Oil: No Easy Answer

The term “blowback,” coined during the First World War, referred to one uncontrollable danger inherent in using chemical weapons. Designed to kill or maim your opponents, they could be deployed by either side, but a sudden shift in the winds could send those same gases drifting back over your lines and do their damage to your own troops. Although most nations have agreed never to use chemical weapons again, “blowback” has lived on. Among other meanings, it describes having past words or deeds drift back to your disadvantage when the winds of history shift.

Three great examples still confront us every day. Our supporting the Mujahedeen in the 1980s helped them defeat the Soviets. In turn, however, U.S.-supplied training and arms allowed the Taliban to take over Afghanistan, which they promptly made a safe haven for Al Qaeda. After 9/11 we routed the Taliban — and we’ve been fighting there ever since.

We helped overthrow the Iranian government in 1953 and reinstalled the Shah on the Peacock Throne, which the Iranians never forgot or forgave. They revolted in 1979, and we’ve been fighting the Mullahs ever since.

And then we basically duplicated that mistake in Iraq.

In essence, we were absolutely sure of our goals and programs in each of those scenarios, and we achieved them with stunning success. Yet the final outcome was nothing like what we had planned.

To the (Oil’s) Rescue!

Over the past two weeks we have heard open debate on intervening in Libya to help the rebels in their battles against Moammar Gadhafi. Helping the Libyan rebels certainly appeals to two aspects of our national personality. Frankly, we haven’t liked Gadhafi since he came to power and nationalized Libya’s oil industry. His tyrannical rule and his delusions of being Africa’s modern ruler haven’t helped. But say he is overthrown. What if those who gain power want nothing to do with industrialized countries — the same nations who ignored Gadhafi’s brutality because they wanted access to Libya’s oil? Intervening could merely make one more country even more hostile to the West than it was to begin with.

The psychologist’s distinction between “helping” and “rescuing” ties into this possibility. Helping someone means that, first, they ask for your help. Second, they are willing to do half or more of the work; and third, when it’s over they are capable of showing gratitude.

Rescuing is completely different. You rush in without being asked, you do all or almost all of the hard work, and the person you are rescuing isn’t capable of gratitude. In the end, they will turn and make you the new victim.

Applying this distinction to wars, we certainly were helping in the Second World War, and in Vietnam, Iraq and Afghanistan we were just as certainly rescuing. Our helping was why WWII ended so quickly and America was seen as the world’s savior. The other three wars drag on forever, and the outcome of our motivation is questionable. We have a term for that, too: quagmire.

So: When politicians line up to suggest that we need to intervene in the Libyan revolt, they remind the public of America’s renowned humanitarianism. Helping the underdog beat an unjust power also appeals to traits we’re proudest of — our sense of honor and justice. But when we achieve our goals for people living under unjust regimes, and often they then turn on us as if we were the original problem, we are stunned. Americans still don’t realize that it’s because we set out to rescue instead of to help that we end up being turned into the victim.

Although he put it differently to Harry Truman over numerous matters, the great Secretary of State who headed our military during the Second World War, George C. Marshall, fully understood this concept. Underdogs, once they topple power, often end up acting worse than the tyrants they’ve overthrown. So, when anyone brought up the “wise old saying” that the enemy of our enemy is our friend, Marshall knew to move slowly and with great caution.

Only Scary the First Time

Perception usually isn’t reality with oil, and today its truth is something completely different from its portrayal. First, oil surges are really frightening only once. For those who remember paying 36 cents a gallon for gas in 1972, when oil spiked in 1973 and unleashed a horrendous recession — caused primarily by the sudden jump in gasoline prices to nearly 90 cents a gallon at its peak — that caused major problems. Then gasoline fell back. It rose again; but the 87 cents per gallon that caused the 1974 recession was not a problem at all when the economy made a comeback in the late seventies.

Likewise, when consecutive hurricanes took out nearly 25 percent of our refineries in 2005, the resulting gasoline price spike to $3 a gallon immediately sent our auto industry into a flat spin and impacted the overall economy. Today, though gasoline is again over $3 a gallon, our economy is coming back and automobile sales are doing reasonably well as compared to the last two years.

So, even if gas does hit $4 a gallon, it won’t have the same impact it did in 2008. Why? It’s like watching a scary movie for the second, third or fourth time. It just doesn’t make you jump the way you did the first time you saw it.

This doesn’t mean that the current high oil prices are justified, or that they justify the massive jump in gasoline prices. That’s another story for another day — if the Shias in Saudi Arabia revolt.

Really Scary: Saudi Shi’ite Revolt

True, politicians love to grab current topics that cause the public high anxiety. They use them to make the point that they or their political party are the smart ones, while their opponents are either weak, misguided or downright stupid. So let’s use some pragmatic logic on this one. One thing we know for sure: Despite its promise to help us wean ourselves from imported oil, the only effect our national ethanol pipedream is having is to raise food prices worldwide.

As things have happened, Libya’s oil exports have fallen, though how much their internal protests are to blame isn’t clear. Libya’s oil makes up only a small percentage of world production, anyway — in the best of times maybe 1.2 million barrels per day. That figure may have been cut in half, or more, but OPEC’s overall exports are already down by 270,000 barrels per day for seasonally reduced demand, and Saudi Arabia will make up for any shortfall if asked. (Roy Mason of Oil Movements believes this situation will last until the middle of April.)

That said, the Libyans have not asked for our help, so why are we discussing giving it?

The Saudi Arabian situation is far more critical. Why? The Shi’ites in Saudi Arabia form a 10 percent minority of their population, but make up nearly 75 percent of the citizenry in their oil regions. If they go into revolt and shut down their oil facilities — a remote possibility — that could potentially cut 10 percent of the world’s daily oil production.

Knowing that our military is already stretched to the limit, would you send them to intervene in Libya, where such a move can have little impact and would likely end up with us becoming their victims one more time? Or would you make plans to ensure that Saudi Arabia’s oil production stays steady?

Do Right and Disregard the Weather

Six years ago paying $3 for gasoline was terrifying and damaged our economy for a while. Today we have economic growth and new hiring and better car sales, even at $3 a gallon. Likewise, $4-a-gallon gas is a problem, but it’s not near as frightening as it was three years ago.

It’s been written that current gasoline prices hurt 60 percent of the public’s purchasing power. Sadly, that’s true. But the reality is that the best estimates suggest that about half of the public is now living paycheck to paycheck. Therefore high gas costs are hurting just 10% more of us.

That’s the reason we may sell 13.5 million – 14 million cars this year, instead of the 18 million new cars we purchased 11 years ago. On a more positive note, it’s also why used car sales are soaring, more than offsetting the drop in new vehicle sales.

Our only real concern should be the long-term blowback potential in whatever America does. We should probably quit trying to win goals today that will cost us even more down the road. But we live in a time where pragmatic business logic always seems to take a backseat to intentionally divisive political emotionalism.

In a world this complex there are no easy answers. What seems absolutely right today is often foolish in retrospect. So we should focus on extending our economic recovery. That’s something we control completely that is likely to have a strongly positive outcome for most Americans — no matter which way the winds of history blow tomorrow.