A very vicious addiction



Ian Deitz

With every second that passes, 3,700 gallons of gasoline are consumed in the United States. This statistic, combined with the fact that we get most of our supply from foreign sources, should be enough to compel every voting-age American to the ballot box this November. Forget every other issue that’s being debated in the campaigns; oil dependency alone makes current public policy of profound importance.

Of the numerous problems inherent in our dependency, perhaps the most distressing is the connection between oil prices and the health of our economy. This connection is exemplified by the price-fixing practices of those countries which hold the most lucrative oil reserves.

The reserves contained in the Middle East are some of the cheapest and easiest to access in the world. Unfortunately, they are controlled by state-owned companies which have organized themselves into a cartel to milk the market of all its worth. This cartel, as you may already be aware, is known as the Organization of Petroleum Exporting Countries – OPEC for short.

Its purpose is to regulate oil production levels in response to “customer” nations’ level of demand. Altering output in this way is a means of keeping prices up and incomes steady. The familiar logic of supply and demand works particularly well for a cartel that sits atop a goodly portion of the world’s most precious commodity.

This past Friday OPEC member countries held one of their regular meetings in which they carry out their “mission.” The result was typical and expected: production quotas will remain unchanged because, as Saudi oil minister Ali al-Naimi put it, “Market fundamentals are very sound.”

However, he and others hinted that production levels might be lowered at the next meeting should the global economy continue its downturn. The assumption is that, if the oil addicts’ purchasing power wanes, demand will decrease and so will prices. Consequently, supply must be reduced to prevent a price drop.

Not all of the OPEC ministers agree with this logic, though. In fact, some of them revealed to the press disagreement with other members’ notions of how to proceed amid an ailing world economy. Their belief is that, if production quotas are reduced, the concomitant surge in prices will repulse consumers who are already financially strained, thereby further diminishing demand and negating the increase in prices.

Thus there is uncertainty about just how OPEC’s strategies influence the world oil market. The troubling part is the implications inherent in this uncertainty. The competing viewpoints within OPEC are part and parcel of the most dangerous aspect of the United States’ oil dependency. Suppose for a moment that, as some in OPEC forewarn, high oil prices in the face of a recession will in fact reduce demand.

Even so, we couldn’t just go without gasoline for our cars. Sacrifices would have to be made somewhere, and the economy as a whole would feel the reverberations. In short, oil prices have a direct impact on the U.S. economy at large.

That is why the Bush administration continues to urge OPEC member Saudi Arabia to step up production. Washington is duly wary of the threat that surging oil prices pose to its economy as it heads into a potential recession. Indeed, stock markets have been known to fluctuate based merely on fears of oil price shocks. One can only imagine the consequences of a calamitous change in prices resulting from a terrorist attack or natural disaster affecting the worldwide supply chain.

It is therefore essential that the United States’ energy policy take into account the danger that oil prices pose to our economic fate. Compared to other countries, our oil dependency is uniquely detrimental due to a lack of fuel-efficient vehicles, alternative fuels and public transportation infrastructure.

When you hear the presidential candidates talk of a “Manhattan Project” that will cure our energy-related ills, don’t be fooled. There is no silver bullet, but there are a variety of technologies and practices already in existence that can be employed as a comprehensive energy-independence strategy. To describe all of these in detail would require more space than I am allotted; suffice it to say that only a multifaceted, long-term approach will be adequate.

Oil dependency is just one of a number of issues that are being neglected for lack of immediate effect but will have momentous consequences down the road. It is a vicious addiction that will by no means go away by itself.


Ian Deitz is a senior political science major from Gettysburg, Pa. He can be reached at [email protected].