By Arnold Kling
Many of the leading neoconservatives who pushed hard for the Iraq war are going green. James Woolsey, the former director of the Central Intelligence Agency and staunch backer of the Iraq war, now drives a 58-miles-per-gallon Toyota Prius and has two more hybrid vehicles on order. Frank Gaffney, the president of the Center for Security Policy and another neocon who championed the war, has been speaking regularly in Washington about fuel efficiency and plant-based bio-fuels.
This was picked up by Andrew Sullivan, who supports the “green neocon” movement. However, Sullivan was persuaded to link to the alternative view that I offer in Oil Econ 101. This in turn led one of Sullivan’s readers to write
While Kling is correct that an intense conservation program would only marginally cut our reliance on the Saudis (they are the equivalent of the global Federal Reserve in crude production capacity, and nothing will change this unfortunate geological reality), what ultimately matters is the price they receive…
The volume of oil that OPEC and the Saudis produce only changes marginally year to year, but the price can very tremendously. Crude prices — and all commodity prices — are set at the margin.
The argument for conservation appears to be that it would lower oil prices, therefore it would lower oil revenues for OPEC countries, therefore it would destabilize their governments, therefore the United States would be better off.
I think it is fair to say that conservation of oil, particularly to the extent being discussed, would reduce our GDP. I wonder how much GDP we should give up in order to help destabilize the Saudi government. For example, 5 percent of our GDP would be more than $500 billion a year. We could invade Saudi Arabia for a lot less than that. I am not advocating invasion, just using it as a benchmark. The point is that economic warfare is not cheap. People ought to at least look at the numbers before they jump on board the conservation bandwagon.
But are there other, long-term benefits of conservation? Peter Huber and Mark Mills think not.
To pick just one example among many, finding costs are essentially zero for the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada. Yes, that’s trillion — over a century’s worth of global supply, at the current 30-billion-barrel-a-year rate of consumption.
For Discussion. Does the Free Trade with the AARP argument also apply to Saudi Arabia?