Americans have a love-hate relationship with oil. We depend on it to fuel our cars, trucks and SUVs, which we cherish, but it causes us periodic pangs of guilt. Now President Bush is promising to free us of our addiction to this heroin-like substance, replacing it with clean, wholesome "renewable fuels." It will be easy and painless, and we'll feel much better. There are only two flaws in his plan: wrong problem, wrong solution.
Why should we feel bad about using petroleum? Not for most of the reasons Bush and others give. "For too long our nation has been dependent on foreign oil," he declared in his State of the Union address. "And this dependence leaves us more vulnerable to hostile regimes, and to terrorists -- who could cause huge disruptions of oil shipments, and raise the price of oil, and do great harm to our economy."
Others say our need for imports props up rogue governments (notably Iran) that use the proceeds to finance violence against us. As New York Times columnist Thomas Friedman never tires of repeating, "We're funding both sides in the war on terrorism."
But the notion that reducing oil imports will reduce our vulnerability is an illusion. Even by the most optimistic predictions, we will be running much of our economy with oil for decades to come, and where that oil comes from is largely irrelevant.
Why? Because oil trades in a world market, and when disruptions occur, the price rises everywhere. If it goes from $50 a barrel to $80 a barrel, we will suffer if we import all of our oil, and we will suffer if we import none of our oil.
Measures to cut imports and prices won't make much difference in the behavior of nasty oil-exporting regimes. Being low-cost producers, they reap tidy profits at any price. Besides, they can always find ways to finance high priorities like anti-U.S. troublemaking.A decade ago, the price of oil was depressed, but the Tehran government was just as radical and belligerent as ever. If impoverished, backward North Korea can afford to build nuclear weapons, so can Iran, whatever the price of oil. As for the effect on terrorism, remember that the rise of al Qaeda in the 1990s coincided with a slump in oil prices.
The only convincing reason to use less petroleum is environmental: Burning fossil fuels produces pollution, including greenhouse gases blamed for the warming of the planet. Bush has to use this argument sparingly, since his administration has rejected the Kyoto accord on global warming. But in the State of the Union address, he proclaimed his determination to "confront the serious challenge of global climate change."
If the goal is to restrain carbon dioxide emissions, though, he's ingeniously settled on the most expensive and least effective method. One element in his plan is forcing refiners to increase their use of "renewable and alternative fuels" nearly fivefold over the next decade. What the administration most wants to promote is ethanol, but that option has more than its share of defects.
One is that meeting Bush's target would require using the entire U.S. corn harvest to make ethanol -- pushing up corn prices and making ethanol even less cost-effective than it already is. The president suggests that ethanol can also be made from wood chips, grasses and agricultural wastes. But those sources are not yet economical, and it's anyone's guess if they ever will be.
Instead of discouraging unnecessary driving, it does just the opposite, by lowering the cost of traveling an extra mile. That, as Randall Lutter and Troy Kravitz note in a paper published by the AEI-Brookings Joint Center for Regulatory Studies, will lead to more crashes and more traffic jams. Not to mention that more driving will offset much of the intended fuel savings.
The simplest and most cost-effective way to cut greenhouse gas emissions from cars is to increase taxes on gasoline -- which would encourage Americans to buy more efficient vehicles and drive less. By boosting fuel economy standards instead, Bush can say he's spared us a hateful tax increase. But his approach would impose large, unseen burdens on all of us.
Bush's plan to reduce our oil dependence is full of such hidden costs. And the benefits? They're even harder to find.