Social Studies July 2006

Not a Gas Tax—a Gas Pact

Here's an idea for President Bush: propose an international treaty whose signatories would agree to eliminate gasoline from their transportation systems.
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Dear President Bush,

Your Social Security initiative is dead. Your immigration reform is divisive. Tax reform is a yawn. Iraq is a mess. Fairly or otherwise, you are widely viewed abroad and at home as a leader who disdains internationalism, snubs the environment, shills for oil interests, and rarely rises above partisanship.

Good news, sir. You could reinvigorate your leadership, transform your image, and wrong-foot your adversaries with a proposal that would bolster security, promote democracy and development, improve the environment, and embrace enlightened internationalism. The idea would attract support among hawkish Republicans and green Democrats, in Europe and Japan as well as the United States, and from Dick Cheney, Al Gore, and Kofi Annan all at once. It also has the advantage of being smart.

Here is the idea: Propose an international treaty whose signatories would agree to eliminate gasoline from their transportation systems by a date certain—say, in 30 years. Seek initial support from Europe and Japan, but open the treaty to any country that cares to join. Specify only that the treaty should allow signatories to reach the goal in any fashion they please and that it should allow for tradable credits against whatever interim targets it sets. That way, countries can act at different speeds and in different styles. Then let the negotiations begin.

You are no stranger to the theme of energy security, Mr. President. In your State of the Union address this year, you declared: "America is addicted to oil, which is often imported from unstable parts of the world." You announced an Advanced Energy Initiative aimed at replacing more than 75 percent of the country's oil imports from the Middle East—about 5 million barrels a day—by the year 2025. The way to get there, you said, would be by "incredible advances" in technology, especially ethanol, a gasoline substitute made from corn and other plants.

All well and good, but you set the bar low. According to the Center for American Progress, saving 5 million barrels a day would reduce oil imports by only about 25 percent in 2025, and overall U.S. demand by only about one-sixth.

No wonder the initiative was lost in the fine print. "Reduce oil imports by one-fourth in two decades!" is not an inspirational rallying cry.

In any case, the problem is not oil imports; it is oil. Because oil is a fungible commodity, shortages anywhere affect prices everywhere. Even if the United States imported no oil at all, it would feel a severe economic jolt if Iran closed the Strait of Hormuz. Still, if the country were to halve (say) its consumption of oil, it would, other things being equal, also halve its vulnerability to Iranian antics.

The potential benefits of decreasing reliance on oil only begin there, however. What economists have called "the curse of oil" turns out to have manifold dimensions.

Oil sustains and aggrandizes some of the world's most mischievous regimes, and within those regimes it often encourages the most mischievous tendencies. In Iran, the windfall from high oil prices is helping an alarmingly belligerent president to buy political support and prop up the mismanaged economy. Saudi Arabia has spent something like $90 billion of oil money, according to former CIA Director James Woolsey, exporting the jihadist ideology of Wahhabism, to America's very clear detriment.

Oil wealth is empowering Venezuelan President Hugo Chavez, an authoritarian populist, to set himself up as a U.S.-bashing regional bully. In Russia, writes New York Times columnist Thomas L. Friedman in Foreign Policy magazine, President Vladimir Putin "has used his oil windfall to swallow (nationalize) the huge Russian oil company, Gazprom, various newspapers and television stations, and all sorts of other Russian businesses and once-independent institutions." And, of course, it was oil that made a two-bit thug named Saddam Hussein both dangerous and relevant.

The nexus between oil and rogues is not happenstance. A growing literature suggests that oil wealth emboldens autocrats, fosters corruption, retards economic development, and undermines democratic accountability. Though Friedman is probably exaggerating when he posits that "the price of oil and the pace of freedom always move in opposite directions," it does seem that oil wealth distracts states from building diversified modern economies, establishing accountable governments, writing sensible tax codes, and investing in human capital. Oil states, notes The Economist, "fare worse on child mortality and nutrition, have lower literacy and school-enrollment rates, and do relatively worse on measures like the U.N.'s Human Development Index."

In short, oil subsidizes all kinds of trouble: geostrategic, developmental, and democratic. And that is before factoring in environmental costs (global warming and the rest). And that is before accounting for what the United States spends playing oil cop in the Middle East.

So oil is a problem, not just for the United States but also for the entire community of liberal nations. But what to do? The end of the oil era is many decades away. The best to be hoped for is a reduction in oil use, ameliorating but not solving the problem.

That, Mr. President, is why it makes sense to focus most on where the problem is worst: gasoline (including, for purposes of this article, diesel fuel). About 70 percent of U.S. oil is used for transportation (cars, trucks, and planes), whereas electricity comes mainly from coal, natural gas, and nuclear power. And the transportation sector is 97 percent dependent on oil. The electrical grid can juggle fuel sources, and many industrial consumers can adjust demand, use substitute fuels, or draw down inventories. But ordinary Americans depend on their cars, and nothing works in cars except gasoline.

"Our gasoline demand is the least elastic part of overall oil use, and so most vulnerable to supply shortages," says Nathanael Greene, a senior policy analyst with the Natural Resources Defense Council. Gasoline is the fuel that holds a knife to the country's ribs. If you want maximum security bang for every barrel of oil you save, Mr. President, then gasoline is your target of opportunity.

Replacing gasoline also happens to be do-able. In a December 2004 NRDC report, Greene calculated that by 2050 the United States could virtually eliminate its demand for gasoline by substituting ethanol, making cars more efficient, and taking some other conservation measures. That was without considering the effects of plug-in hybrid cars, which can be charged from the power grid at night. Because they switch to liquid fuel only for longer trips, plug-ins can get more than 100 miles to the gallon of gasoline—and much more than that if they run on a mixture of, say, 80 percent ethanol and 20 percent gasoline.

With plug-ins factored in, gasoline freedom draws several years closer. "I would say the fastest you could do this is probably the 2030 to 2035 time range," Greene says. So shoot for 30 years, Mr. President. Zero gasoline sets an inspiring goal. Even if absolute zero did not prove attainable at reasonable cost, reducing gasoline to the marginal status of, say, kerosene is certainly practical; and, whatever the final result, every increment along the way helps.

Your first instinct might be to go it alone. Don't. Europe's and Japan's susceptibility to oil blackmail is a security problem for America. The more resistant our allies are to pressure from the likes of Iran, the stronger the alliance will be. Moreover, by joining hands with other nations—especially the European Union—the United States can leverage its own commitment into a much larger reduction in global gasoline dependence.

There is politics to consider, too. A U.S. law piously calling for withdrawal from gasoline by 2036 could easily be repealed or forgotten in 2009. An international treaty would be much harder for any country to squirm out of. Finally, as a statement of resolve, the symbolic impact of an international treaty would be inestimably greater than that of a pledge by any one country.

For a market-oriented Republican, the beauty of such a treaty is that it need not dictate means. To reduce their gasoline use, countries could use conservation requirements, gas taxes, alternative fuels, new technologies, or any combination they chose. A gas pact need not create a big international bureaucracy. Gasoline-reduction credits could be traded on commercial exchanges, and compliance, though admittedly hard to enforce, would be easy to monitor.

So think about it, Mr. President. You could be the guy who set the world on a course to a post-gasoline age. Or you could be the guy who mumbled something about reducing oil imports by 25 percent. Your call.

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Jonathan Rauch is a contributing editor of The Atlantic and National Journal and a senior fellow at the Brookings Institution.

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