Clunker Energy Policies

Cliff May

4/14/2011 10:04:00 AM - Cliff May

Oil is selling for close to $110 a barrel and gasoline for around $4 a gallon. Bad news for motorists. Marvelous news for jihadis.

Yet many of our elected leaders still don’t get it: The rising cost of gasoline is not just an energy dilemma and an economic drag. It’s a national security threat. We are fighting a war and we are funding both sides -- transferring unprecedented amounts of wealth to those who openly declare themselves our enemies.

Iran’s rulers are using oil money to develop nuclear weapons and fund terrorists, including Hezbollah, now staging a slow-motion coup in Lebanon, and Hamas, which is committed to the extermination of Israel. A generous share of the money that goes to Saudi Arabia and other Gulf nations ends up in the coffers of the Taliban and al-Qaeda. Hugo Chavez spends Venezuela’s petro-dollars to expand his influence, and that of his Iranian allies, throughout Latin America.

The war we are fighting is unconventional but our enemies are not so different from those we have faced in the past. In the 20th century, free nations were threatened by Nazis, whose goal was global rule by a race, and communists, whose goal was global rule by a class. Today, the challenge comes from regimes and movements committed to global rule by members of a religious group.

In World War II, Roosevelt and Churchill understood that Hitler could not win if he were denied access to the oil fields of North Africa and Central Asia. In the Cold War, Reagan’s use of economic weapons was key to bringing about collapse of the Soviet Union.

Of course, we can’t deny oil to OPEC, the cartel that sits on more than three-quarters of the world’s conventional reserves. But we could implement policies designed to break oil’s virtual monopoly as a transportation fuel, stabilize and even reduce fuel prices, and diminish the ability of hostile oil-producing regimes to wage economic warfare against us.

Such polices would include increasing – rather than decreasing -- domestic oil production, and speeding – rather than delaying -- the pipeline project that would bring oil mined from Canadian sands to the U.S. Conservation is good, too. But these measures can be only part of the solution. Why?

As Jim Woolsey, former director of Central Intelligence and current Chairman of the Foundation for Defense of Democracies, and Anne Korin, co-director of the Institute for the Analysis of Global Security, recently noted, OPEC is “a conspiracy in restraint of trade.” That means that when non-OPEC countries “drill more, OPEC simply drills less and drives prices back up.” If demand is reduced through conservation, “OPEC again drills less and prices zip back up.”

The Saudis, the world’s largest oil producer, can and sometimes will agree to boost production to moderate prices. But should America’s economic and national security really be left in the hands of Arabian monarchs who fund Wahhabi clerics preaching hatred for Christians and Jews? And does anyone believe that the kind of turmoil we’ve recently witnessed across much of the Arab world could not break out on Saudi soil as well? Even a brief period of instability could produce a panic in the oil markets that would shake the entire world economy.

What we desperately need and should encourage: a competitive transportation fuel market. We – most of us, anyway -- know the value of competition. If the price of Coke goes up, you can switch to Pepsi. If the price of beef climbs too high you can eat lamb or chicken. You’re not satisfied with ABC, NBC, CBS, CNN, MSNBC and NPR? Switch to Fox. But, at the moment, when the price of gasoline goes up you have no choice but to pay or change your lifestyle – in some cases dramatically.

Congress can begin to bring about consumer choice at the pump by adopting the Open Fuel Standard Act, soon to be reintroduced with bipartisan support. Woolsey and Korin emphasize: “An Open Fuel Standard would require new cars to include a $100 tweak that would allow them to run on a variety of liquid fuels in addition to gasoline. Such fuels would include methanol, which is easily made from natural gas and biomass (and, less cleanly, from coal). Enabling vehicles to use natural gas, whether directly or via liquid fuels that are made from it, allows consumers to benefit from the very large cost advantage that natural gas holds today over oil.”

And a word about ethanol: It should not be subsidized with tax dollars -- nor should any fuels, including those made from petroleum -- but neither should its potential be dismissed. Brazil is today the leading producer of ethanol made from sugarcane. Farmers throughout much of the Third World could be improving their standard of living while contributing to America’s national and economic security by growing a variety crops that can be readily distilled into alcohol fuels for export.

What about wind, solar and nuclear power? At this point, they cannot be part of the solution because they cannot substitute for liquid transportation fuels. Sooner or later, we will see electric and plug-in hybrid vehicles come on line in numbers sufficient to make an impact. But we can’t wait. There’s a war on.

To avoid losing that war we must reduce the power of oil -- not by limiting our mobility but by introducing fuel competition which will lead to fuel diversity and abundance.

Last week, President Obama ridiculed those concerned about the rising cost of gasoline. “If you’re getting eight miles a gallon you may want to think about a trade-in,” he said. Yes, but it’s not our clunker cars that need to be traded in. It’s our clunker energy policies and the clunker politicians responsible for them.