If you suffer a heart attack but your doctor thinks you've got a nasty case of indigestion, the medicine he prescribes probably won’t cure you. The same applies to policy-making and legislating: Misunderstand the problem, and you’re likely to come up with a useless — or damaging — response.
Anne Korin and Gal Luft, co-directors of the Institute for the Analysis of Global Security (IAGS), have long argued that liberals, conservatives, and libertarians have all misdiagnosed why the West has become dependent on oil; why the price of oil keeps rising no matter how much we drill, conserve, and boost miles per gallon; why dependence on increasingly expensive oil is a dire threat; and what we can do to restore the health of our national and economic security. In Petropoly: The Collapse of America’s Energy Security Paradigm, they make a muscular case for a Teddy Roosevelt–style solution: trust-busting.
This point requires emphasis: Korin and Luft are not attempting to pick technological winners and losers. On the contrary, they recognize that think-tank researchers, Energy Department bureaucrats, and politicians are ill-equipped to make such calls. President Carter’s Synthetic Fuels Corporation, President George W. Bush’s “hydrogen economy,” President Obama’s Solyndra scandal, and years of bipartisan ethanol subsidies should have taught us to reject “taxpayer funded boondoggles.” Their alternative is to seek guidance from the works of such free-market economists as Milton Friedman, Ludwig von Mises, and Friedrich Hayek.
Friedman, Von Mises, and Hayek all believed in limited government. But as Friedman noted, “the first and most urgent necessity in the area of government policy is the elimination of those measures which directly support monopoly.”
Oil is unlike other products: It is a strategic commodity — a shorthand way of saying that America and other industrialized nations would collapse without it. Our enemies know this as well as we do — better, actually.
We don’t need oil for electricity — for that we are now using coal, natural gas, nuclear energy, and renewables. We do need oil for transportation, an essential component of a modern economy. In the transportation sector, oil enjoys a virtual monopoly.
The Organization of Petroleum Exporting Countries (OPEC), a cartel, controls 78 percent of the world’s conventional oil reserves, yet accounts for only about 33 percent of global oil production. The explanation: By conspiring to restrict production, OPEC members manipulate prices.