Anne Korin’s profile is rising with the price of crude oil

Anne Korin is accustomed to writing for policy wonks who read Foreign Affairs and testifying about global security before politicians in Congress, but with the rising price of oil her message may soon be reaching a wider audience.

Korin’s recent speech at the National Conservative Student Conference on reducing U.S. dependence on foreign oil seems to have touched the nerves of audience members and viewers of CSPAN who saw her speech. She is the co-director of the Institute for the Analysis of Global Security and was one of the keynote speakers during Monday’s opening session of the weeklong conference, hosted by the Young America’s Foundation in Washington.

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Pervious conference speakers have included conservative heavyweights such as Ronald Reagan, Milton Friedman, Ann Coulter, Sean Hannity and John Ashcroft.

Korin’s talk addressed the power of the OPEC cartel and its ability to control supply of a strategic commodity on the global market – oil. In many ways her statistics-laden speech was an expansion on her testimony in May before the House Committee on Foreign Affairs.

Anne Korin

“In 2006, the United States spent about $260 billion on foreign crude oil and refined petroleum products,” Korin told the committee. “This year, with oil hovering over $125 a barrel, the figure could surpass $500 billion, the equivalent of our defense budget. At today’s prices, foreign oil producers are extracting a tax of more than $1,600 a year from every American man, woman and child.”

During the past 30 years non-OPEC production of oil has doubled while OPEC production has stayed nearly the same, at the same time global demand has grown, according the Korin’s testimony.

Although Korin favors increased domestic production of oil, she does not see this as a solution our increasing dependence on foreign sources. The United States has just 3% of the world’s oil reserves while consuming 25% of the world’s production.

Korin argues that if the U.S. increases production of domestic sources through offshore drilling or exploration in Alaska, OPEC will decrease production by a corresponding amount. “What happens every time non-OPEC drills more?” Korin asked in her speech. “OPEC drills less. It is a precise mirror image.”

Despite efforts to increase supplies and decrease demand domestically, Korin predicted world oil supplies will remain constant because OPEC will adjust supplies to create an equilibrium. Because of this, and the increased demand for oil from developing nations, global oil prices have risen quickly, according to Korin.

Another example of OPEC deliberately constraining supply was the 2007 addition of two new countries to the cartel. “In 2007, OPEC expanded its member roster to include Ecuador and Angola – together the two had accounted for nearly 2.4 mbd (million barrels a day) of non-OPEC oil, Korin testified to Congress. “Yet, total OPEC production remained constant, allowing existing members to reduce production, This translates into a net reduction in non-OPEC supply with no equivalent increase in OPEC supply. This is equivalent to the production of Norway disappearing off the market.”

Choice and competition in the transportation sector

One of the solutions to U.S. dependence on foreign supplies, she said, is “choice and competition in the transportation sector.” Korin would like to see auto manufacturers be required to make every new car a flex fuel vehicle, capable of running on any combination of gasoline, ethanol or methanol.

Automakers could add this capability to the 17 million new cars that hit the roads each year for just $100 more per car, according to Korin.

One problem, she said, is that the U.S. places a 54-cent-per-gallon tariff on imported ethanol, yet there is no tariff on imported oil. Korin traces this to the farm lobby protecting ethanol made domestically from corn.

Another transportation fuel choice cited by Korin is electricity. She believes that plug-in hybrid vehicles are a major component of creating energy independence because electric and plug-in hybrid vehicles would be able to run on hydroelectric power, solar power, wind power, nuclear power and other types of electric power.

Korin maintains that a combination of plug-in hybrids and standard flex fuel vehicles will allow the U.S. to eliminate the use of foreign oil and achieve domestic energy independence.

“Let’s say you are Kentucky, then most of the electricity you are driving on is coal, and the alcohol you’re driving on is also probably methanol from coal,” she said. “If you happen to be in Iowa then that ethanol is from corn. If you happen to be in New York then it’s ethanol from sugar cane barged in from Latin America.”

“This is how we strip oil of its strategic value,” she said. “This is choice and competition. If we do not do this then we are guaranteed to be in a situation in which, in the words of the International Energy Agency, the economic well being of the world is in the hands of five or six countries in the Middle East. We are guaranteed to keep bleeding wealth and we are guaranteed to see our economic sovereignty being weakened.”

Korin concluded her speech with this:

“We talked about some things we can do. We have a responsibility to make them happen. These are very straight forward non-interventionist policies. Requiring new cars to be flex fuel vehicles. Repeal the tariff on ethanol imports. And if we want to encourage more rapid commercialization of plug-in hybrids…a consumer tax credit…to drop the cost for early adopters and push this technology into the market quicker. If we do this we change the situation. If we don’t do this we are all responsible for the diminishment of this country and our inability to prevail in the long war of the 21st century.”

Quick statistics from Anne Korin’s speech

• The U.S. has about 3% of the world’s conventional oil reserves
• The U.S. accounts for about 25% of the world’s oil demand
• During the oil embargo on the 1970’s the U.S. imported about 30% of its oil
• Today we import over 60% of our oil and the number continues to grow
• The transportation sector is 98% petroleum dependent
• 66% of our oil consumption is in the transportation sector
• 2% of our electricity generation comes from oil
• 35 years ago the countries of OPEC produced 30 million barrels of oil per day
• Today the countries of OPEC produce 32 million barrels of oil per day
• In the same 35 years non OPEC production of oil has doubled
• OPEC countries have 75% of the world’s oil reserves
• The global oil market is currently about 85 million barrels of oil per day
• Flex fuel vehicles can run on any combination of gasoline, ethanol or methanol
• 90% of cars sold in Brazil in 2008 are flex fuel vehicles
• The U.S. produces its ethanol from corn
• Brazil produces its ethanol from sugar cane
• It is much cheaper and more efficient to produce ethanol from sugar can than from corn
• There are 100 countries in the world with a suitable climate for producing sugar cane
• All cars that General Motors will sell in Brazil in 2008 will be flex fuel vehicles
• There is no tariff on imported oil in the U.S.
• There is a 54 cent per gallon tariff on imported ethanol in the U.S.
• It cost an automaker $100 more to make a flex fuel vehicle than one that runs only on gas
• 17 million cars are sold in the U.S. each year
• The average lifespan of a vehicle in the U.S. is about 17 years

Watch the speech on YouTube (part 1 of 7)

Part 2 of video

Part 3 of video

Part 4 of video
Part 5 of video
Part 6 of video
Part 7 of video

Other related materials by Anne Korin
Terrorism goes to sea - By Anne Korin - Foreign Affairs
Turning Oil into Salt - By R. James Woolsey & Anne Korin - National Review Online

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