Gas Pains

Tired of paying $2 a gallon to fill up your SUV? Here's how America ought to respond to OPEC's crude behavior.

A COUPLE OF YEARS AGO, Texas Monthly hosted a meeting of editors of city and regional magazines. Most of them came from points north: Boston, Philadelphia, Chicago, Cincinnati, Minneapolis. After the meeting, I ferried several of the visitors to dinner at a local Mexican restaurant. “Several” in this case added up to seven; nothing can match a Suburban when it comes to hauling people around. But my passengers were not impressed. “How can you drive this thing?” one of them asked. “Don’t you realize what you’re doing to the environment?” “What kind of mileage do you get?” another demanded to know. (The answer is 12 to 13 in city traffic, 17 to 18 on the highway, but it seemed prudent not to respond.) I listened to this chorus for a few more moments, and finally I said, “I feel about my Suburban the way NRA members feel about their guns. You can have my car keys when you pry them out of my cold, dead fingers.”

I have driven Suburbans for almost twenty years. My current one is my third. I can’t imagine driving anything else. Or at least I couldn’t, until the day a couple of weeks ago when I filled the 32-gallon gas tank and took a look at the price display on the pump. The digital numbers danced by faster than the eye could register and didn’t stop until they had recorded more than sixty bucks’ worth of fuel. I’m not ready to trade in my Suburban for a Hyundai, but I will make this concession: It’s way past time for America to start doing something about energy policy, and yes, that includes sport utility vehicles.

With one exception—the war in Iraq— U.S. energy policy has hardly changed since the end of the 1973 Arab oil embargo. It consists of encouraging oil exploration worldwide (but not at home, where environmentally sensitive areas remain off-limits); cozying up to Saudi Arabia through diplomacy to keep prices stable and the oil flowing (but also wondering, after 9/11, if the regime itself is stable); trying to get automobile manufacturers to improve fuel efficiency (but not trying very hard); supporting research of alternative energy sources, such as solar (but not supporting it very much); and having a strategic petroleum reserve on hand in case of an emergency (and, judging by the cars clogging Interstate 35 on my recent trip to Dallas, $2 gasoline isn’t an emergency). As for Iraq, I’m not suggesting that oil was the primary motivation to go to war—just that oil was, and should have been, a factor. If Saudi Arabia, with a quarter of the world’s proven reserves, were to fall into the abyss, Iraq would have the next largest amount of reserves, 11 percent. In Saddam Hussein’s hands, oil could have become a weapon of economic mass destruction.

The trouble with this policy is that thirty years have passed since the Arab embargo, and America has not been able to reduce its dependency on foreign oil. Indeed, the trend is in the opposite direction. We entered the nineties importing fewer than 7 million barrels a day and left them importing more than 10 million.

What to do? Everyone ought to be familiar with the two sides of the energy policy debate by now. One side argues that the market will solve the energy problem. If OPEC (the Organization of Petroleum Exporting Countries) raises the price of oil, the argument goes, the market will respond in two ways: conservation (consumers will buy cars with better gas mileage, thus reducing the demand for oil) and exploration (the higher price will encourage more drilling, which will lead to increased supplies of oil entering the market, which will force prices downward). This is what happened in the decade after the embargo, eventually resulting in fifteen years of cheap oil to end the twentieth century. But markets work both ways. Americans fell in love with SUVs, and the nation’s demand for oil began to climb anew. The other side in the energy debate contends that the only permanent solution to high energy prices is for America to kick the oil habit and look to something else to fuel our economy and our lifestyle—solar energy, perhaps, or hydrogen or wind. Anything but bad old oil.

There’s a third voice in this debate: those insistent neoconservatives. The neocons want to bust up OPEC. “Is the OPEC cartel a good thing for consumers?” asks a scholar for the Cato Institute, a staunch free-market advocate. “Given the political and economic angst sparked by the recent spike in gasoline prices, you’d think that the answer would be rather obvious. You would, however, be wrong.” The author assails the idea among “Washington politicos and policy mavens” that OPEC brings stability to oil prices and Middle Eastern governments. “The argument that these undemocratic, oppressive, ideologically bizarre, and terrorist-friendly regimes are propped up by high oil prices is scarcely a strong argument for [ OPEC]… . Let’s be clear about what’s at stake. If OPEC disappeared tomorrow, oil prices would drop to somewhere around $8 a barrel and gasoline prices would almost certainly be south of $1 a gallon.” Like the neocons’ argument that Iraq was ripe to be refashioned into a democracy, this one is high on wishful thinking. OPEC isn’t the only player in the game. Russia, for example, now trails only Saudi Arabia in oil exports. That the United States could simultaneously insist on low prices and high consumption seems far-fetched.

Still, the neocons are right about one thing: It is not in America’s best interests to be dependent on Middle Eastern oil. What to do, then? What would a sensible and realistic energy policy entail? For an answer, I called up Amy Myers Jaffe, at Rice University’s James A. Baker III Institute for Public Policy. I had heard her speak at an oil conference two years ago on the geopolitics of energy, and I had read a recent article she co-authored on the same subject. I have encountered

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