Don Mayer, Oakland University / ALSB Environmental Law Forum – 2005-03-27 23:12:35
http://www.sba.oakland.edu/Faculty/mayer/Petrodollars_and_Peace.DOC
The attacks of September 11 confirmed the continuing cost of US and European reliance on oil from the Middle East, even as large passenger vehicles display US flags and their drivers claim cheap gasoline a American birthright. (1)
Ever since the OPEC-induced oil price shocks of the 1970s, policymakers have understood the risks to US economic security in this reliance. Because the transportation sector has been a rising source of US oil consumption, there is keen interest in alternative fuel technologies (using ethanol, hydrogen and diesel) as well as renewed demands for stricter fuel economy standards. But automakers – especially in Detroit – are determined to fight such standards, (2) largely because the “light trucks” as defined by Corporate Average Fuel Efficiency (CAFE) standards have been the primary source of their profits in the 1990’s.
This article describes the dangers of US dependence on Middle Eastern oil, and suggests that the current debate on energy policy and fuel efficiency standards has failed to enlighten the US citizenry, at least partly because of extravagant advocacy by both environmental groups and auto corporations. If the US is ever to wean itself from non-renewable fuels, and especially oil, a more responsible and informative public dialogue will have to take place.
I. A Faustian Bargain?
As noted by Daniel Yergin in The Prize, Egypt’s Gamal Abdel Nasser was one of the first to realize the potentially disruptive power of Arab oil.
Nasser, too, wished to carve out a great empire, and in his book, he emphasized that the Arab world should use the power that came with the control over petroleum — “the vital nerve of civilization” – in its struggle against “imperialism.” Without petroleum, Nasser proclaimed, all the machines and tools of the industrial world are “mere pieces of iron, rusty, motionless, and lifeless.” (3)
The Persian Gulf war of 1991 and the United States “war on terrorism” may represent what Samuel Huntington has called the “clash of civilizations.” (4)
The US economy’s dependence on oil provides a motive for US military intervention in the region, as well as a stimulus to further terrorist responses. To the extent that consumers, corporations, and the US government could gradually reduce their collective reliance on Middle Eastern oil (or reduce their reliance on oil generally), the prospects of peace would be enhanced.
Yet even after the OPEC-induced “oil shocks” of the 1970s, the US has shown little willingness to reduce its appetite for imported oil, despite clear warning signals for national security and the considerable environmental and social costs (5) of our dependence on the internal combustion of gasoline for vehicles.
The energy-intensive economies of Europe, the United States, and Japan are largely dependent upon imported oil, (6) and much of that oil is from the Persian Gulf states. US oil dependence on Persian Gulf oil has grown since the oil price shocks of the 1970s. (7) Overall oil imports to the US, E.U. and Japan are predicted to increase between 2002 and 2020. (8)
As of March 2002, there was little likelihood that Congress and the President would agree on any set of policies that would significantly reverse that dependence for the US (9) Unless that dependence is reversed or at least significantly reduced, the US will likely commit military, political, and diplomatic resources to maintaining ‘stability’ in the Middle East. (10)
That military commitment is now long-standing. In the late 1970s and early 1980s the Soviet Union invaded Afghanistan, closely approaching oil resources in the Gulf. President Carter did not hesitate to respond in what came to be known as the Carter Doctrine, which stated that any attempt by an outside force to gain control of the Persian Gulf region would be regarded as an assault on the vital interests of the United States.
In 1987-88 the United States navy escorted reflagged Kuwaiti oil tankers to protect them from any hostile attack, at the urging of the Kuwaiti government. The Gulf War (1990-91) confirmed the American role in protecting oil resources in the region. This growing American involvement in the Gulf region reflects a consensus in the United States and other countries that the prosperity of the global economy depends on the availability of Persian Gulf oil in reliable volume and at reasonable prices. (11)
The cost of that commitment is considerable, is not easily calculated, and is not included in the price of oil (or gas at the pump). Nor, for that matter, are the numerous social and environmental costs of our automotive oil-based economy. (12) US military presence in the Gulf, especially in Saudi Arabia, is a significant motivating factor behind the Al Queda network’s attacks on US embassies in Africa, the World Trade Center towers, and the Pentagon. (13)
Moreover, the US alliance with King Fahd’s fragile government in Saudi Arabia is inherently unstable, and has been described as a “Faustian bargain.” (14) In exchange for US military support, Saudi Arabia provides bases for US forces, attempts to stabilize world oil prices, and gives preferential prices to US importers. (15) Yet the Fahd regime also has maintained “tangible connections to Islamic fundamentalist terrorism” (16) and Saudi citizens have been implicated in numerous attacks on US interests during the 1990’s, (17) including attacks on US embassies in Kenya and Tanzania, and the attack on the USS. Cole in 2000. (18)
It is grimly ironic, therefore, that US dollars for Saudi Arabian oil were converted into direct aid for Al Queda, and that Osama bin Laden’s network trained and financed the actions of 15 Saudi citizens in the attacks of September 11, 2001.19 It is also troubling that Saudi cooperation after September 11 was somewhat halting. (20)
With or without Saudi cooperation, the US public expected its government to end or at least disrupt the Al Queda terrorist network; yet there was no reason think that getting Osama bin Laden (dead or alive) or his chief aides (or Saddam Hussein, for that matter) would end conflict between Islamic fundamentalists and the West.
Other matters must also be addressed; among them is the apparent sense of entitlement in the US about the world’s fossil fuel resources. US military action against the Taliban and parts of the Al Queda network may provide retribution and at least temporary respite from further attacks, but peace will be served only when the roots of Islamic unrest are examined and dealt with. A plan for weaning the US economy from Persian Gulf oil would also help, but the status quo seems to have a mind of its own.
Patriotism and Fuel Efficiency
A recent article in the New York Times captures the post 9-11 mood of many American motorists.
Sue Smith had already heard the theories, and she dismissed them entirely. “I don’t think it’s unpatriotic to use so much gas,” Ms. Smith said, loading her silver Chevy Tahoe with groceries. “It’s very patriotic. It’s our way of life. . . .We’re an affluent society. Should I hate my neighbor because she has a better house, a better car, more money?” (21)
Ms. Smith shows us how it is often hard to see ourselves as others see us. How does the US (its corporations, consumers, and government) evoke so much unrest and resentment in other parts of the world? (22)
Relevant to the conflict between Islam and the West, Samuel Huntington notes a number of apparent realities that escape many in the US, but which are prominent in the minds of many people in the Middle East. Among these the subjugation of the world by Western powers through violence, (23) the inherent tensions between “Western values” and Islamic culture, (24) the reality of US imperialism over the past hundred years, (25) the link between “Western values” and “modernity,” (26) and the resurgence of Islam as a reaction to modernity. (27) Moreover, Huntington sees a link between US-style consumer-driven capitalism and a “decadence” that Asian and Islamic peoples oppose. (28) In short, the US public has a sense of entitlement to inexpensive supplies of gasoline that may be part of the problem.
Ms. Smith would no doubt consider me a “wacko environmentalist” to point out that high levels of gas consumption in the US have indirectly helped to fund Osama bin Laden’s network, (29) that fuel consumption harms the environment, or that the price of gasoline is actually far less than its social and environmental costs. (30) But this lack of awareness is at least in part the result of politicians and corporations who will not consistently speak the truth to the public.
To count the ways in which this is so, let’s look at the recent dustup in the Senate over fuel economy standards. First, however, there are three basic things to make clear at the outset. I now hail from Detroit, and would very much like to see our auto companies lead the world in creating cars of the future: comfortable, safe, minimally or non-polluting vehicles that delight the eye and preserve our freedom to move about at our convenience.
Readers should also be aware that I believe that a corporation is not just a “nexus of contracts,” but has been given personality (legal personality, at the very least) by states and by the judiciary, which decided in Santa Clara County v. Southern Pacific Railroad Co. (31) that corporations are persons for purposes of the Fourteenth Amendment, and subject to its protections. Persons – whether natural or juridical – may be protected by the law, can break the law, and can also help to make the law.
Finally, I believe that corporations thus have a responsibility to comply with sound environmental laws, and oppose or advocate change (rather than disobey) environmental laws that are unwise. In this regard, corporate compliance with or defiance of environmental laws is not automatically “good” and “bad,” respectively. Corporations should oppose unwise environmental laws, and support good ones (with obedience of existing laws and advocacy for sound proposals).
Generally, good environmental laws will contribute to overall efficiencies, ecologically and economically. In Ties that Bind, Thomas Donaldson and Tom Dunfee note that “historical business insensitivity to environmental concerns. . .is characterized by faith in technology and the presumption that an irresolvable conflict exists between ecology and economic growth.” (32) They cite Paul Steidlmeier’s concept of “public policy ecology” in contrast to “pre-ecological economism.”
Their comment on pre-ecological economism is that it “presumes what their hypernorm of structural efficiency formally rejects- namely, that efficiency is to be measured only by the height of the gross domestic product. The efficiency hypernorm implies, rather, than until we factor into the broad economic equation the value of scarce natural resources, we have an inadequate measure of social efficiency.” (33) T
heir conceptions dovetail with free-market environmentalism and natural resource economists, both of which emphasize rampant inefficiencies in many parts of our economy; with the transportation sector, the market failures include numerous subsidies and externalities, (34) as well as unintentionally constructed barriers to entry for alternative fueled vehicles powered by natural gas or hydrogen. (35)
We should all advocate for structural efficiencies in an economy; just as importantly, we should advocate the dismantling of persistent, perverse inefficiencies. This duty of advocacy extends to everyone who cares about the dialogue about democracy and free markets, and includes politicians, voters, academics, consumers, auto makers and oil companies.
An auto company should oppose ill-conceived legislation, but to further the dialogue, should provide good faith suggestions how the desired ends can be reached. For example, if California proposes that each automaker must insure that at least 15% of the vehicles they offer for sale in California have zero emissions by 2003, a strong case for corporate opposition emerges.
The case is strong not only in terms of the corporation’s “natural” desire to maximize shareholder wealth, but even stronger because the proposal does not square with structural efficiencies, and fails thereby to maximize social and environmental well-being.
If GM knows that the law will mandate the production of zero emission vehicles, and that existing technology allows this to be accomplished only through battery powered vehicles (rather than, say, minimal emission vehicles powered by natural gas), a number of realizations follow.
First, the vehicles are not likely to be purchased by consumers (based on reasonably reliable market studies showing consumer reluctance to try something new, and reluctance to operate with a limited driving range).
Second, the mandated vehicles will not really result in zero emissions, because the ultimate power source is an electric power plant burning coal or using nuclear fuel.
Third, the mandates will significantly reduce profits to the company, and thus will shift resources away from better, long-term solutions (fuel cells, hybrids, or advanced diesel technology). Thus, the corporation has a duty to oppose the law, even though at some levels, the mandate makes environmental sense (e.g., scrubs and filters on the power plant may provide an economy of scale that makes the ZEVs less polluting than the same number of internal combustion gasoline powered vehicles).
Thus, there is nothing wrong with an automaker opposing unwise or ill-conceived legislation or regulation, even if the basic thrust of its opposition is founded on self-interest (such as “maximizing shareholder value”), as long as the opposition is also grounded in a civic responsibility to ensure that the market is governed by structurally efficient rules. (36) In either case, opposition should be tendered to politicians and the public in good faith, meaning that specious, hypocritical, or solely self-serving arguments are morally suspect.
Auto companies’ arguments against stricter fuel efficiency standards don’t fare quite as well as arguments against mandated ZEVs. There are, to be sure, some strong arguments against mandated fuel efficiency standards. The principal arguments against fuel economy standards – advanced during the late 1980’s and early 1990’s amid concerns over motor vehicles and the greenhouse effect, when a 40 mpg standard was proposed in the Senate – are as follows:
• (1) making more fuel efficient vehicles requires making lighter vehicles, which are not as safe;
• (2) a doubling of fuel-economy in the US will not appreciably alter carbon dioxide emission levels, since moving from 27 mpg to 40 mpg would not appreciably reduce those emissions if motorists simply drove more; even if vehicle miles traveled did not increase, 40 mpg is only half again as fuel efficient, making emission reductions almost insignificant; (37)
• (3) global warming is not a problem, and even if it were, US carbon dioxide emission
reductions would be pointless against increased vehicle emissions from developing nations, where large increases in vehicle fleets are predicted;
• (4) consumers want choice, and do not want to be forced by government regulations
into smaller, less safe vehicles;
• (5) existing CAFE regulations are an inefficient means of enforcing conservation
because a bureaucracy must measure miles per gallon for each vehicle the corporation sells and then levy fines; an increase in gasoline taxes would be far more efficient, and tax incentives for purchase of fuel efficient vehicles or alternate fueled vehicles would preserve consumer choice;
• (6) market forces will regulate far better, anyway; when consumers want fuel-efficient cars, they will buy them.
The vigorous efforts to defeat more stringent CAFE standards are partly motivated by reason, and partly motivated by money. US automakers’ profitability in the late 1980s and 1990s was due in no small part to the market success of larger vehicles, which profit a far better profit margin than smaller ones.38 Some of the arguments automakers make against CAFE standards are better than others, and some seem to lack honesty or good faith.
For example, the argument that smaller vehicles are not as safe is certainly true in one respect: SUVs as manufactured in the 1990s were a hazard to any small car that collided with them. (39) The missing premises in the usual argument (“Fuel economy standards will result in less choice and less safety for consumers.”) are that gains in fuel economy require the manufacture of smaller, less safe cars.
But this cannot be proven in terms of mismatch collisions between large SUVs and smaller cars with few safety features; larger vehicles could still be more fuel economical, and smaller cars could be made safer. Indeed, there is ample debate over whether larger cars, per se, are safer than smaller ones, or that smaller cars cannot be built with adequate safety features. Nonetheless, most of the automakers’ arguments are couched in the rather simplistic terms of “larger is safer.” The lack of good faith is fairly evident in the automakers’ concerns over driver safety, when governmental efforts to require safety features (seat belts, headrests, airbags) have almost always been met with fierce resistance. (40)
The argument that consumers had a right to choose larger, safer, more comfortable vehicles (SUVs) is a potent one (why should government dictate how comfortable and safe you can be?). A recent ad sponsored by the Alliance of Automobile Manufacturers just prior to the Senate debate of fuel economy standards featured a housewife explaining to her clueless husband that “the government wants to take away my SUV,”41 and implies that no one should take away her right to choose a safe vehicle that provides needed size and comfort. The integrity of this argument seems undermined by available technologies to enhance the fuel efficiency of SUVs42 and automakers’ failure to adequately inform SUV owners of rollover tendencies that drivers would not and did not expect.43 Moreover, if consumers’ right to choose safer vehicles is vitally important, then full disclosure by automakers of safety and crash data would also be important. But the industry record in this regard has not been impressive. (44)
There is also some merit to the “market forces” argument: US drivers willingly buy larger, less fuel-efficient vehicles. (Seemingly, many drivers also buy for image rather than safety).(45) In polls, the public seems concerned about global warming and favors fuel efficiency standards; in showrooms, they choose size and power. (46) But the consumer’s choice does not take place on a blank slate. As we have seen, the context of consumer choice for personal transportation takes place in a context of subsidies to oil companies and the market’s failure to fully price gasoline. (47) Bradsher has also shown how current laws favor SUVs and light trucks, (48) and the phenomenon of path-dependence (49) largely limits consumer choice to different brands of gasoline-powered vehicles.
Generic appeals to “consumer choice in the market,” in short, are a lot less straightforward than they seem. By gliding over the social and environmental costs of gasoline use, and ignoring subsidies to the oil industry, automakers can appeal to “consumer freedom of choice” in a way that perpetuates the naïveté of Ms. Sue Smith and many others.
Interestingly, the Alliance of Automobile Manufacturers also supports “consumer tax incentives” to help offset the initial costs of advanced technology vehicles until “more advancements and greater volumes make them less expensive to produce.” (50) Such arguments are (in terms of ecological economics) more appropriate, yet still advocate for an additional subsidy without explaining that these subsidies (incentives) are necessary because of existing subsidies for oil and auto use. Nor do these appeals risk telling US motorists that higher energy taxes would make even more sense. Thus, the most recent CAFE debate continued an almost ingrained habit of overlooking the ecological and social costs of oil and gasoline use on US highways.
III. Conclusion
The recently proposed fuel efficiency standards would not, in themselves, bring about energy independence from Persian Gulf oil, nor would they drastically reduce carbon dioxide emissions.
But such claims are seldom made by proponents of higher corporate fuel economy averages; most environmental advocates realize that oil and gas and fossil fuels have a market advantage through current subsidies and untaxed externalities, and that a number of solutions (fuel economy standards, incentives for alternative fuels and higher consumption taxes) are needed. CAFE standards are less structurally efficient than higher energy taxes, or even incentives favored by automakers; but the rhetoric opposing higher standards does not speak to the public in a way that promotes understanding and thereby makes better environmental laws possible.
Would less profligacy in oil and gasoline consumption reduce the level of conflict between Islamic fundamentalists and enhance the opportunities for peace in that region and in the world?
Maybe nothing will. But if US and E.U. consumption of Middle East oil is not a primary cause for the animosity that led to the September 11 attacks on the Pentagon and World Trade Center, the US military presence to insure that supply may well be.
In the long run, patriotism will be found less in those who celebrate our “right to consume” non-renewable energy, and more among those individuals who consider their ecological footprint on the world, among those corporations and environmental organizations that seek and speak the truth, and among those politicians who are committed to forging a national energy policy that can allow us to drive without dependence on Persian Gulf oil.
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