In 2008, President Barack Obama was elected into one of the worst economic disasters since Franklin Roosevelt stepped into the Oval Office. The United States economy was shedding approximately 800,000 jobs per month. Home foreclosures were skyrocketing and the stock market plummeted. From continuing the Troubled Asset Relief Program (TARP) and the Recovery Act, to the emergency bailout of General Motors and Chrysler, policies pursued by the Obama administration and the Federal Reserve put a floor on the recession and returned the economy to sustained growth. The GDP growth rate turned from negative 5.3 percent during the first quarter of 2009 to positive growth by the third quarter. Today, the unemployment rate is lower than it has been at any point during Obama’s term in office led by 31 consecutive months of private sector job growth. The stock market indices more than doubled from their low point, observed just six weeks after Obama took office. Corporate profits of the Fortune 500 reached an all-time high in 2011 and consumer confidence is now higher than it has been at any point since 2007. The housing market is recovering, with home prices, sales, and construction rates rising significantly in 2012. Even though the Obama administration’s handling of the economy has not been flawless, their accomplishments have been impressive given unprecedented partisanship in Washington.

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Procter and Gamble is a great American company.  In 1837 two immigrant brother-in-laws combined their soap and candle business to start what would eventually become the largest consumer products company in the world.  Their early beginnings are a testament to American capitalism, and just as important, patriotism.  In 1860 on the brink of Civil War, William Procter and James Gamble were concerned about their supply of red oil critical for making soap and candles shipped from the South.  In a strategic move they sent their two sons to buy as many barrels of oil as they could and ship the supply back to Cincinnati.  Their sons bought hundreds of barrels even to the point that P&G became a laughing stock by the dock hands that were tasked with unloading supply from the Ohio River.

When the Civil War broke out the following year, the Southern oil supply was cut short for all competition and the initial $1 a barrel oil price skyrocketed to $16.  Due to the supply constraints P&G won the contract to supply the Union Army and did not raise prices a single penny.  The widespread use of their products by soldiers continued even after the war ended and was the foundation for the next 150 years of sustained company growth.  P&G continued this pricing behavior during WWI and WWII.  P&G held pricing power over competition, and remained faithful to the American consumer.

Fast forward to 2012 where we are facing a different kind of oil shortage.  With sanctions placed on Iran, OPEC is leveraging the gap in supply to drive prices up.  What most Americans fail to understand is only 10% of US consumed oil comes from OPEC and the Middle East.  Almost 50% of consumed oil is produced in the US and another 20-30% comes from Canada and Mexico.  OPEC is the largest producer in the world which allows for price control given the elasticity of oil.  Instead of Exxon and Chevron holding their prices steady and putting pressure on OPEC, they choose to follow the oil cartel   They understand that rising prices has minimal impact on demand so any increase positively impacts profit.  Just to add to shareholder’s delight, US tax payers are subsidizing Exxon’s fair share to Uncle Sam.

Here is my plea to American oil companies:

Show some respect to the country that provides you with a capitalistic market and protection to enable healthy long term business.  Do not look at Iran as your meal ticket for greater profits at the expense of American citizens.  Be a pricing leader, not a follower. Demonstrate to the American consumer that the conflict in the Middle East is not just a business strategy.  And finally, stop begging for tax handouts with one hand while gauging the US consumer with the other.  Doing so might help with the argument to increase domestic drilling, and would  follow the example of companies like P&G who take pride in making an honest profit and paying their fair share of tax.

[caption id="attachment_331" align="aligncenter" width="525"] Historical Oil Barrel Prices - Global[/caption]

I smile every time a pundit tries to link escalating gas prices to our president.  Not because I am satisfied with the erroneous connection, but out of amused exasperation at the hypocrisy that continually plagues polarizing talking heads.  Gas pricing is a function of market dynamics, meaning that it is driven by supply, demand, and speculation.  Any action by President Obama to influence pricing would be governmental regulation, which opposes conservatives’ fundamental advocacy of smaller government.  The only organizations that can truly impact pricing are the oil companies whom our tax dollars continue to subsidize.  Domestic oil companies are set to rake in windfall profits as pricing continues to rise.  It’s time to ask for those subsidies back.

Most Americans do not understand that half the oil consumed by the United States is produced within its borders.  The United States consumes almost 18 million barrels daily (MBD), of which 9.1 MBD comes from our own drills.  We are the largest oil consumer in the world, using 22 percent of total global production. We are also the third largest producer of oil, just behind Russia (9.9) and Saudi Arabia (9.7).  The other half of U.S.-consumed oil is imported from several nations.  The  largest exporter of oil to the U.S. is Canada, which accounts for 2.3 MBD.  Saudi Arabia, Venezuela, Mexico, and Nigeria are all next in line, with each exporting roughly 1 MBD.  Surprisingly, and despite all the rhetoric, Iraq ships just 400,000 barrels a day, a mere 2 percent of our total oil consumption.  In total, the United states only receives 10 percent of its total oil supply from the Middle East.

So if the U.S. consumes oil almost exclusively from North America, how does the Middle East impact pricing?  What consumers need to understand is that the largest global producer of oil has the greatest control on pricing.  Even though the United States receives only 10 percent of its imported oil from the Middle East, that region of the world accounts for 30 MBD, or 34% of global oil production.   The Organization of Petroleum Exporting Countries (OPEC) is a cartel of participating countries that unify production and pricing to maintain greater control of supply and demand.  OPEC supplies the majority of oil to the world’s Eastern Nations (China, Japan, India, etc).

So why are gas prices rising?  Bordering Iran is the world’s greatest natural choke hold of oil transportation.  Almost 17 MBD pass through The Straits of Hormuz on their way to consuming nations.  Iran has threatened to close the Strait, which would result in incremental increases in cost to transport oil out of the region.  Since OPEC nations control the largest collective supply, any price increase due to their control will impact the worldwide marketplace.

American oil companies do not have to raise prices as no incremental production costs are being reflected, as in the Middle East.  The problem is increased market demand for cheaper U.S. oil can drive prices up (i.e. China would prefer to buy our cheaper oil instead of OPEC’s more expensive offering).  U.S. companies understand competition, and would much rather raise pricing with OPEC than undercut competition in the short term.  Why?  Oil is highly inelastic and consumers will pay for gas regardless of price.  Over the next several months, as oil prices stay high, U.S.-based oil companies will deliver some of the most profitable quarters for their shareholders, taking full advantage of Middle East instability.

There is no better time to withdraw the subsidies our government pays to domestic oil companies.  Each year domestic oil companies take $4 billion of taxpayer dollars and add it to their bottom line.  As noted previously, subsidies have no impact on domestic oil prices, nor does increasing U.S. production through additional drilling.   Any incremental oil production will be sold at the market prices, regardless of those subsidies, unless companies are willing to break away from OPEC direction.  As gas prices continue to climb at the pump, understand that capitalism is in full swing.  Oil company shareholders could not be happier, and they should thank both Iran and the American taxpayer.

The last convoy of U.S. troops departed from Iraq last week, marking the end of a nearly 9-year war. I am grateful that the Obama Administration did not extend the troop presence any longer, despite harsh criticism from neoconservative Republicans like Mitt Romney, who would have preferred we kept troops in Iraq almost into perpetuity. I was never a supporter of the war, even prior to its commencement. The consequences of the war have been far reaching and disastrous for the U.S. on many levels. Some of the most important consequences are as follows:

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Opening up My Yahoo! this morning yielded quite a surprise. Mahmoud Ahmadinejad visited Iraq? The surprise was not due to the event, but the low attention paid by the conservative media. This event is a witness to how poorly we have progressed in Iraq.

A little history… In the Iraq – Iran contra back in the 1980’s, over one million Iraqis and Iranians lost their lives in a war which brought national attention. Guns were sold to Saddam Hussein to advance America’s denouncement of Iran. One of the more interesting photo ops was snapped, the then Secretary of Defense Donald Rumsfeld greeted Saddam in a friendly handshake signifying America’s support of the conflict. With our current involvement and the events leading up to the war, our press and presidency have portrayed Iraq as a longstanding enemy of the US. In the 2003 State of the Union address, President Bush’s reinvented “Axis of Evil” tied Iraq in with the likes of North Korea and Iran. How did the relationship of the United States and Iraq fall out of sync so quickly? The answer is Desert Storm, the early 90’s conflict between the US and Iraq in which Kuwait was proclaimed Iraqi territory.

When Iraq decided to repossess the small oil-rich country, they did so with the understanding that the United States would remain neutral in the takeover. What happened next was quite surprising to Saddam and the Sunni controlled government. The conflict was sold to the American public as a bloodied takeover by the Iraqis, when in reality the truth was less dramatic. The Kuwaiti defense was minimal at best, and the Iraqis met little to no resistance (some estimate that 200 died in the skirmish). Unlike our current Iraq war, this was actually about oil. Iraq wanted to take back possession of Kuwait and their rich oil fields (in the mid 1900’s, England decided to split Iraq and Kuwait and annexed the country), and America realized the increased scale and power Iraq would possess with the expanding commodity (actually, I am not sure we really understand the underlying driving force).

When the US became engaged in the conflict, Iraq must have felt betrayed by their previous ally and cowardly started firing scud missiles toward Kuwait and Israel. America’s offense increased (Operation “Desert Shield” became “Desert Storm”), and thousands of unequipped and poorly trained Iraqi soldiers lost their lives. America’s casualties numbered in the hundreds, with the majority resulting from accidental weapons malfunctions. Iraqi forces were driven back into Iraq, and the conflict ended as quickly as it began. This was the beginning of the third member of the “Axis of Evil”, as Saddam felt betrayed by the US and revolted against imposed UN sanctions later in the decade.

Fast forward to 2008: Iran has always been at odds with the US as well as with the Sunni controlled Iraq. Saddam, though a terrorizing dictator, was able to keep Iran suppressed and stabile in the region. The conflict between Sunnis and Shiites stems from thousands of years of in fighting and civil unrest. Through America’s influence, control in Iraq was transferred from the Sunnis to Shiites. The majority Shiites are now looking to avenge the Sunni oppression, with civil war appearing inevitable. Currently American troupes stand in the way of widespread chaos, offering stability. However, this proves a tough situation for the Sunnis, who fear retaliation from the majority power Shiites and their once bitter neighbor, Iran.

Enter Mahmoud Ahmadinejad. The anti-American dictator now possesses a greater influence within the new Government of Iraq. There have already been reports of Iran supplying weapons to Shiite extremists, a real problem for the US. Ahmadinejad’s growing relationship with Shiites defies America’s best interest, and is an alarming bi-product of the Iraq war. However, it not unreasonable to believe that this specific situation was foreseen and ignored by the White House in making the decision to go to war. Perhaps we underestimated the deep routed conflict between the Shiites and Sunnis, or downplayed the real possibility of civil war. Regardless Mahmoud Ahmadinejad is in Iraq, and He is there to stay.

Representative Tim Ryan (D-Ohio)

Congressman Ryan makes a point concerning the torture bill being debated in Congress. Worth a listen.

As we continue to fight this global war on terror (actually, let me rephrase that), as we fight this war in Iraq it is alarming how many American’s have no idea of the power struggles between Sunnis and Shiites.

Who can deny that Saddam Hussein was an evil and malice dictator? However, would you be shocked to know that woman’s rights in Iraq, America’s relations with Iran, and partisanship in Iraq has become increasingly worse without Saddam?

Saddam is a Sunni, and Sunni’s are a minority party in Iraq. How, you might ask, if Sunnis are a minority power could Saddam remain as a dictator? Easy, fear. There were many attempts at taking Saddam out of power by the two other parties.The Kurds paid dearly for their attempt with the massacre fueled by chemical warfare. American’s determination to label this genocide is incorrect; Saddam was not interested in destroying the culture, but to send a strong message to those who opposed him. Shiites were just as scared, though they maintained the majority of the population, and watched the Sunni leader control Iraq for decades.

With Saddam out of power and the seeds of democracy now growing, the Shiites are using their majority to take back control. However, the Shiite’s are interested in intertwining religious ideals into their new constitution. One of those ideals is the lack of influence woman maintain in society. Iraqi woman can expect more oppression, less freedom of thought, and a non-existent role in any position of influence.

Over the course of Saddam’s administration, the Sunni controlled Iraqi government was at odds with Shiite dominated Iran. Saddam was a spoken enemy of Iran, and the Shiite Iraqis looked to Iran for strength and support. With Saddam removed from power and the Shiites now in control of Iraq, loyalties run deep and an alliance between the two great Middle East countries is being formed. Look past the soft media and you will find many Iran loyalists in the newly formed Iraqi government. America’s purpose of creating stability in the Middle East is being accomplished. Unfortunately it’s not the stability we were hoping for.

Another issue between Sunnis and Shiites is the great partisan divide that continues to widen. Shiites now in power are looking to avenge the many years of Sunni control over their nation. The problem with democracy in the Middle East is history runs deep and is not forgotten. Unlike America where the domination of power by one party can easily be ousted by the diversity of the population, Iraqis at the mercy of the united Shiite citizens. Many Sunni delegates have walked away from the new government in complete dismay because the Shiites propose and ratify legislation that opposes their group. This discontent between these two cultures is also what is sparking a civil war.

As we continue to watch Iran speak with more confidence and less remorse, know that we have made their position stronger by providing a friendly neighbor. The Sunni-controlled Iraq is history, and history the Shiites will not forget.

(There is a great article in the NY Times titled, "Can You Tell a Sunni From a Shiite?")

There is a new report being published today trying to determine how many Iraqi lives have been taken by the war. The figure of 655,000 deaths might shock you, as they did me, largely due to the poor reporting of today's media. The writeup can be found in the Washington Post.