My Take On Iran's Threat To Close The Strait Of Hormuz

OPEC's Short-Term Vision

Just recently, OPEC decided to cut production to keep oil prices high. The reason is simple: OPEC countries like Saudi Arabia, Iran, and Venezuela, have become accustomed to the mammoth cash inflows they have been getting into their government coffers for high oil prices. Many are still working off the cost to sink an oil well in the 1970's; so, profits can be as high as 800% on a barrel of oil.

But, OPEC's greed will ultimately hurt them. It will hurt them more than consumer actions that were taken following the Arab Oil Embargo of 1973 when small cars became the rage and the demand and price of oil fell dramatically. It hurt them more because, this time, the West won't just cut back on oil usage with more fuel efficient cars. This time, the West will walk away from oil completely as the consumer decides to find other ways to avoid four dollar a gallon, or higher, gasoline prices.

OPEC might not realize it but, this could be the beginning of their end. This country, and the world, has already started moving away from oil for its energy needs. People are buying more fuel efficient automobiles such as hybrids. Expect offshore drilling to become a reality. Electric cars like the GM volt and the Chrysler "EV's" are scheduled to appear on the market by 2010. Wind and solar are getting attention. Hydrogen vehicles are closer than ever in being a reality. And, yes, we might even build a Nuclear power plant our two!

It is possible, that within one or two decades, OPEC will see the demand for oil fall off dramatically. We could do it if we do "all those" things that will cut into this country's "imported" oil demand; including drilling for our own new oil reserves. We could be the leader that the world will follow in becoming energy independent. In doing so, we will become more secure because we would no longer be dependent on our enemies for oil. We won't be sending $700 billion a year to our enemies military coffers. But, most importantly, we can watch the only economic base that many of our enemies have, oil production, just wither away from below their feet.

The Road Block to Fuel Efficiency

Many states, like Georgia, California and Nevada, have annual vehicle taxes or registration charges that are based on a vehicle's assumed market value. This tax, called an "ad valorem tax," provides for a maximized tax level in the first year that a car is taken off the showroom floor. Then, over a period of five, seven or ten years, that tax is reduced on step-basis until some standard or minimum tax level is eventually achieved. This is a class-based tax on the assumption that it targets the "rich" who can afford a new or newer car. It favors the poor of the community who have and hold older cars. It certainly acts as an incentive for someone to keep an older car as long as they can keep it running.

In Barack Obama's acceptance speech of Thursday, he mentioned his goal of getting off Middle East oil in 10 years. Of course, he didn't specifically say how that would be done. He did, however, mention that his plan would include assisting people in buying newer and more efficient cars. I suppose he would do this with some kind of Federal tax deduction as a incentive for buying a new car.

To me, this is another case of the "left" hand not understanding or knowing what the other hand his doing. Because of the prevalence of "ad valorem taxes" in America, mostly in Democratic, tax-it-if-moves legislatures, the ad valorem tax will always act as a deterrence to anyone wanting to buy a new or newer car. That's because the Federal tax deduction, the one that Mr. Obama will probably propose, will only apply in the first year. From then on and until the minimum tax level is achieved, the owner of the car will continue to pay the higher tax for his newer car. Therefore, only the higher income peoples of our society will be able to afford both the new car and afford the tax burden that goes with it. Mr. Obama doesn't know it but, in essence, he had just promised a tax cut for the rich. The rich who can afford new cars and will gladly take that tax deduction against the new and higher taxes that Mr. Obama plans to impose on them.

It is really easy for a national politician to make speeches that sound so rosy. However, the implementation is something entirely different. I guess the "hope" that Mr. Obama is always talking about is the "hope" that you, the voter, can't figure out that he can't really achieve what he is saying. Right, Mr. Obama!

One final note. Barack Obama seems to think that the Middle East is the only source of oil that we should worry about. This just shows how clueless he is. Russia is a big oil producer in the world. Oil is helping to fuel their new military growth. Because both Western and Eastern Europe are so dependent on Russian oil, don't expect any effective or real or substantial actions to be taken against Russia by either NATO or in the United Nations. Also, more closely to home, Venezuela is another oil producer that is flush with cash from the current high oil prices and is heavily buying military equipment from Russia. We should be seriously concerned about any future moves Venezuela can take against its neighbors in South America and, ultimately, against us. Also, the oil markets in the world work like a big commingled bucket that gets dipped into by most non-old and some oil producing countries in the world. While we don't trade with a country like Iran, it is more than likely that we are, today, getting Iranian oil into are ports. A staff writer from the Obama-friendly Associated Press clearly outlined how unlikely Mr. Obama's promise of Middle East oil dependence would be (See Full Story).


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