11 December 2008

Oil: It's Not Black & White (UPDATED)

As a general rule, I look to the efficiency and amorality of the market to solve economic issues. I guess that makes me libertarian. However, my libertarian-ness has limits. I won't get into those here.

From that general rule, I find myself hesitant of any plan that seeks to manipulate the market to attain some desired, utopian end. One example of this would be "an end to oil dependency." You see, I used to just accept, like everyone else, that dependence on oil for our energy use was an unmitigated bad--the blackest of black.

(nor should this be interpreted as a call for laissez faire, whatever)

My opinion is shifting. Like any other traded good, and especially one so vital to the operation of a country, I think oil forces the United States to make compromises and care about parts of the world which would otherwise receive no attention. And I don't buy the "blood for oil" arguments of the most ardent anti-Bush people. Sorry, folks, President Bush doesn't/didn't just take his marching orders from Exxon & Haliburton.

And I'm worried about the unintended consequences of "going green" or even of imposing some sort of pigovian tax. Sure, I'm sympathetic to a plan that trades cuts in income taxes for a carbon tax, but I'm worried that under such a scenario, the poor will pay--and not just the poor of this country. I'm reminded of the failure of the massive ethanol subsidy which contributed to worldwide food shortages and famine.

I bring all of this up because of an article in the Wall Street Journal which argues, essentially, that oil dependency and the moderation in foreign policy it forces is good. It's a persuasive essay written by someone, Roger Howard, who has done his homework.
While there are, of course, circumstances in which oil can exacerbate tensions and be a source of conflict, it can also act as a peacemaker and source of stability. So to identify America's "foreign oil dependency" as a source of vulnerability and weakness is just too neat and easy.
It's at least worth considering because, like so many other things, the question of oil is not black & white.

12 December 12:50am BST: RD at Pendulum Politics responds.

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