Black
Gold and Political Economy
By Siddique Malik
Louisville, KY
When a sector of the economy
lacks genuine competition, consumers suffer, and
this is exactly what is happening in the area
of oil and gas. The lack of competition in this
sector is not because of a shortage of providers
and producers but because of a lack of alternative
products. This is the reason there is never a
price-war between oil companies. A tacit price-fixing
is in place in this market.
What other reason could possibly explain almost
uniform price at all gas pumps regardless of the
company that owns them? At the slightest provocation,
oil prices jump up, but they come down very slowly.
Is there a solution to this virtual enslavement
of the consumers of black gold (oil)?
Yes, there is! It is a two-prong solution: Reduce
the demand for oil to help lower prices, and develop
alternative energy products to induce genuine
competition in the field. But who is going to
do that? Certainly, it must not be the kind of
solution that President Hugo Chavez, blinded by
his hatred of America, is trying to apply in Venezuela.
No doubt, America’s record in the area of
its relationship with Latin America is dismal.
But this should not be a reason for a country
in the region to destroy its oil industry by injecting
a heavy dose of government control into it.
Nationalization or excessive government control
may satisfy the needs of a megalomaniac leader
like Chavez, but sooner or later it would destroy
the affected industry. This is what happened to
the oil industry in Libya and Algeria, and banks,
educational institutions, and other industries
nationalized by Zulfiqar Ali Bhutto on the New
Year day, 1972, in Pakistan. When the push came,
the behemoth of state-control, the Soviet Union,
fell like a house of cards. China has learnt this
lesson and is adjusting very fast.
Naturally, the solution will have to come from
the private sector, albeit, it would need to be
helped and perhaps even stimulated by the government.
If the government and Congress could shed their
obeisance toward the energy sector, they should
encourage the private sector to enhance intra-city
public transit systems and establish a nation-wide
high-speed inter-city train network. This would
cause the demand for gasoline to shrink, making
prices decline and thus teaching the avaricious
oil companies that have become addicted to their
de-facto monopoly a much needed lesson. It would
also encourage these companies to put their heart
into research and development. This might see
the emergence of ethanol and other alternative
energy products in America. This, in turn, would
stimulate competition, giving control to the consumers.
These changes would place the automotive industry
into an overdrive to develop vehicles that use
various types of energy sources, not just the
blood of freedom and human dignity, also known
as gasoline. A considerable amount of oil that
flows into the US market originates in the suppressive
Middle Eastern countries in which the concept
of freedom and equality is as alien as is the
headscarf at Florida beaches. We have no choice
but to consume this import because we need to
get to places to which we need to go. You see:
Freedom of travel and movement is one of the basic
freedoms that we Americans cherish. Never mind
that exercising this freedom helps dictators of
oil-producing countries suppress their people.
We are in a hurry; don’t want to miss the
freeway exit thinking about other countries’
problems.
When the results of this glibness reverberate
back to our shore in the form of terrorism, we
would budget more money for the Department of
Homeland Security and push Pakistan to do more
to stem terrorism. Meanwhile let us enjoy the
weekend. Would it not make sense to lower our
living standard just a bit so as to help freedom
and human dignity take root in suppressed societies?
By the way, this would also help nip the evil
of terrorism in the bud.
So far, the auto industry has played in the hands
of the oil industry because it does not want to
rock the boat and endanger its revenues. Surely,
it has pretended that it is developing vehicles
that use alternative energy sources, and some
such models are available for purchase. But the
efforts have been half-hearted. I am sure some
of the lobbyists who earn their money by keeping
mass-transit legislations from reaching the floor
of Congress are paid by the automotive industry
in addition to the oil industry. You scratch my
back, I’ll scratch yours! If there is sound
and fast mass-transit system, who is going to
buy cars?
Recently, the French high-speed train, TGV, established
a record speed of 356 miles an hour. At this speed,
a train could take us from Louisville to Chicago
in 53 minutes, from Los Angeles to San Francisco
in 64 minutes and from coast to coast in less
than 6 hours. If one could take such a train or
even a train with a little less speed, one would
generally avoid driving or even flying to long-distance
destinations. Modern high-speed trains are powered
by pollution-free nuclear energy; no oil dependence
and no harmful gas emission. This would help stem
global warming, too. Moreover, this is what I
call genuine competition.
China is a rookie in the field of capitalism and
consumerism. Yet, it is already on track to establish
a nationwide network of high-speed trains. While
it is warming up to the Middle Eastern regimes
so as to have a steady oil supply, it is taking
steps to keep its oil-dependence at bay. American
leadership needs to emulate such a vision.
At the risk of being accused of repetition, I
would again argue that a great benefit would emerge
from America's reduced oil dependence: We would
be able to deal with dictators of the Middle East
on terms that suit their people, not just these
dictators. This would help freedom and democracy
spread without wars – not to mean that warmongering
is a way to foster these values --improving America's
international image. Did those who were desperate
to bring democracy to Iraq ever think of this
slow but sure option?
Since fast trains need special tracks, a network
of these tracks would need to be built. Improving
intra-city public transit systems would require
massive building efforts, too. Imagine the boost
these activities would give to the economy by
creating thousands of jobs. The question is not
if it would be a win-win situation, the question
is if the vested interests want a win-win situation
for Americans.
A few months before the crucial mid-term elections
in 2006, the gasoline prices started to drop slowly
and by the election day, they were at the lowest
they had been for quite a while. Soon after the
elections, this price transformation took the
reverse route and the oil prices are now back
in their high range. Market forces at work? I
don’t think so! Market forces in the oil
sector hold their ugly dance when a cue emerges
on the horizon. This is why I want genuine competition
in the field. I want genuine market forces to
go to work for the exploited and desperate oil
and gas consumers.
In the second paragraph while talking about a
possible solution I asked: Who is going to do
it? Now, we know who is not going to do it. Neither
the politicians, nor the energy sector would take
the lead. It would be, “we the people”.
In a democracy this entity has the real power.
Only, if it could wake-up and order its servants
(the government and the legislators) to act. By
doing so, it would bring tremendous economic savings
to itself and foster freedom and democracy in
the most unlikely places. No war needed.
- smalik94@hotmail.com
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