What To Do On Gas Prices?

With the price of oil spiking, President Obama last week ridiculed Americans concerned about the impact on their wallets. “If you’re getting eight miles a gallon,” he admonished an audience, “you may want to think about a trade-in.”

Yes, but it’s not our clunker cars that need to be traded in. It’s our clunker energy policies. Too many of our elected leaders still don’t get it: The rising cost of gasoline is not just a problem for commuters and soccer moms. It’s a threat to our national security.

The theocrats in Tehran are using Iran’s oil money to develop nuclear weapons and fund terrorist groups, including Hezbollah, which is right now in the process of taking over Lebanon, and Hamas, which remains committed to wiping Israel off the map. An alarming share of the oil wealth that goes to Saudi Arabia and other Gulf nations ends up in the coffers of the Taliban and Al Qaeda. Hugo Chàvez spends Venezuela’s petro-dollars to expand his influence and that of his Iranian allies throughout Latin America.

Yet we are doing nothing to break oil’s near-monopoly as a transportation fuel, stabilize or reduce fuel prices, and diminish the ability of hostile oil-producing regimes to wage economic warfare against us.

Conservatives favor increasing domestic oil production. Liberals support conservation. I’d argue that while both approaches are fine, their impact will be limited as long as a cartel — OPEC — controls more than three-quarters of the world’s conventional oil reserves.

As former CIA director Jim Woolsey, the current chairman of the Foundation for Defense of Democracies, and Anne Korin, co-director of the Institute for the Analysis of Global Security, recently noted, OPEC is “a conspiracy in restraint of trade.” When non-OPEC countries “drill more, OPEC simply drills less and drives prices back up.” If we reduce demand through conservation, “OPEC again drills less and prices zip back up.”

The better option: Encourage the development of a competitive transportation fuel market. For example, Congress can begin to bring about consumer choice at the pump by adopting the Open Fuel Standard Act, soon to be reintroduced with bipartisan support, e.g. Reps. John Shimkus (R-Ill.) Eliot Engel (D-N.Y.), and Roscoe Bartlett (R-Md.). Their goal is to gather as many as 60 co-sponsors before introducing.

Woolsey and Korin explain that an open fuel standard “would require new cars to include a $100 tweak that would allow them to run on a variety of liquid fuels in addition to gasoline. Such fuels would include methanol, which is easily made from natural gas and biomass (and, less cleanly, from coal). Enabling vehicles to use natural gas, whether directly or via liquid fuels that are made from it, allows consumers to benefit from the very large cost advantage that natural gas holds today over oil.”

I do not think that ethanol should be subsidized with tax dollars — nor should any fuels, including those made from oil — but neither should ethanol’s potential be dismissed. Farmers – particularly in the Third World — could improve their standard of living while contributing to America’s national and economic security by growing a variety crops that can be distilled into alcohol fuels for export.

Sooner or later – and I hope it’s sooner — electric and plug-in hybrid vehicles may become widely available at affordable prices. But we can’t wait. We’re in a war – and, at the moment, we’re lavishly funding our enemies.

Part of our strategy should be to inject competition into the fuel market. That will lead to fuel diversity and abundance. And that, in turn, will diminish the power of oil as well as those who control much of the supply and do not wish us well.