A Post-Oil Arab Economy?

Here's a UAE-based column from Greg Dobbs, in the Rocky Mountain News. It's an indicator of what is possible when a country knows they actually have to compete for business.
It's a very interesting article, but for this piece of faulty logic:

With far more skyscrapers on the skyline than mosques, these people seem more into income than ideology. This is not your father's Arabia. The ports deal was just part of this country's creed: The business of Dubai is business.
But of course, that didn't mitigate fears in the United States that an Arab country would use financial influence to impose Islamic ideology. So I asked a lot of locals about those fears. What they said was, there are bad apples in every society. Look at Great Britain, where terrorists have proved they can operate in obscurity. Or look at other places where al-Qaida wove its 9/11 plot: Hamburg, Germany, where much of the planning took place; or the U.S., where the hijackers learned to fly airplanes!

In none of those three examples did the perpetrators receive radical Islamic indoctrination financed by their host countries. If the UAE has been using oil money to finance madrassas that teach radical Islam, then they cannot rightly be compared to Western countries who spend their money trying to counter the effects of that oil-financed indoctrination.

Aside from that point, it really is an illustrative example of what will be possible when we are weaned from our consumption of oil.

Mixed Feelings on Ports

We Republicans correctly have mixed feelings about the outcome of the UAE ports debacle. On the one hand, the outcome was what it should have been, given the circumstances. A very questionable “ally” in the GWOT was treated differently, in their efforts to assume management of a sensitive U.S. assets, than they would have been, had they been a reliable ally such as Britain or Australia. On the other hand, this debate has revealed a huge conflict within conservatism itself, between people for whom the forces of free-market capitalism are the sole judge of the merits of transactions, and people like me, who love the free market, but also recognize that the free market is tremendously limited in its ability to best allocate resources.

The free market is limited in that it is only the best way of governing transactions when its actors are rational and acting on good information. And since matters of national security deal heavily with irrational actors and ambiguous information, the analyses of security-minded people are often going to clash with the analyses of market-minded people. That doesn’t mean either group is somehow not conservative or patriotic; it just means that we approach things from two very different worldviews.

For example, on the website redstate.com, the recent post DubaiPortsVictory.com was a mildly sarcastic, take on the worldview of those of us who lean more security-minded than market-minded. I responded (along with some sarcasm, which I would rather not have employed in retrospect) by pointing out that Dubai’s funding of radical Islam is well documented, and therefore, they should be treated differently than other countries in matters of direct foreign investment. When I asked for a response to the articles I provided, and a response by vipertrunk made several points.
S/He began:

If you want to punish every country that ever had anything to do with terrorism - then make sure you:
• punish the country that gave Timothy McVeigh his military training.
• punish the country that trained the 9-11 hijackers how to fly.
• punish the country that could have had Bin Laden's head on a pike in 1990 if we had asked (oops I gave the answer away!)
I don't point this out to slam America. I am an American, but the above facts don't lead me to reason that a US company shouldn't be trusted to run our ports.

Now, I think those are not good analogies; we did not, as an act of state, fund the propaganda that made Timothy McVeigh or the 9-11 hijackers into terrorists. And in 1990, Bin Laden was a very small-fry crackpot, not worth getting worked up over given what we knew at the time.

He continues:

In addition, did you know that we have been flying military aircraft out of the UAE since Desert Storm? In support of Desert Storm, Southern Watch, Enduring Freedom and Iraqi Freedom. Because, it's really popular in the mid-east to allow American military aircraft to fly continuously from your bases for 20+ years. Did you also know that we run hundreds of thousands of tons in military cargo through the UAE onto US Navy replentishment[sic] vessels who then load those supplies onto Carriers cruising in the Gulf and Indian Ocean? That is what an evil, America-hating terror state normally does, right? Haven't we also been flying thousands of military sorties and a moving a million tons of military cargo from Iran for the last 20 years? Oh, that's right, they're an evil America-hating terrorism sponsor.

All of those things are great, but they do not change the fact that while they are extending a hand to us militarily, the other hand is financing our worst enemies. They feel a need to be nice to us because their oil money is running out and they want our tourism dollars, but they also feel a need to sponsor radical Islam to appease terrorists in the region and keep them from disrupting things in UAE. I would prefer that we actually practice the Bush doctrine and force them to choose one or the other, and I would like to see our trade relationship force them to make that choice, as does our trade relationship with Iran.

He goes further:

Finally - in response to your "short range standard of living" comments - have you ever considered what would happen in this world if the oil wells ran dry tomorrow? Half the world's population would be dead by Christmas, and half of the remaining would die by Dec '07. The distribution of the world's oil isn't about "saving a nickel on a gallon of gas" for my lavish SUV. Oil is everything - everything. Everything you touch today (almost) would not exist but for oil. Every plastic and synthetic fiber, nearly every moving part that is lubricated, nearly every solvent, more than 50% of our electricity, 80% of the world's commerce (goes by ship) and - of course - every truck and car that distributes the things you need to actually live and breathe - does not work without oil.

That is all correct, and it’s a problem.

More:

I know you have some glorious vision of all Americans driving a hybrid, building a few nuclear power plants and then telling the mid-east to pound-sand - but it won't work that way. You could plant the entire arable land of the US in corn and still not produce enough ethanol to meet our energy needs - not to mention the fact that it takes more energy to produce ethanol than we actually get from ethanol. So, for at least the next several decades, arguing that we need to be free from our "oil addiction" is just as stupid as arguing against our "air addiction." If 5 nations in the mid-east owned more than 50% of the world's known air - then maybe you'd realize the importance of making and maintaining friendships with the less extreme nations in that region.

Well, vipertrunk, here is where you are mistaken. According to your logic, we need oil to do anything, and terror-sponsoring middle eastern countries are important sources of oil, so we need to look the other way when they finance radical Islam because that’s not a big deal since terrorists have operated on our soil in America, anyway. We need to do all of this because ethanol is not a viable solution.

Well, you’re right about a couple of things there, wrong about others.
Number one, youre right- ethanol is not the only solution. But if you group ethanol with biodiesel, thermodepolymerization, synfuels, a mandate for optional worker telecommuting throughout the federal government and preferred bidding for government contracts for companies that adopt telecommuting as well, you have a mix of solutions that more than meets our energy needs, and saves massive amounts of government facilities expenditures in the process. Add to that a moratorium on taxation of alternative fuel companies and investment therein (my libertarian solution), and you have an economic boom on your hands in the energy sector that would make the Internet boom look like pocket change, coupled with a narrowing trade deficit- likely even a surplus.

And, you also have your research wrong. Ethanol is, in fact energy-positive. It’s not the dream fuel a lot of environmentalists would like it to be, but it is definitely energy positive. The latest research was done just last year. Surprisingly enough, it found that ethanol research done by researchers sponsored by oil companies overlooked all kinds of variables in their studies that made ethanol come out energy-negative, while research sponsored by ethanol heavyweights like ADM drastically overstated the environmental benefits of using ethanol- its environmental benefits are only marginally better then petroleum, not by a significant amount.

Anyway, to those of us who were against this deal, I can say I do believe we had the right outcome, but it’s hard to say for sure. What I would rather have seen is a longer debate, with televised congressional hearings wherein the UAE could have made their case for being an ally in the GWOT. We could have put their terror-sponsoring record on display and given them an opportunity to refute it or acknowledge it. The American people might have been persuaded that the UAE are a reliable ally, and public sentiment might have been swayed. That would have been the ideal outcome for everyone.

I believe the UAE understand now that part of the price of doing business with the U.S. is, their record is going to come under very close scrutiny. This is what happened, and over the last two weeks, more and more details emerged, and the UAE backed out. Is that because they wanted to avoid harm to our friendship, as they said, or is it because the picture became clearer for many of us just what kind of a two-faced ally they are?

On Taxing Oil Profits

The president is right again.

President Bush rejected criticism of U.S. oil companies over their record profits due to high oil prices:

NASHVILLE, Tenn. (AP) - President Bush defended the huge profits of Exxon Mobil Corp. (XOM) Wednesday, saying they are simply the result of the marketplace and that consumers socked with soaring energy costs should not expect price breaks.
In an interview with The Associated Press, Bush also addressed oil's future, offering a more ambitious hope than in his State of the Union speech for cutting imports from the volatile Mideast.

Those who suggest we should tax oil companies over their profits are basically saying that companies should not profit in circumstances where people are experiencing hardship.

Should we tax defense contractors more heavily in times of war for their record profits when military families experience hardship? Should we tax home builders along the gulf coast who are making a post-hurricane fortune while their customers are living in such hardship?

This is another very misguided energy policy, because it leaves no burden of responsibility on the individual. Remember that people choose which homes they buy, so the best thing to do right now is allow the housing market to drive down the values of homes that require expensive heating oil. It would be best if government did not try to intervene, because many of these companies would simply respond by decreasing their profits through more capital expenditures or bonuses on the payroll. And they would have every right to.

SOTU Excerpt On Energy

Here's the President's SOTU excerpt on energy:

Keeping America competitive requires affordable energy. Here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology. Since 2001, we have spent nearly 10 billion dollars to develop cleaner, cheaper, more reliable alternative energy sources – and we are on the threshold of incredible advances. So tonight, I announce the Advanced Energy Initiative – a 22-percent increase in clean-energy research at the Department of Energy, to push for breakthroughs in two vital areas. To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants; revolutionary solar and wind technologies; and clean, safe nuclear energy.

We must also change how we power our automobiles. We will increase our research in better batteries for hybrid and electric cars, and in pollution-free cars that run on hydrogen. We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips, stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years. Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025. By applying the talent and technology of America, this country can dramatically improve our environment … move beyond a petroleum-based economy … and make our dependence on Middle Eastern oil a thing of the past.

I'm happy that he articulated the problem, but I'm really disappointed that he only proposed an increase in funding for research by the DoE. I think DoE and Sandia have done great things in this area, but I really believe the solutions are best left to the private sector, which can be spurred to action through tax incentives. There's already a VC stampede going on in the field of alternative energy, and he could make this an entirely private-sector effort by using tax incentives to sweeten the deal for financing these kinds of ventures. He could make investment in these companies tax-free and give these companies corporate tax immunity for the next 10 years, and the government would not have to spend a dime; the current private sector VC fire hose would turn into a dam burst overnight.

Nevertheless, the President did good tonight, as far as making this a priority.

A Refreshing Bit Of Candor

Radioblogger has coverage of Joel Stein's piece ("I don't support the troops") in the Los Angeles Times, as well as Hugh Hewitt's interview with him. You get the feeling he vocalized lot of things that other people on the left feel, but don't have the courage to say.
This column has been greeted with crickets at Daily Kos; I'd be interested to see their take on it.

More Mexican Army Border Incursions

Michelle Malkin has a great post about the Mexican Military crossing the border in support of the drug trade.

Mexican soldiers and civilian smugglers had an armed standoff with nearly 30 U.S. law enforcement officials on the Rio Grande in Texas Monday afternoon, according to Texas police and the FBI.
Mexican military Humvees were towing what appeared to be thousands of pounds of marijuana across the border into the United States, said Chief Deputy Mike Doyal, of the Hudspeth County Sheriff's Department.Mexican Army troops had several mounted machine guns on the ground more than 200 yards inside the U.S. border -- near Neely's Crossing, about 50 miles east of El Paso -- when Border Patrol agents called for backup. Hudspeth County deputies and Texas Highway patrol officers arrived shortly afterward, Doyal said.

This is going to be a campaign issue in the next election; it's time to deploy our own military along the border. When Mexican military units cross our border, they need to be met with much more firepower than they're seeing at the moment.

Ron Brownstein On Energy Policy

The L.A. Times occasionaly runs a thoughtful article, and this one from Ron Brownstein makes some good points:

America already bars oil imports from Iran; but if Iran withheld some of the 2.7 million barrels of oil it exports daily, the U.S. would suffer from the rise in international oil prices. (Oil prices are already rising just because of Iran's threats to close the spigot.) And for that we have no one to blame but ourselves.

Since the first oil shocks in the 1970s, the U.S., inexcusably, has allowed its dependence on oil imports to grow, from about a third then to about three-fifths now. Fuel economy for America's vehicles is virtually no better today than it was 15 years ago, according to federal figures, as small fuel-efficiency gains in passenger cars have been offset by a shift toward gas-guzzling trucks and sport utility vehicles. Washington hasn't raised fuel-economy standards for passenger cars in two decades.

More expensive gas will encourage somewhat more conservation and greater demand for fuel-efficient cars. But Washington can't rely on the hidden hand alone to solve the problems it has been too timid to tackle. The federal Energy Information Administration, in its most recent long-range projection, estimated that market pressures would increase automotive fuel efficiency only modestly over the next quarter-century. As a result, the EIA projects that by 2030, the U.S. will import 62% of its oil, up from 58% now. That means another generation of subsidizing — and remaining vulnerable to — regimes that threaten our security.

State Of The Union 2006 Preview

The Washington Post has an article predicting three broad themes for Pres. Bush's upcoming SOTU address on Jan 31. One of the themes, according to the Post, will be energy prices.

To help address rising energy costs, Bush said the administration will push development of new technologies and alternative and renewable fuels to make the nation less dependent on foreign sources of energy.

Depending on how broad and bold his proposals are, he may rock the markets enough to offset Iran's influence on prices. I hope he goes deep; the 2006 and 2008 elections could very well depend on it.