isn't documented that American intelligence was guilty of failing
to predict, and therefore to abort, the attacks of September 11.
It was never a case of the night watchman being asleep when the
thief walked in. Intelligence is an inchoate resource and sometimes
it just misses out, as the Secret Service missed out in Dallas on
November 22, 1963. But when a potential crisis materializes before
history's very eyes, to have no policy is on the order of national
delinquency. The only step we have taken to guard against the interruption
of foreign oil imports is a national reserve which would
look after our needs, in normal consumption, for approximately 53
That isn't good enough. On top of the high cost we are paying, we
have the political question. It is humiliating to do nothing when,
for instance, the Peacock Throne of the Ayatollah calmly advises
that it proposes to reduce oil production by 220,000 barrels per
day. That means, after the decree is implemented, that the price
of oil would rise about 10 percent.
What we do hear every now and again are proposals for reducing our
consumption of oil. Most recently, the formidable Martin Feldstein,
the Harvard economist who writes for the Wall Street Journal,
proposed a voucher system of considerable ingenuity. Feldstein,
remember, is a free-marketeer, and is alert to keeping the covetous
hands of government, to the extent practical, out of the way. What
he proposes is that everyone be given at the start of every year
vouchers for X amount of gasoline (with allowances for geographical
location and profession), the design being to cut down gasoline
consumption by increasing the cost of the incremental post-voucher
gallon. But do not confuse this with wage and price controls, because
if you ran out of your vouchers, you could buy somebody else's,
buy from the guy or gal who drives less and looks forward to selling
unused vouchers. All of the above, by the way, would be automatic
at the gas pump, which would sell you the gas and buy and sell vouchers
in a simultaneous transaction.
Then of course there are the supply-siders, who reasonably urge
that obstacles to the development of oil and gas reserves be reduced.
It is good rainy-day stuff to dream about the day Bill Gates III
discovers how to decoct energy from the sun's rays. But meanwhile
we have to live with the consequences of our huge appetite for energy
and the caprice of OPEC, an oligopoly we have never seriously figured
out how to deal with.
Consider, to name only one OPEC power, Saudi Arabia and its 7 million
barrels per day. How might we protect ourselves against Saudi hostility/petulance/greed?
It is satisfying to keep repeating to ourselves that Saudi oil is
of no use to the Saudis unless they actually sell the oil. That
is reassuring, but doesn't deprive the Saudis, as OPEC operatives,
of the right to tease/irritate/threaten/plunder their clients without
regard for market adjudications of supply and demand. We know what
it is to have to stand in line for gasoline. Sixty years ago the
Japanese knew what were the implications of an oil embargo, one
of them being Pearl Harbor.
The policy question today is: What is our policy? We need
to try to tame demand by such proposals as Professor Feldstein's,
but we need also deterrent stratagems, which are political. How
to align our forces with fellow states in the industrial world in
such a way as to protect ourselves? Oil is a vital interest. Japan
went to war in part because of its need for oil. We need to develop
non-military means of affecting OPEC.
Well (to stay with Saudi Arabia), the purpose of selling oil is
to generate income. What does one do with income, other than buy
jewels and yachts and private jets? The OPEC powers buy industrial
goods. We need to devise economic counter-measures aimed at aggressors,
here defined as those who collaborate to fix prices. Our policy-makers
should be resourceful enough to devise measures of economic retaliation,
custom-designed for Venezuela, or Nigeria, or Iran, or Saudi Arabia.
Reasonable and justifiable criteria for the fair price of oil are
not easy to come up with (the production of a gallon of oil in different
oil fields can vary by a factor of 500 percent), but there is no
reason to ignore the challenge. President Bush is understandably
preoccupied. But it would be reassuring to know that something is
afoot other than abject compliance every time OPEC decides to extort
from industrial oil consumers.