Speaking of completely false...  

Posted by Wayne Bretski in

Annoying comment this morning from Mark Steyn at the National Review:

And, besides, the premise is completely false: If you trade in the Expedition for a Honda Civic, that oil you save won't stay in the ground and thus impoverish the Saudis; it will merely be sold to the Chinese and Indians and other fast developing nations who will replace America and Europe as buyers of the cheapest and most easily extractable oil in the world. So the sheikhs will be as rich as ever and funding as many Islamist nutters. But we'll be driving worse cars and feeling virtuous.

Dude has not quite put Economics and 101 together. I'll leave aside the value judgement of which is a 'worse' car, not to mention the environmental benefits/morality of reducing your carbon footprint, reducing emissions, yada.

If we don't buy oil, that's called a reduction in demand. When demand falls, prices fall. When prices fall, revenues fall. If revenues fall, then by definition sheikhs will NOT be as rich as ever.
Of course the oil won't stay in the ground, the Saudis are paying to remove it. They are unlikely to reduce their investment in oil production anytime soon, so every marginal consumer that doesn't pay them for their efforts hits their financial bottom line.

Furthermore, Sino-Indian demand is going to rise, regardless of U.S. national policy and its citizens behavior. So either the Saudis get the COMBINED force of a rise in Asian and Western demand, or they get a rise in ONLY Asian demand. If demand goes up a little, prices (and revenues) go up a little. If demand goes up a lot, and American companies are brawling in the market with Indian speculators and Chinese industry, the Saudis benefit by very high prices, and an overall increase in net gains. My point's bottom line: a reduction in U.S. consumption leaves the price and revenues lower than they would have been. Leaving the Saudis with less money, to fund fewer Islamist nutters.

So, yeah, I will feel virtuous as I ride my bike and drive my small car. I can't affect Chinese trade policy, or the driving habits of the emergent Indian middle class, so I'll do the only thing that is in my power: give as little of my money to the Saudis as possible.


Post a Comment

Recent Comments