flights

…and not just because my recent investment in oil futures depends on the price continuing to rise.

The sudden upsurge in the price of gas has been the top news story for the past few weeks, and there doesn’t seem to be any relief in sight. Oil is a finite resource, and as China, India and other developing nations have… well… developed, the worldwide demand for oil has shot up. As Americans turn to the government – and the three people campaigning to be the next president – for a solution, it seems amazing that no one saw this coming.

Of course the US leads the rest of the planet by a long shot when it comes to oil consumption, thanks to a combination of massive suburban sprawl, the popularity of gas-guzzling SUVs and a system of government subsidies that keeps our gasoline cheap compared to the rest of the world.

Progressives have lobbied the government for years to raise the mandatory average fuel-efficiency requirements of American cars, and the government’s response over the last eight of those years – especially from that bunch of oilmen in the executive branch – has been predictably dismissive.

The normal Republican philosophy regarding such things is to let the market take care of it. Keep the government out of it, they say. In an ideal world, I totally agree. The government is bloated and slow and bad at getting things done. In reality though, the problem with the Republican hands-off philosophy is that Republicans are totally disingenuous about it.

If the real price of gasoline was actually reflected at the pump, then people would stop using gasoline simply because they couldn’t afford it. People would stop buying gas-guzzling behemoths in favor of smaller cars. People who work in cities would stop moving into houses way out the suburbs, and people who already live in the suburbs would start carpooling or taking public transportation (if it’s even an option). That’s the market at work. We know the market would do its thing because it’s exactly what happened in the past when gas prices shot up for any length of time.

And it’s happening again. Even the modest rise we’ve seen over the past year or so – and it has been modest for Americans, no matter what it feels like – has sent a surge of riders to mass transit, according to this recent article in the New York Times. The difference this time is that given what’s happening with China, India and much of the rest of the developing world, oil prices aren’t likely to level off again… ever.

The bottom line here is that the Republican philosophy works. We just need the courage – yes, courage – to let the market actually do its thing.

Of course there’s another part of me – the part that loves to travel – that’s afraid to see what all this will do to air fares.

President Bush is touring the Middle East right now, and he has made sure to bluster about Iran’s fictional nuclear ambitions at every stop, but oil has been the main topic on his agenda. Yesterday he met with Saudi leader, King Abdullah and tried to persuade him to up his country’s production, in order to stabilize prices.

Bush argued that high oil prices will cause the US to import less oil, and therefore less money will flow from American wallets into royal Saudi Arabian wallets. The problem with this argument (other than the notion of protecting the exchange of our cash for Saudi palaces and ponies) is that the increasing demand for oil in China, India and the rest of the developing world will more than offset any decrease in US imports.

Saudi Arabia shrugs.

In the 1970s, before the Ayatollah overthrew the Shah, Iran was one of our main sources of imported oil. The Iranian Revolution of 1979 triggered an energy crisis when in November of that year, President Carter cut off oil imports from Iran. This marked the beginning of the end for Carter, who famously proposed to the American people that the solution to the crisis was to conserve. “Wear sweaters,” he told us.

The thing is, we’re addicted to oil, and to conserve is… well… un-American. The Reagan administration saw the light, and Saudi Arabia became our new best friend in the Middle East.

Fast-forward to 2008. Iran is still chock full of oil, so it should come as no surprise that our current president has steadfastly ignored the U.S. Intelligence Estimate finding that Iran stopped pursuing its nuclear ambitions in 2003. Iran has oil. We want it. We need it. Therefore we need Iran to be a threat, just like we needed Iraq to be a threat, because President Bush needs to guarantee access to oil.

Consider the following:

• Current US consumption of oil is 20.7 million barrels per day.
• The US strategic reserves contain 689 million barrels.
• Factor in our domestic production, and without imports we have about 60 days of oil to burn before it’s all gone.

Bush’s commitment to keeping oil lines open is not sinister in itself. The reality is, our economy would cease to function without foreign oil, and that would hurt every single one of us, probably more than we can imagine. If Bush had simply told the truth – we need a steady supply of oil from Iraq in order for our economy to function, therefore we need a more stable and sympathetic regime there – he would not have gotten the necessary support from Congress or the American people. So he used terrorism as a pretense.

Now Bush is trying to do it again, with Iran.

The war in Iraq is about oil. Few people would dispute that. Some would say it was waged simply to take the oil, while others argue that it is being waged in order to create a stable regional ally who will reliably sell us oil. It’s probably the latter, but it doesn’t really matter. The war is about oil.

To ensure access to Iraq’s oil, we are paying $275 million per day. How much would it cost to expand the war to Iran?

So, to summarize, we consume an enormous amount of oil. We have dangerously little oil of our own, so we need everything we can get from the Middle East. To maintain this dynamic of dependence, we are willing to invest $275 million per day and hundreds of thousands of American lives (because it’s not just the lives lost that we are investing, but the hard work of all the soldiers) in a war.

This is the true cost of oil, which is not represented at the pump. The $3-plus that you pay per gallon does not include the costs of tax subsidies to the oil industry, the subsidies for the extraction, production, and use of petroleum, the military costs of protecting access to oil supplies – not to mention health care costs for treating respiratory illnesses ranging from asthma to emphysema, or finally, the costs of climate change. If we factored all this into the price of gasoline, it would cost about $15 per gallon, according to a study (pdf) by the International Center for Technology Assessment.

Are we getting a good return on this investment? Does it have a future? What else could we do with $275 million per day and the hard work of hundreds of thousands of people we’re spending just on the Iraq war?

$275 million per day works out to about $100 billion per year which, according to one study, could pay for…

• Reforesting the earth (6 billion)
• Stabilizing water tables around the world (10 billion)
• Restoring all the world’s fisheries (13 billion)
• Protecting topsoil on the world’s croplands (24 billion)
• Providing universal basic health care to everyone on the planet (33 billion)
• Providing universal primary education to every child on the planet (12 billion)
• And finally, for good measure, closing the condom gap (2 billion)

Before you get into a tizzy, the figures above reflect additional money that would need to be spent on the various initiatives, rather than the total figures. These are all things, like the military, that only cost us money. They don’t generate any, which is why I didn’t compare the military spending on the Iraq war to money we could invest in, say, developing alternative energy sources. We’d actually make money if we did that.

It’s good to know we have our priorities straight.