Some automakers are going beyond just letting you choose the color of your car, if you actually need an infotainment system, and whether or not you want seat-warmers (yes, duh). They’re letting you choose the fuel that it runs.
The U.S. interest in going to war or supporting war efforts on behalf of our “democratic” allies like Iraq, Qatar, the United Arab Emirates, Egypt and Saudi Arabia is not based, as said by some political leaders, on converting those countries to democracies or providing their citizens with increased freedom. Neither is it, primarily, aimed at reducing terrorism possibilities here at home. For the most part, it is instead aimed at protecting the U.S. and our allies’ interests in oil and stability in some of the most corrupt, autocratic oil-producing states in the Middle East.
Surely, recent history indicates that use of patriotic and compassionate language reflecting America’s historical ethos to justify our actions often wins initial public support for “Operation This” or “Operation That,” but as conflicts drag on and U.S. soldiers, sailors or marines suffer physical and emotional wounds, the gap between articulated justifications and reality becomes clearer to the public. When the fog of war or near-wars lifts a bit, support for U.S. military activity, often becomes muted among the citizenry.
Concern for protecting oil resources, production and distribution has been, and is currently, a paramount objective of the U.S. The U.S. and its allies have helped overturn governments, remake global maps, redefine national or tribal borders, create new nation states and abandon old ones and dispatch national leaders. Contrary to Gen. Powell’s admonition, we sometimes have failed to own the disastrous results of the wars that we have fought (Libya, Iraq, etc.). Based on our own desire for oil, we have tolerated sometimes exotic and many times terrible behavior among private oligarchs and despotic rulers, which, regrettably, often, escapes coverage in text books and in the media. Clearly, the link between our large-scale addiction to oil and its negative political, social and economic consequences in several Middle Eastern countries lacks sustained attention in our public policy dialogue.
The importance of oil and the U.S. willingness to go to war or engage in covert activities to protect it has been intensified by the relationship between petrodollars and the U.S. economy. Since 1944 at The Bretton Woods Conference, the global reserve currency has been the good old U.S. dollar. First, gold was the back-up to the dollar. As reported by the Huffington Post, the dollar was pegged at $35 to an ounce of gold and was freely exchangeable. “But by 1971, convertibility of gold was no longer viable as America’s gold resources had drained away. Instead, the dollar became a pure fiat currency (decoupled from any physical store of value) until the petrodollar agreement was concluded by President Nixon in 1973. The essence of the deal was that the U.S. would agree to military sales and defense of Saudi Arabia in return for all oil trade being denominated in U.S. dollars.” We as a nation committed to go to war in return for ostensible economic benefits and access to oil.
Was it good for the American economy? Sure, at least in the short run. The dollar became the only currency for energy trading. All foreign governments desiring to secure and trade for oil had to hold U.S. currency. The dollar was easily converted into barrels of oil. As the Huffington Post indicated, the dollar costs for oil flowed back into the U.S. financial system. What a deal!
Recently, lower U.S. interest rates, a troubled, slow-growing U.S. economy and the rise of oil-shale production in the U.S. has muted the almost-absolute, four-decade direct relationship between the dollar, and other nations’ need for oil and or export of oil. Instead of “next year in Jerusalem,” some nations like China, Russia and even France and Germany have indicated next year either a return to gold or the use of their own currencies as a peg to trading. However, the petrodollar still plays an important role in the exchange of oil in the global trading system. Its demise, as Mark Twain suggested about reports of his death, is, if not greatly, (at least) somewhat exaggerated. I suspect the petrodollar will be with us for some time.
Our nation’s willingness to militarize support of countries that depart radically from supposed U.S. norms of global behavior (encoded in the U.N Charter and other international agreements), because of their oil resources and the post-World War II emergence of dollar-based trading in oil and its benefits, has muddled U.S. foreign policy. Critics have questioned our not-so benign initiatives in countries throughout the Middle East and, as a result, they have raised issues concerning supposed American exceptionalism.
We have more than just a Hobson choice (that is, there is no real choice at all) if we choose to break from oil dependency. Increased U.S. oil production to secure profits and reach demand will still require both importing and exporting oil. This fact, coupled with the desire to keep the dollar the key oil-trading denomination, will sustain U.S. entanglements and the probability that we will continue to play oil policemen in many places.
A different future could be achieved if we took the president seriously and tried to “wean” ourselves off of oil. Paraphrasing liberally and adding my own meaning, Léon Blum, former French leader, “Life doesn’t give itself to one [nation] who tries to keep all of its advantages at once…morality may consist solely in the courage of making a choice [between energy sources and fuels].” The U.S. has not had the political guts yet to really focus on converting from an oil- and gas-based economy and social structure to an alternative energy and fuel-based one (e.g., natural gas, ethanol, methanol, biofuels, electricity and hydro fuels). Such a strategy would allow consumers greater freedom at the pump. It would be fuel agnostic and let consumers pick winners and losers based on cost, and impact on the quality of their lives and the nation’s life. We know that if we do make alternative energy and fuel choices now, based on equity, efficiency, GHG emissions and pollution reduction criteria, we can secure important environmental, economic, social and security benefits. To fail to act is an act itself, one that will harm the nation’s efforts to become the country on the shining hill and pave the way for other countries and itself to access a better, more peaceful future for present children and their children.
Photo Credit: www.defense.gov
Early on I wrote a column about an unanticipated Thanksgiving dinner conversation with a special operations soldier who had served in Iraq. His comment, in response to a question I asked about whether he and his buddies knew why they were sent to Iraq, was brief and blunt: “oil and U.S. security.” He would have none of what he thought was b.s. about “freedom and democracy” or “weapons of mass destruction.” Before I asked the question I actually already knew what his answer would be, but a glass of wine, a wonderful piece of turkey and good company suggested that my inquiry would lead to an opening for a longer repartee on the Middle East and U.S. policy. It did, and again oil and oil politics were the dominant theme.
I suspect that many of the writers of today’s headlines and op-ed articles anticipated Republican Eric Cantor would win. They are now arguing, in sometimes misleading reference terms concerning democracy, inter-sectarian harmony and morality, for a more aggressive U.S. policy toward the invasion by Sunni radicals of parts of what once on a map called the nation of Iraq.
But the real issue for many “experts,” I again suspect, is oil — a fear, whether factual or not, that if Iraq collapses, the world oil supply (already close to equilibrium concerning demand and supply) will relatively quickly reflect shortages and much higher prices per barrel of oil ($150 a barrel) and oil’s product, gasoline ($5 and more).
Should we be sending kids to fight for our apparent God-given right to Middle Eastern oil? Although I think a lot about the ethics of public decision making, I am not an ethicist. But as long as there are alternatives to supply, my hard-nosed policy advice would be against war or the steps that might lead to war. Iraq has not been the noble state that welcomed America in to rescue it ostensibly from Saddam Hussein. Its form of democracy has been limited, corrupt and sectarian.
What should our calculations be, concerning alternative supplies of oil? First, we ought to really think through whether a full or partial shutdown of Iraqi oil wells will mean a damn. Iraq alone supplies a small share of U.S. oil imports. Most of the often-shrill economic coverage of the radical Sunni invasion and its potential impact on U.S. oil seems to relate more to perceptions, not empirical evidence, about shortages and prices. Commentators “perceive” what the oil markets might or will do — really what oil speculators and investors will or will not do — based on what is currently happening in Iraq, not on facts on the ground. Neil Cavuto of Fox Business said, “Oil is a commodity, a global commodity, and like any stock in almost any market, it often trades on issues having little to do with basic fundamentals, and more to do with simple fear.”
Assuming, however, there is a real worldwide shortage of oil as a result of a closure of Iraqi wells, or that fear drives the prices up so much that there is a strain to the economy, the Saudis, probably, among all the OPEC nations, are the only ones with sufficient oil in the ground to make an immediate difference concerning supply. But will they? They have shown some flexibility in the past to U.S. petitioning. They have also, at times, despite their security relationship to the U.S., turned us down. This time around the Saudis could well be more than a bit sensitive, particularly if it looks like the radical Sunnis might win. The Kingdom is vulnerable with respect to a radical brand of Sunniism. I bet they also fear a potential Shiite effort to push the radicals back, particularly one led by Iran. Life is never simple for the House of Saud.
Okay, where are we? Oil is sold in an international marketplace. No matter which side you are on regarding the Keystone XL pipeline, if approved and completed, it will not have a major impact on U.S. gas supply or prices. Ask your friendly oil refinery or oil company executive where he or she believes Keystone-supplied oil will be going. Most of the assumed supply will be traded internationally for the highest global price. The predicted increased supply of U.S.-produced gasoline will probably help diminish price increases slightly, but don’t make a bet on how much. Today, a price of a gallon of regular unleaded gasoline is well over $4 in California and U.S. production is at a very high level.
What would likely help keep gasoline prices from spiking significantly and, at the same time, lessen the amplitude of the cycles is a commitment to competition in the fuel marketplace. Let Adam Smith reign! Allow safe, cheaper, environmentally better replacement fuels, particularly natural gas-based ethanol (and someday soon, methanol) to compete with gasoline. Encourage the conversion of older vehicles to flex-fuel vehicles! Push for renewable fuels and related vehicles that appeal to a larger market than at present, given costs and design constraints! Reduce our dependence on imported oil! Make love, not war! Drive (excuse the pun) for strategic solutions!
It’s a free county, ain’t it? Americans have many choices that are denied to citizens of other less-fortunate nations. But we forget how many decisions are made for us, sometimes out of necessity, such as paying taxes; sometimes out of greed, such as the monopolistic actions of oil companies in denying many Americans the ability to purchase alcohol-based fuels at their corner gas station. Try it someday! On your way home from work, on your shopping trip to your friendly supermarket or on your way to see a movie at your favorite theater, make a stop for fuel at a gas station. Make sure to have some gasoline in your tank, because it likely will take you a lot of time to find a gas station that sells E85 or even E15.
Now, I went to Harvard Law School for four days, before I decided that there were too many lawyers around and memorizing case studies was not my forte. But Harvard provides significant value added, apart from being near Harvard Square and Boston. I was exposed to terms and content related to antitrust, restraint of trade, collusion and monopolies. Now, I didn’t stay long enough to know whether those concepts applied to oil companies that restrict consumer choices of alternative fuel. Probably not, because I am sure, by now, one of my Harvard colleagues would have filed a well-reimbursed case to break open the fuel market to options like ethanol, methanol and more. But whether legal or not, oil companies deserve their comeuppance for limiting many of us who, too often, are required to use more expensive, environmentally harmful gasoline, instead of existing, safe, alternative fuels.
How do they do this? Well, if you are a gas station owned or franchised by an oil company, your contract and rules related to behavior often prevent you from adding a pump or adding to an existing pump to sell E15 or E85. As relevant, since oil companies generally require the stations they own to buy fuel from them, and since they don’t sell E15 or E85, adding a pump would be akin to waiting for the hereafter (and acting on faith that you will get there).
Wait, there is more! Every now and then an oil company wants to publicly show it is a bit beneficent (for image purposes), but don’t hold your breath with respect to proof that image and reality are the same. Sure, you might find an alternative-fuel pump near the rear side of the garage proximate to the men’s room, or, if you are lucky, on the side of the station near the air pump. Most oil-company-owned stations and franchisees are generally precluded from putting an alternative-fuel pump under the covered island or space out front. They also face restrictions on advertising alternative fuels as an available product and oil-company pricing limits competition from alternative fuels.
Congress has refused to enact open fuels legislation, which would require oil companies to open up their gas stations to other fuels. Ongoing efforts by public and private sector advocates, as well as nonprofit groups, to encourage policies that would convert older cars to flex-fuel vehicles and to encourage Detroit to build more FFVs could well lead to a large consumer market for alternative fuels and generate a positive market reaction among independent gas companies and, perhaps, even some smart oil companies. While I have been wading through the pros and cons of allowing oil companies to increase exports to other nations, I do believe that if increased exports are in the nation’s future, they should be approved only if the oil companies agree to require their stations and franchises to offer alternative fuels in a primary space alongside gasoline. A bit of tat for tat is in the public interest. Let freedom ring for consumer! Let capitalism mean competition for gasoline and alternative fuels at your nearby gas station! Oh, I forgot, alternative fuel station!
