Do American Drivers Get a 'Dictator Discount' on Gasoline?

Today, as Anti-Mubarak protests in Egypt wear on, Brent crude oil prices are continuing their week long rise above $100 to levels not seen since 2008. While US drivers are fretting about the effect even higher gas prices will have on their commutes and the economy, we should also be asking ourselves the opposite question: Have dictatorships in the Middle East been giving us discounted gasoline? With our notorious dependence on cheap gas, have we been the beneficiaries of an authoritarian markdown at the pump?

Watching the oil market, it's obvious that this week's rise in prices is not really attributable to real problems around the Suez Canal or the Sumed pipeline, but lies in less tangible fears about stability. Steve LeVine, at Foreign Policy, calls the rise in prices "classic casino behavior." But more and more, the fear that's being articulated is that all the regimes in the Middle East are vulnerable, and the days of cheap oil may be over. "The OPEC president has said that oil above $100 is not desirable, but while Middle-East unrest continues prices will probably hold around here," Bache Commodities analyst Christopher Bellew said. "The terrible fear must be of this unrest spreading to a major producing country like Saudi."

The Saudis are a notable authoritarian regime in the Middle East, but by no means the only one -- or the only one that could significantly raise oil prices. Look at this rendering of the Economist's Democracy Index Survey for 2010. Virtually all of the countries in the region are authoritarian, with the exception being Iraq. Now look at the EIA's map of oil production, and you can easily see the problem. Compare it with the tab about oil reserves for a glimpse of the future.

It's not possible to quantify the relationship between the authoritarian status quo in the Middle East and the cost of a gallon of gas here because the oil market is more art than science. (I invite readers to estimate in the boards.) But I'd imagine that a few months of political uncertainty in the Middle East could send gas prices up perhaps an extra 50 cents a gallon. A prolonged period of uncertainty would certainly cost U.S. drivers more. Just yesterday, Ben Bernanke described higher oil prices as "a kind of tax," that could slow the recovery, an intellectual formulation that I think is basically accurate. But it may be time to fear not higher gas prices, but the undemocratic implications of lower ones.

The economic benefits of cheap gas have a moral price for U.S. consumers. There's a lot of scholarship tying oil exports to authoritarianism. See UCLA professor Michael Ross's work, for one. (Ross has also done a fascinating study of the relationship between oil exports and women's rights.) This nuanced essay by Larry Diamond examines the role of oil money in creating and reinforcing the structure of states in the Middle East, and the geopolitics that causes bigger powers to shower them with diplomatic and economic legitimacy. Diamond follows the implications of this repression into non-oil areas like the Israel-Palestine conflict. Diamond sees the solution as a prolonged period of low oil prices -- but that is precisely NOT what the oil market will deliver as more regimes are threatened by protests like the ones going on in Egypt. As we've seen this week, turmoil makes prices rise.

Here's the rub: America's oil problem runs deeper than our dependence upon authoritarian regimes for cheaper gasoline to keep our economy running. The very mechanism of the oil market reinforces the status quo by raising oil prices when these regimes are threatened, potentially keeping them (or others nearby) in power.

And this suggests that we need a whole holistic approach to deal with the various tentacles of our oil problem. American consumers express their will not only at the voting booth but by buying products that support everything from breast cancer research to rainforest preservation to tuna fishing methods to PAC's. Merely buying gasoline, though, with its dictator discount, makes a mockery of these righteous efforts. The solution to our gasoline problem -- both economically and morally -- will require much more than "right" buying: concerted legislative action to lower oil demand, funding for science for alternatives for transportation, diplomacy to lower oil prices, and of course, diplomacy that encourages the will of the people in the Middle East, whatever that turns out to be.