http://www.star-telegram.com/2010/06/25/2293860/the-ore-on-terror.html
By ED WALLACE
I have been extremely gratified by e-mails readers have sent over the years responding to my columns. As many already know, I am far more interested in our social and economic wellbeing than in the nation's politics or ideology. Likewise, I don't see our auto industry as just an isolated business, maybe capable of little more than delivering an exciting new family sedan that manages 33 mpg (highway) within the next two years.
No, just like every other industry that uses natural resources and employs people, the auto industry is interwoven with all the others; and so is every critical situation and every major event that happens in America. You need look no further than the ongoing spill in the Gulf of Mexico.
Some worried that it would raise the price of gasoline (more money out of your pocket to drive), or cause economic disaster along our coasts (more taxpayer monies lost in cleanup and bailouts, diminished incomes and tax revenues by businesses there). Some worry about the moratorium it has incited on new drilling -- yes, jobs and incomes and revenues lost.
Some want to use the Gulf crisis to end our demand for unlimited energy sources for our vehicles. Others simply want to string up those most responsible for the disaster. But if you look at the motivation behind the aspects of that one particular disaster, you see someone wanting to use an accident to change somebody else's lifestyle, occupation or income.
All over a regrettable and tragic accident, but one that has happened repeatedly since the earliest days of the oil industry. One has only to look at many regions of the Baku Oil Fields today to see a decades-old environmental disaster, stunning in scope.
But possibly the worst disaster to come out of the Baku region wasn't a spill. For 100 years ago the Communists used the wealth from that oil to plan and disseminate their propaganda across Russia to foster a revolution.
Cost, Benefit, Balance
Yes, the price of oil worldwide was abnormally cheap for decades because access to Baku crude was so easy. But what the multi-decade Cold War standoff -- driven by the rise of Communism in Russia -- cost us was in no way offset by those low oil prices.
Likewise, few know that just before World War I Joseph Stalin fled to Baku. There he organized the deaths of many right-wing supporters of the Czar, ran protection rackets, kidnapped the wealthy for ransom and learned the art of counterfeiting. Every undesirable stratagem he would use against the Russian people and the world for the next three decades was funded by the Baku Fields' oil wealth.
This is where one has to be able to create balance and understand cost/benefit analysis.
Ultimately, we see oil as nothing more than how cheap our gasoline is or isn't. We know that most major recessions of the last 60 years have all been foreshadowed by a serious rise in the price of oil, but most Americans have never connected those two events. The fact is we were going to have a recession once oil hit $147 a barrel in 2008, with or without the financial system going into meltdown. That was a secondary event, though it made the situation infinitely worse.
Beginning early in the last decade, there were three major factors that guaranteed a major oil spike would cause disproportionate problems.
1. Incomes were not just frozen for the better part of the decade, they were falling against the rate of inflation.
2. That meant that discretionary incomes for normal consumer spending were being shrunk by the quickly rising commodity prices, of which gasoline was just one part.
3. In order to fund their normal lifestyles, many Americans went into debt, including borrowing massive amounts from the equity in their homes.
Those three lines crossed when the debt became unsustainable against incomes, causing discretionary spending to collapse just as oil prices spiked.
Since economists still argue about what really happened, it's not surprising that they can't see how Congressional reform of the system (as proposed) will keep it from happening again.
Deficit-Fueled Hypocrisy
Two months ago my friend Dennis McCuistion, host of the show of the same name on KERA Channel 13, invited me to a luncheon with WBAP's Mark Davis. Dennis and I talk on a regular basis; Mark I see less often, but I enjoy both men's company. Dennis is certainly out there promoting fiscal responsibility and waving the warning flag on the federal deficit, while Mark is concerned about the high level of taxation, which is likely to go higher in the future.
Me, I'm just tired of the hypocrisy. In fact, seven years ago, I got possibly the nastiest e-mail I've ever received on a column about hypocrisy. The author said she had just been to a Christmas party at which they'd passed around my then most recent Star-Telegram column and all had a good laugh. She simply wanted me to know that I was the laughingstock of Fort Worth.
Personally I was astonished, and not that I was the laughingstock of Fort Worth. It seemed more than a little insane to me that anyone would read my column out loud at a Christmas party, when they could have been singing carols or kissing under the mistletoe.
But I remember what that column was about; the foolishness of the Iraq War. At least for the reasons we claimed we were fighting it.
Yes, I compared President Bush to a used car salesperson who was low-balling a buyer to sell them a piece of junk. But do you recall the president's sales pitch? He said it would cost us only $50 billion -- Iraq would pay the rest out of their oil revenues. I stated the war would not be over in a few months and would cost far, far in excess of the publicly stated costs. And if Iraqis wanted to be safe during the heaviest combat, they should hide under an oil pipeline, because that was the only place we wouldn't bomb.
Now it's seven years later, $1 trillion has been spent, and few people deny that the war simply opened up the world's last great easy oilfields.
I don't mean to be callous, but today I wonder whether the environmental damage to the Gulf of Mexico will exceed the real damage done in Iraq.
Don't Forget the Poppy Fields
I do remember telling Dennis McCuistion that one thing that drives me nuts about the national cry over the deficit is that, when it was really going through the roof years ago, the same individuals that are so mad about it today slammed those who first raised the warnings.
Then two weeks ago, an astonished media informed us that we have stumbled across a gold mine in Afghanistan. Really, it turns out the place is full of gold. Not to mention copper, iron, cobalt and lithium; the Pentagon put the value figure for all those minerals at $1 trillion. Three days later, Wahidullah Shahrani, the Minister of Mines for Afghanistan, said that their mineral wealth was worth possibly $3 trillion. Now how lucky is that?
We have two wars going, ostensibly against terrorists who attacked us on 9/11, and those fanatics "accidentally pulled" us into the richest untapped oil fields in the world, followed quickly by the richest untapped mineral fields in the world. Isn't that a coincidence?
The only problem with that report about the Afghan mineral wealth on June 14th? The primary information was posted on the Web site of the United States Geological Survey two years ago. It was not new "news" at all, except to the media.
Saving Pvt. Energizer® Bunny
It gets even better. On March 14, 2006, the USGS published its assessment of the Afghan petroleum and natural gas resource base. It included these two lines: "The assessment was conducted over the past two years, with funding provided by the U.S. Trade and Development Agency. The estimates increase the oil resources by 18 times and more than triple the natural gas resources."
Oh, this just keeps getting better and better. Turns out the USGS published its "Mines and Mineral Occurrences of Afghanistan," the prelude to the last two reports, back in 2002. Mere months after Al Qaeda fled Tora Bora for Pakistan.
See, it wasn't just soldiers we were sending into those danger zones, but also geologists and petroleum engineers. And when one journalist wrote excitedly that this discovery of major deposits of lithium in Afghanistan would be great for the coming electric car era -- to be honest, I sat there numb, unable to frame coherently my contempt for what he had written.
I always knew Iraq was about oil. It was confirmed when a court case forced Dick Cheney to release the maps of the oil fields in Iraq that he had divided up between oil executives in 2001 -- before 9/11. But I hoped against hope that Afghanistan was about the war on terror. Now we are being told to just chalk it up as a future American victory for the cellular phone, laptop computer and electric car industry.
And for that we're spending trillions?
Great. We used to claim we were making the world safe for democracy. Now we're making the world safe for iPhones and Chevy Volts.
© 2010 Ed Wallace
Ed Wallace has received the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Association. He reviews new cars every Friday morning at 7:15 on Fox Four's Good Day, frequently contributes articles to BusinessWeek Online and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570 @sbcglobal.net; access all of Ed's work at his Web site,
www.insideautomotive.com.
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