Christopher Todd McDougall

“Paying for Oil Security”

(Edward Renshaw, Challenge, Vol. 33, No. 6, November-December 1990, pp. 11-16)

-The United States cannot afford to continue its current rate of oil consumption. A gasoline tax combined with other measures can help us conserve and achieve oil security.

Iraq’s attempt to annex Kuwait led Bush to send military forces to the Middle East to protect the Saudi oil fields. The justification for sending troops to Saudi Arabia was to preserve the American way of life. The United States consumed nearly a quarter of the world’s crude oil output in 1989. A political point of view would be to build a multinational peacekeeping force under the United Nations or create a new foreign legion composed mainly of recruits from Arab countries.

The Oil Supply Situation

The United States is consuming too much oil putting a huge dent in the oil reserves. In 1981, the US had 83 billion barrels and by 1989 it dropped to only 49.9 billion barrels. The United States has become more energy self-sufficient in the short run by engaging in infill drilling and stabilizing secondary and tertiary production technology. Energy conservation measures, the substitution of coal and other types of energy for oil, and increased oil production in non-OPEC countries which reduced demand of OPEC oil by 47% from 1977-1985 and staged a dramatic collapse of oil prices.

Oil resources, population, and price

Five small counties in the Middle East, with less than 2% of the world’s population (Saudi Arabia, Iraq, Kuwait, Iran, and the United Arab Emirates), control almost 65% of the world’s oil resources. The most troubling aspect of oil production in the Persian Gulf is that those countries don’t have a compelling need to do so if oil prices remain in the vicinity of $30 or more per barrel. This leaves too much power to a small number of Countries that happen to all be neighbors. Any war or breaking of peace affects the production of oil and in turn affects the rest of the world.

The oil-guzzling United States

From 1982 to 1989 the United States increased 13.5 percent in oil consummation compared to an 11 percent increase with the rest of the world. Gasoline consumption per person was almost 40 percent greater in the United States than in Canada. One of the main reasons for other countries consuming less is higher taxes. In Japan there is a $1.20 per gallon tax to more than $3.00 per gallon tax in Italy. In the United States (30 cents per gallon tax) fuel taxes are mainly used to finance the construction of roads and bridges. If the United States would increase fuel taxes the Author believes would increase the willingness of Japan, Germany, and France to pay for peacekeeping operations in the Middle East.

Gasoline taxes and conservation

The United States also use the lower fuel tax to increase the market of Automobiles. This puts more money into the US economy. Alan Greenspan recognized that our own greedy demand for imported oil might contribute to another oil price shock that would force the Fed to tighten credit to the point of risking another recession. A disadvantage in relying on higher gasoline taxes to promote energy conservation is that these taxes are regressive and will be harder on the poor than on the rich. People who live in poor and thinly populated parts of the country don’t’ have access to public transportation, and are heavily dependent on their cars. Part of the answer is for Western corporations to emphasize technology, projects, and equipment that improve energy efficiency. If the United States find more ways to produce our own energy we can become less dependent on the Middle East which leads to a more stable economy.