robertbryce.com ------ End of Forwarded Message ------------------------------------- You are subscribed as interesting-people () lists elistx com To unsubscribe or update your address, click http://v2.listbox.com/member/?listname=ip Archives at: http://www.interesting-people.org/archives/interesting-people/
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