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Wednesday, May 17, 2006

Why don't we call them Ford Venezuelas?

Fareed Zakaria — whose book The Future of Freedom I highly recommend — writes in Newsweek that there are two parties to blame for the current surge in oil prices. Bad guy #1: The state-run oil companies in the five largest oil-exporting countries, which are keeping the supply down by failing to develop new oil fields. Zakaria explains:

There are really only five countries that matter in the world of oil: Saudi Arabia, Iran, Iraq, Russia and Venezuela. And in every one of these countries, the government has questionable legitimacy or competence. Thus political leaders use their oil money to buy political support. They provide vast handouts to their people — gas is 40 cents a gallon in Iran! — in hope of keeping them quiet.

Rather than invest in the future, these countries are placating restless populations with oil profit subsidies. But there's another bad guy who's also getting by on articially cheap gas:

The second political reality is in the United States. For all the talk about China and India, America remains the gorilla of global gas. India consumes 2.5 million barrels of oil a day. America burns 10 times that amount. The single biggest shift in global demand over the past decade has not been the rise of China but the rise of SUVs. Since the mid-1970s the demand for petroleum in Western Europe and Japan has been flat. In the United States it has doubled.

This ever-rising economic demand in America is fueled by politics. Without a loophole in the law, SUVs would be banned. Without artificially low gas prices, Americans would not guzzle as much gas. The American government subsidizes gas in many different ways, big and small. As consumers, we do not pay for the enormous expense involved in policing the Middle East, an expense we would almost certainly not incur if its chief export was carrots. We do not pay for the environmental fallout from burning gasoline. We get free roads and a free ride. And it might get freer. American politicians are jumping all over themselves to provide tax relief because a gallon of gas might hit $4 — while prices in Japan and Europe are close to $7. I understand why the Saudi regime keeps gas cheap to bribe its citizens. But must America do the same?

Ouch. We should be ashamed.

(The real story of pricey oil, Fareed Zakaria, Newsweek 5.22.06)

Copyright © 2006 by Philocrites | Posted 17 May 2006 at 9:27 PM

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