"It's all about Oil." A different perspective. NRO
DEC. 17, 2002: PEACE FOR OIL
The price of oil has crossed the $30 a barrel mark, driven up by civil strife in Venezuela and war fears in the Persian Gulf. Some will no doubt interpret this price jump as an argument against military action in Iraq, see, they will say, if the mere threat of war pushes oil past $30, just imagine what the reality of war will do. It's very odd: it's considered quite illegitimate to make war for cheap oil, yet perfectly legitimate to carry on appeasement for cheap oil.
Venezuela's turmoil is very bad news, for the Venezuelans themselves, whose once-stable country has been pushed to the edge of civil war by the clownish and thuggish Hugo Chavez, and for the whole world. Venezuela is the world's fifth-largest oil exporter. The strikes and marches that are shutting down the Venezuelan economy are also denying the world some of the buffer supply of oil that would otherwise have been available to cushion the immediate shock to oil prices if (I mean when) a shooting war starts in the Persian Gulf.
We could see a couple of days of very steep oil prices at the very beginning of the war. But the Venezuelan experience should open our eyes to something else too: The terrible harm that the OPEC cartel does the whole world. It costs about $2 to produce a barrel of oil, and less than that to ship it. Refining costs money of course and so does distribution, but still, the stuff is about the most profitable commodity it is legal to sell. Probably more than $20 of the $30 that a barrel now costs is pure windfall profitable for somebody, with the lion's share going to the governments of the producing countries.
The excessive price of oil is obviously a burden on consumers, a relatively small burden on affluent consumers in the West, a hardship for poor people in the West, and an utter disaster for poor people in the poor world. Africa has plenty of other troubles, but I don't think it's pure coincidence that the continent's economic development stopped cold and started going backwards in the early 1970s, when the era of ultra-cheap oil abruptly ended.
The irony is that cheap oil is no blessing for most oil producers either. For those oil countries with diversified economies and strong democracies, Canada, Britain, Norway ? oil has been a tidy source of additional income. But most oil producers are not diversified and not democratic, and oil for them has been an unmitigated catastrophe.
A democratic intellectual from a major Arab oil producer once said to me: ?In our country nobody pays taxes ? the government gets all its money from the oilfields. When Westerners hear that, they say, ?Luck you.? We?re not lucky. Your Revolution said ?no taxation without representation.? But it?s also true that there is no representation without taxation.?
There is a fairly long list of once-poor countries that have made the trek from poverty to relative wealth since World War II: Italy, Spain, Portugal; Singapore, Hong Kong, Taiwan, South Korea, Israel; Lithuania, Latvia, Estonia, the Czech Republic ? and so on. The striking thing about that list is how few countries on it possess any natural resources whatsoever. They were forced to accept the strongly counter-intuitive teaching of Adam Smith, that the wealth of a nation is the skill and knowledge of its people.
In the oil countries, though, the people can be left ignorant ? and untaxed ? and unrepresented ? without any reduction in the wealth of the elites that control the state. And that is exactly what has happened almost everywhere oil is abundant.
The United States is not fighting for oil in Iraq. The United States covets nobody?s wealth, if only because it is far too rich to be susceptible to covetousness. I was in the British House of Commons on the day it debated the British government?s report on Iraq?s program to acquire weapons of mass destruction and heard a Labor M.P. claim that the U.S. wanted to fight Iraq because it was envious of a recent Russian oil contract worth $40 billion over ten years. $40 billion! That?s half the GDP of Arkansas in one year. If Saddam Hussein were spending his nation?s oil wealth on power plants, roads, and schools ? or for that matter on palaces, racehorses, and fancy women ? it would occur to nobody to fight him. The U.S. will fight for security, not oil.
On the other hand, this fight that has other causes will nonetheless have large effects upon the world oil market. By this time next year, American troops will be occupying the world?s second-largest oil state. Like it or not, the U.S. will have acquired responsibility for administering Iraq?s oil wealth in such a way that it ceases to be a curse for Iraq?s people. People inside the U.S. government are already thinking hard about that problem. It?s time that the U.S. public joined the debate.
There is one large sense in which the war on terror is all about oil. On 9/11, the United States became a collateral victim of the failure of Arab and Muslim politics and society. That failure has many deep causes, but it also has one direct and proximate cause ? the impact of oil on societies incapable of using unearned wealth for the betterment of their people. We?re not fighting for oil. But in a very basic sense, the terrorists are ? and they won?t stop until oil?s pernicious impact on their societies stops. |
