Former CIA director R. James Woolsey shares some oil factoids:
At the end of March, oil posted its fifth consecutive quarterly price increase: It’s now solidly above $80 per barrel. If it reaches $125 a barrel again, as it did in 2008, then approximately half the wealth in the world — above and below ground — will be controlled by OPEC nations.
Oil dominates transportation: About 95% of transportation fuel in the U.S. is derived from petroleum. And over three-quarters of the world’s reserves of conventional oil are in OPEC nations. But OPEC is pumping less than it did in the 1970s, despite a doubling in global demand, because it’s a cartel maximizing its income. OPEC sets oil’s price at a level that exploits our addiction but is generally not high enough for long enough that we go cold turkey.
Oil profits enhance the ability of dictators and autocrats to dominate their people. This is one reason that eight of the top nine oil exporters (Norway is the exception) are dictatorships or autocratic kingdoms, as are virtually all of the 22 states that depend on oil and gas for at least two-thirds of their exports.
Saudi Arabia’s oil wealth enables it to control around 90% of the world’s Islamic institutions even though it has less than 2% of the world’s Muslims. So the teaching in most Islamic schools is not the tolerant form of Islam associated with the late Indonesian President Abdurrahman Wahid. These schools teach Saudi Wahhabi doctrine — fundamental hostility to Shiites, Jews, homosexuals and apostates; oppression of women; and the pursuit of a global caliphate, or theocratic dictatorship. This doctrine bears startling resemblance to the substantive teachings of the Taliban and al Qaeda (although of course they and the Wahhabis disagree passionately about who should have power). The effect is that we now are financing both sides in our war with radical Islam.
Because OPEC has very large reserves and cheap extraction costs, the cartel can fend off competition from costly alternatives — so Woolsey recommends just such costly alternatives: improved internal-combustion vehicles, natural-gas vehicles, flex-fuel vehicles, and electric vehicles.
What he doesn’t suggest is a gas tax, which would transfer “excess profits” from the OPEC cartel to the US government, without increasing the price at the pump all that much:
The result is a simple application of the theory of tax incidence. The burden of a tax falls on those who can least afford to escape the tax. The world’s demand for oil is inelastic but the supply is even more inelastic. What is Saudi Arabia, for example, going to do with its oil except sell it? The oil is already fetching a price well above cost so if there is a world tax on oil that’s like a tax on land — Saudi Arabian land to be precise — and a tax on land is born by land owners not by consumers.