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Saturday, Jul 11, 2009
People who hate America are flush with money from oil sales -- we should stop subsidizing them by becoming more energy independent.
Jun 15, 2004 | When I think about Ronald Reagan's legacy, one question haunts me: Was his national energy policy also, inadvertently, a terror-subsidy policy? A quarter-century later, it appears that Reagan's presidency helped bring to America a plentiful supply of energy -- and also oil-financed terrorists.
In 1973, during America's first energy crisis, brought on by the Arab oil embargo, President Nixon declared a national goal of "energy independence" by 1980. For the rest of that decade, Republican and Democratic presidents alike emphasized such independence, to be achieved by a combination of statist means -- price controls, conservation decrees, Uncle Sam-funded ventures such as the Synthetic Fuels Corp. But they didn't work. In 1973, oil imports accounted for 26 percent of U.S. consumption; seven years later, in 1980, imports had risen to 38 percent of the national total. In the meantime, oil prices had soared 1,300 percent.
Enter Reagan, a free marketeer and avowed opponent of "utopian schemers." On July 17, 1980, as he accepted the Republican Party's presidential nomination, he declared, "Those who preside over the worst energy shortage in our history tell us to use less, so that we will run out of oil, gasoline and natural gas a little more slowly." The Gipper continued, "Well, now, conservation is desirable ... But conservation is not the sole answer to our energy needs. America must get to work producing more energy." Reagan's idea was to liberate the oil companies from controls, as part of his belief in "getting government off our backs." In my role as a low-level staffer on his campaign, I cheered those libertarian words.
And I cheered more as the newly inaugurated 40th president swept away all the Nixon-Ford-Carter-era rules and regulations -- although he also helped kill off solar-power programs, a legacy of the loathed Carter presidency. Yet at that time, few complained. Indeed, what came next was a miracle of the marketplace: During Reagan's two terms, oil prices fell by three-fourths, and the real output of the U.S. economy grew by a third.
Lower prices? More wealth? What's not to like? Only this: The market produces miracles, but it's nonetheless blind; it makes no distinction between a barrel of oil pumped in Oklahoma and a barrel pumped in Saudi Arabia. If the foreign crude is 1 cent cheaper, that's what Adam Smith's "invisible hand" selects. Oil, said the Reaganites, is just another commodity; it doesn't matter where it comes from. So while the economy boomed, the vision of energy independence withered.
And thus the catch: The free market lowered the price of energy, but since the United States was a high-cost producer, domestic production was a big loser. And the long-term decline in U.S. oil production -- accelerated, too, by environmental concerns -- continued through the Reagan years and has kept on ever since. Today, the United States imports 59 percent of its oil; it has gone from being one-quarter dependent on foreign sources to three-fifths dependent.
And what happens to the dollars we export in return for this oil? Many of them go to our mortal enemies. New York Gov. George Pataki, referring to the trillions that the United States and the West have sent to Arab "oilocracies" over the past 30 years, has spoken of a "terror tax." That is, we send them money and they send us al-Qaida. And the problem could get worse. Even assuming that Saudi Arabia follows through on its plan to increase production, the desert kingdom could easily take in $100 billion in the coming year, around a quarter of that from the United States.
