IN A LANDMARK Supreme Court decision last Tuesday, March 21, the justices ruled in a 5-4 decision that the Food and Drug Administration (FDA) does not have the proper authority to regulate tobacco as a drug. While this viewpoint is questionable, given nicotine's obvious addictive qualities,
perhaps the FDA should begin looking into America's deepest addiction. I'm not talking about cigarettes, heroin, sugar or any other kind of temptation. I'm talking about the chain around our country's neck. That's right -- I'm talking about oil. Black gold, Texas tea. The economic force that has our economy wrapped around its finger. And right now, it's squeezing pretty hard.
Petroleum is unlike any other product because, by itself, it can completely disrupt an economy. Its immediate effects are visible at the gas station and in higher energy bills.
Since it is so ingrained in our economy, it has far-reaching implications beyond these quick price hikes. Indirectly the Organization of Petroleum Exporting Countries' price increases have caused severe recessions, and the inflation they brought contributed to the fall of President Carter. The current price increases, as painful as they seem, are not much compared to the supply shocks of the 1970s. But because these increases pose the risk of interrupting our present economic health, we have to take a deeper look at the real problem. Unless the United States can find other energy sources beyond OPEC's reach, this cartel will continue to exercise disproportionate power over our economic health and our nation's stability.
It's important to examine the political sacrifices we have to make, all in the name of securing more petroleum. For example, we continue to certify Mexico as a fully cooperative nation in the war on drugs, despite the rampant corruption throughout its government. Why do we tell ourselves such an open-faced lie about our neighbor to the south? Because it is also one of our leading suppliers of oil. And if we don't re-certify it and give it that sought-after foreign aid, you can bet that it will reduce the amount of crude it sends our way.
In the Middle East, we continue to support nations whose values are often in direct contrast to our own. Saudi Arabia, for example, while it boasts an impressive national income, has a dreadful record for human rights. It allows for no freedom of religion, does
not have a democracy, and according to the U.N.'s Human Development Index (1994), had an adult literacy rate of barely more than 60 percent. Every time we fill up the tank, we -- myself included -- hand over a disturbingly large portion of our sovereignty to regimes that are only pseudo-democratic, or worse. Even though we like to pat ourselves on the back for always "standing up" for democracy around the world, we accomplish just the opposite in our insatiable desire for petroleum.
In addition to OPEC's drop in production, which is partially responsible for the current situation, our own consumption habits are to blame as well. Right now, in the midst of our booming economies, a lot of us have been less than responsible when it comes to our choice of automobiles. As Dan Becker of the Sierra Club's Global Warming and Energy Team said, "Much of the demand occurred in the United States where SUVs and other vehicles guzzle gas at increasing rates." ("A primer on gasoline pricing," CNN.com) The combined effect of shrinking supply and booming demand naturally will lead to our current problem.
So what are the solutions to our dilemma? That is really a two-part question. In the short-term, clearly we need to get OPEC to raise production, which it has agreed to do. After all, a lot of these countries would be calling Saddam Hussein "Mr. President" if it were not for our efforts in the Persian Gulf War. Kuwait's oil minister, Sheik Saud Nasir Sabah, admitted as much. "There are political considerations that for the moment are much more important than economic factors," he said ("OPEC to increase output," The Washington Post, March 29). But a temporary return to more "reasonable" prices is not a solution that can work for us in the long run. Why? Because any time OPEC has the whim, it could hike prices again. And the next time, such a hike might not be so timid.
In the long run, we will have to start relying more on domestic oil production. According to geologists, we have not even tapped half of the petroleum reserves within the United States. Of course, domestic petroleum is more expensive. But as oil reserves begin to empty out, oil prices inevitably will increase. The key benefit to domestic oil production is that, while it is more expensive, it is also more secure and not nearly as susceptible to the kinds of international events that make crude prices fluctuate. Plus, it creates more
jobs here in the U.S.
For decades now, America's lust for petroleum has been its Achilles' heel. A large enough price increase in this commodity alone is enough to ruin economic prosperity, no matter how strong it appears. This is one addiction we cannot afford to stay hooked on forever.
(Timothy DuBoff's column appears Fridays in The Cavalier Daily.)
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