Oil’s economic warfare 

Oil is selling for close to $110 a barrel and gasoline for about $4 a gallon. Bad news for motorists. Marvelous news for jihadis.

Iran’s rulers are using oil money to develop nuclear weapons and fund terrorists, including Hezbollah, now staging a slow-motion coup in Lebanon, and Hamas, which is committed to the extermination of Israel. A generous share of the money that goes to Saudi Arabia and other Gulf nations ends up in the coffers of the Taliban and al-Qaida. Hugo Chavez spends Venezuela’s petro-dollars to expand his influence, and that of his Iranian allies, throughout Latin America.

The war we are fighting in many parts of the world is unconventional but our enemies are not so different from those we have fought in the past. In the 20th century, free nations were threatened by Nazis, whose goal was global rule by a race, and communists, whose goal was global rule by a class. The challenge today comes from regimes and movements committed to global rule by members of a religious group.

In World War II, Franklin Roosevelt and Winston Churchill understood that Adolf Hitler could not prevail if Allied troops denied him access to the oil fields of North Africa and Central Asia. In the Cold War, Ronald Reagan’s use of economic weapons was key to bringing about the collapse of the Soviet Union.

Of course, we can’t deny oil to OPEC, the cartel that sits on more than three-quarters of the world’s conventional reserves. But we could implement policies designed to break oil’s virtual monopoly as a transportation fuel, stabilize and even reduce fuel prices and diminish the ability of hostile oil-producing regimes to wage economic warfare against us.

Such polices would include increasing domestic oil production, and speeding the pipeline project that would bring oil mined from Canadian sands to the U.S. Conservation is good, too. But these measures can be only part of the solution.

As Jim Woolsey, former director of Central Intelligence and 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.” That means that when non-OPEC countries “drill more, OPEC simply drills less and drives prices back up.” If demand is reduced through conservation, “OPEC again drills less and prices zip back up.”

What we desperately need is a competitive transportation fuel market. If the price of Coke goes up, you can switch to Pepsi. If the price of beef climbs too high you can eat chicken. But when the price of gasoline goes up you have no choice but to pay or change your lifestyle — in some cases dramatically.

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. Woolsey and Korin emphasize: “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.”

At this point wind, solar and nuclear power cannot be part of the solution because they cannot substitute for liquid transportation fuels. Eventually, we probably will see electric and plug-in hybrid vehicles come on line in sufficient numbers to make a price impact. But we can’t wait. There’s a war on.

Clifford D. May is president of the Foundation for the Defense of Democracies, a policy institute focusing on terrorism. E-mail him at cliff@defenddemocracy.

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