John Kerry, the United States Secretary of State, and the Russian foreign minister have failed to reach an agreement on the Ukraine problem. No one in Europe or the US would even consider military action.
The UN is powerless. Russia vetoed a U.N. Security Council resolution that calls on nations not to recognize the results of Sunday’s referendum in Crimea on whether to secede from Ukraine and join Russia.
Russia’s first significant military move outside the Crimean peninsula could signal plans to escalate the conflict with Ukraine, since Crimea depends on mainland Ukraine for water, electricity and gas.
That only leaves economic solutions.
Already Russians are pulling back on their western economic investments in advance of possible sanctions. This is ironic as the Russian banking sector has made quite a lot of progress in plugging into the global system. While economic sanctions can have value in correcting the bad actions of a country, the downside is too great.
There is another solution that will not tank the global economy or put American lives at risk, America needs to increase it’s production of fossil fuels. I know it’s not what the current thinking holds and many people are opposed to increasing the production and use of fossil fuels, including the president.
Consider that if we were to develop our natural resources to the potential we know that we have, that America’s economy would benefit and the price of oil would fall globally. Russia is a leading provider of Europe’s fuel, this is also a major part of Russia’s GDP. Russia has not developed it’s economy to thrive itself from energy production. Instead, it really only profits from the sale of its energy.
If the United States started to increase its oil and natural gas production, the cost of fuel would fall. Even the talk of increasing production would cause a drop in prices that would have an immediate impact on Russia. But, the impact is greater than lower oil prices.
America’s economic engine would come roaring back to life as fuel costs would consume less of household and business budgets. Europe would benefit from America’s innovations and begin to develop it’s natural resources and become more independent from outside sources.
Yesterday, Oil futures fell on larger than expected supplies. Imagine what would happen if we increased production. Oil prices rallied above $100 a barrel to multimonth highs in recent weeks as a storage bottleneck in the Midwest loosened up due to a new pipeline, bringing more supplies to Gulf Coast refineries. But with refineries closing units to perform seasonal maintenance, some of those new supplies have gone unused, underscoring fears that plentiful domestic production could easily overwhelm demand.
Unfortunately, the Unites States is not positioned to handle an increase in production. We have not allowed the building of new refineries for years. The president and others are not inclined to allow new production of energy any time soon. This is simply because the president does not want a robust American economy. He does not want more energy production.
In short, I do not believe the president is unhappy with our current situation with Russia or the current state of the economy. Therefore, he is not motivated to change the status quo.
