U.S. oil overconsumption aids fundamentalists

Prior to Sept. 11, economics seemed to be pitted against environmentalism on energy policy. National security concerns should now put these two ideologies on the same side.

Becoming independent of Middle Eastern oil has acquired a new urgency. In the last decade, the Pentagon spent $30 to 60 billion a year defending $10 billion worth of oil annually. We have lost scores of American servicemen. Our foreign policy has become to a large degree dictated by Saudi Arabia, a nation that uses the blanket of American security to allow funds to reach Osama bin Laden and his cabal, finance the Taliban and terrorist-training schools in Pakistan and propagate fanaticism and hate through a worldwide network of Saudi-funded mosques. Meanwhile they perpetuate gender apartheid, religious intolerance and oppression at home. The Saudis have not fully cooperated in the Sept. 11 investigation or in shutting down terrorist finances.

The United States consumes 7.34 billion barrels of oil a year, of which 4.26 are imported. This is commonly thought to explain U.S. military forces in the Middle East. However, the United States imports 1.1 from Middle Eastern countries, only 15 percent of our consumption.

The administration and its conservative allies have proposed an energy policy to wean the United States from the Middle East by developing or increasing supplies from the Arctic National Wildlife Refuge, U.S. offshore drilling, and the Caspian Sea region in Central Asia. This policy ignores inescapable realities. Out of the proven oil reserves in the world, 65 percent are in the Middle East. That the Middle East produces only 27 percent of the world's oil gives it excess capacity. The current proven annual oil reserves in ANWR, offshore, and the Caspian are 3.2, 4.8 and 34 billion barrels, respectively. Optimistic estimates of additional possible reserves in ANWR and the Caspian are dwarfed by Iraq and Saudi Arabia alone, which are believed to have more than 1,000 billion barrels of additional possible reserves. Further, it costs $1.50 per barrel to extract oil in Saudi Arabia while it would cost more than a trillion dollars and decades to develop these alternatives. Given these advantages, the Middle East will maintain its primacy in world oil production and pricing: The Middle East's share of oil production is projected to rise to 40 percent in 2020.

Then there is the tyranny of the map. Geography dictates that Caspian oil be pipelined through Russia, China, Iran, Afghanistan or the Caucasus--all potential quagmires for the United States in the future. As the countries in this region are mostly autocratic regimes with nascent Islamic fundamentalist movements, do we really want to breed conflict and terrorism a la the Middle East in the future?

Supply-side efforts to eliminate American dependence on Middle Eastern oil are a mirage; instead, the principal thrust of our energy policy should be on reducing demand for oil itself. First, we should phase out subsidies for oil. Besides military defense of the Gulf, the government gives about $14 billion in direct tax breaks, subsidies for oil production and shipping and foregone revenue in reduced sales taxes on petroleum products. At the same time, society also bears $40 to 250 billion of environmental costs annually from oil. Phasing out these subsidies should be accompanied by shifting the costs of oil use from society as a whole to gas users, such as reducing income tax while increasing gas tax to reflect the true costs of gas usage.

The resources saved from oil subsidies should be used to promote energy efficiency and developing alternative energy resources. The fuel economy standards implemented by then-president Jimmy Carter to combat oil shortages cut our oil imports from the Persian Gulf by 87 percent over six years. In 1986, those standards were rolled back by former president Ronald Reagan. We should focus on concrete measures: Closing the loopholes for SUVs exempting them from fuel economy standards, progressively raising fuel-efficiency standards and requiring fuel-efficient replacement tires alone would save 1.2 billion barrels annually--more than we import now from the Middle East and more than 20 times what we could get from ANWR. We should redirect precious capital from oil pursuits into tax incentives for developing alternative energy sources--more gas efficient cars, fuel cells, gas-electric hybrid vehicles, ethanol, solar energy. Further measures to encourage mass transit, railroads, conservation and smart urban growth would pay dividends to consumers and society.

These times require that we think clearly. The traditional policies of nurturing autocratic regimes should be consigned to the dustbin of history. Countries with economies based on resource extraction, whether oil or diamonds, have almost always fallen prey to corrupt cabals. We have too long prostituted our foreign policy--from the Shah of Iran to Saddam Hussein--for cheap oil, giving birth to different Frankensteins. Let us not replicate this habit in the Caspian or Caucasus.