Oil Against Freedom

All About Oil says oil's high price has fueled Mid-East problems. It's further true that mid-east instability has raised oil prices. When Iran took British sailors hostage, crude oil prices jumped $5 pre barrel. Last summer's Hezbollah war against Israel briefly sent crude oil to $80 a barrel. This cycle gives Iran an incentive to continue funding nuclear programs and incite terrorism and insurgency in Iraq, as part of keeping oil's fear premium channeling more money back to their coffers.

Oil's bounty is funding the worst Governments in the world from Caracas to Tehran, and is a source of conflict in Nigeria and elsewhere. Oil has become freedom's enemy because oil-extraction economies are immune to the economic discipline enforced in production-oriented economies. In the idea and production economy, value is destroyed by Government interference, socialism, and despotism. So the evils of socialism and dictatorship are attenuated by a feedback mechanism: Socialism and despotism creates poverty (witness Cuba and Zimbabwe) and hence such Governments are unable to spread their mischief out side their borders, and further may fall from internal economic collapse (witness USSR).

Not so for the oil dictatorships. We suffer from the irony that oil is so cheap to extract that even third-world thugs and dictators can manage it. The finding of oil is tricky, but Governments long ago found out that they could simply rip up contracts with oil companies when the terms didn't suit them. Nobody stopped them, leaving a "might makes right"

The world would be more free and a safer place if oil were worth a lot less.

Could the US engineer such a change and would it be worth it? The US imports 15 million barrels a day. Were we to stop importing oil somehow, the oil market would crater, but stopping imports would require extraordinary changes in either supply or demand or both. Drastic changes to demand would require drastic reduction of oil in transportation - higher MPG cars, shifts to plug-in hybrids so we run cars on electricity, biodesiel and ethanol, etc. But jawboning and subsidies have not and will not change the behavior of American consumers. Only large tariffs on imported oil and gas taxes would make a permanent difference in demand. Ironically, only by making oil more expensive for consumers can we make it so less money is sent to oil dictators.

To really close the gap, we need to pursue also a supply-side solution: Drill in ANWR, drill offshore. But that would not be enough. We have oil shales reserves that exceed even the reserves of Saudi Arabia, a trillion barrels of oil equivalent. Shell Oil has investigated these resources and claims they can be extracted for $30 a barrel or less.

We would need to double US oil production and halve oil consumption to be self-sufficient in the commodity. A policy to do so would take up to a decade to realize and would be costly to US oil consumers, but it would pay dividends in crushing the oil dictatorships, eliminated OPECs leverage, and curtailing funding of Islamic terrorism and extremism.