As latest Iraqi crisis shows, gas tax is answer to Gulf woes - Iraq's threat to invade Kuwait and the need to reduce US dependence on Middle East petroleum - Column

0 Comments | Insight on the News, Nov 21, 1994 | by Alan Tonelson

The recent Iraqi troop movements should remind Americans and their leaders of something we keep forgetting: As long as the United States remains heavily dependent on oil, we will have to intervene militarily in the byzantine, turbulent, deeply anti-Western Persian Gulf. Unless we want to encounter a real Desert Storm when the next gulf crisis hits, we should take a big step toward greater energy independence by imposing a stiff tax -- 50 cents to $1 per gallon -- on gasoline.

The latest anxiety stems directly from the last Persian Gulf War and its aftermath. And that war in turn stemmed directly from a longtime American strategic calculation that oil is one of our best energy bets. Not only is it efficient enough to cheaply power a motor vehicle, but despite the OPEC price shocks of the 1970s, the world market price remains low. U.S. energy policy long has preferred the gulf's abundant oil to domestic or other international alternatives. Thus, we only cut oil's share of our total energy consumption from 47 percent in 1973 to 40 percent in 1991.

Yet U.S. military involvement in the Persian Gulf is a losing game. Desert Storm was an easy win, but the next gulf war, or the one after that, is almost sure to go nuclear -- or chemical or biological. Iraqi and Iranian hunger for weapons of mass destruction, the huge sums they can pay for technical know-how and critical materials and the thousands of newly impoverished former Soviet military scientists make more optimistic assumptions reckless.

Diplomatically, America cannot hope to secure the gulf by balancing Iran against Iraq, because both seek control over the region. Washington's tilt toward Iraq before the 1990 invasion of Kuwait should have driven that lesson home. Further, the small populations, internal weaknesses and mutual antagonisms of most local officially pro-Western states preclude effective regional defense arrangements unless they are completely dominated by America. And of course, too much cooperation of any kind with America can be the kiss of death for these regimes.

Meanwhile, the economic case for relying on oil is collapsing. First, despite two decades of skepticism by the experts and regulatory obstacles erected by the Reagan and Bush administrations, the price of many renewable fuels, such as solar and wind power, has become almost as low as the market price for oil in numerous circumstances. Benefits such as reliable supplies and predictable prices, not to mention peace, should be worth more than the 4.5-cents-per-gallon levy imposed by the last gas tax. World oil prices are heading back up again for reasons unrelated to the gulf -- mainly, gathering economic recoveries in Western Europe and Japan and continuing vigorous growth in China and the rest of East Asia.

Second, the market is a misleading indicator of oil prices. The real cost of gulf oil is much more expensive for U.S. taxpayers than they realize. The military costs of protecting the gulf in peacetime -- much less fighting periodic wars -- push the price of this oil to three and four times world-market levels. Consequently, numerous renewable and other alternative fuels already are much cheaper than gulf oil.

America's top priority in the Persian Gulf should not be policing, stabilizing or democratizing the area, but getting out. Heavy taxes on gasoline -- which accounts for two-thirds of all U.S. oil use -- eventually would enable the United States to view the gulf as just another troubled but marginal Third World region. Such taxes also would make the United States freer to advance the rest of our Middle East agenda -- promoting an Arab-Israeli peace, for example.

How can President Clinton overcome the long-standing domestic political opposition to such taxes, especially from rural Americans who drive much more frequently than the rest of us? By focusing like a laser beam on these arguments that are not only political winners, but truthful to boot:

* Gasoline prices in re fallen since 1973, so a stiff gasoline tax 20 years later is hardly a hardship. In fact, pump prices fluctuate more in a typical month than the last gas tax raised them.

* A gasoline tax would put the OPEC countries who made us wait in gas lines on the ropes for decades. In other words, it's payback time.

* Although new gas taxes will fall disproportionately on rural Americans, the casualties of the next gulf war will come disproportionately from rural America as well -- as American soldiers always have. As a result, Clinton can make the case for a gas tax without boring the public with talk about the budget balancing.

Even with a stiff gasoline tax, oil and the gulf will remain critical to America well into the future. But we have wasted most of the last 20 years since the first OPEC price shocks. Given the gulf's explosiveness and the likelihood of further advanced weapons proliferation, how much longer do we want to tempt fate?

Alan Tonelson is a fellow at the Economic Strategy Institute, a Washington think tank studying trade, technology and national security issues.