U.S. citizens’ gas money fueling Mideast’s boom

By Jonathan V. Last/The Philadelphia Inquirer
Tuesday, Jul 15, 2008 - 11:00:42 am CDT

If you want to understand the macroeconomic implications of paying more than $4 a gallon (and rising) for gasoline, just look at the skyline of Dubai.

It is cluttered with construction cranes building all manner of modern marvels.

There’s the 80-story Rotating Tower, whose floors will spin independently around a central axis.

There’s the needle-like Burj Dubai, which, when finished, will stand at more than 2,600 feet, making it the world’s tallest building.

In fact, there’s a construction frenzy going on across the entire Middle East - in Kuwait, Saudi Arabia, Qatar, the UAE.

Today, none of the skyscrapers in the Middle East cracks the world’s top 10 in terms of height. But when the current building boom is over, the Middle East will be home to five of the 10 tallest buildings in the world and 12 of the tallest 30.

Where’s all this money coming from?

It’s not as if Middle Eastern countries are industrial or tech dynamos innovating and sweating their way to prosperity.

No, the money paying for the Burj Dubai - residences there sell for $3,500 per square foot - is coming from you and me.

Oil now hovers at $140 per barrel. In January 2001, when George W. Bush took office, it sold for $29 per barrel. When adjusted for inflation, that’s a real-dollar increase of 400 percent.

Remember all the Republican happy talk about how, in constant dollars, the recent oil spike still wasn’t as bad as it had been in 1979 and 1980?

Well, that’s no longer the case. Those oil prices topped out at $35 per barrel - just $92 per barrel in today’s dollars.

Think about that for a moment: The prices we paid during the Carter-era gas crisis would be a bargain today.

What that creates is a massive transfer of wealth, from Americans, who consume 20.1 million barrels per day, to our oil-producing "friends" in the Middle East.

Do the math and it gets a little scary. In real dollars, oil producers are pocketing an extra $105 per barrel on top of the price they were getting in 2001. That’s an extra $2.1 billion per day that Americans are shipping overseas.

Keep in mind that it’s not as though the cost of producing the oil has increased exponentially. This is pure windfall profit for the sellers.

You can see the transfer of wealth in places other than skyscrapers. Look at gross domestic product per capita of Middle Eastern countries between 2001 and 2007. The United Arab Emirates went from $21,100 to $37,300 - an inflation-adjusted increase of 50 percent.

Per-capita GDP really took off in other Middle Eastern nations during that time: up 122 percent in Kuwait; up 87 percent in Saudi Arabia; up 226 percent in Qatar.

Of course, when you transfer wealth to someone, you’re transferring it away from someone else. We see signs of that flip side all the time. There are the increased fees and diminished services in the airline industry.

Starbucks sells daily affordable luxury, making it a good canary in the economic coal mine. Last week they announced that they’re closing 600 locations - more than 5 percent of their U.S. stores. This move is unheard of by a company that looked invincible 24 months ago.

Consider Las Vegas, another purveyor of affordable luxury. Throughout the ‘90s, Vegas boomed as hotels were regularly booked to 95 percent occupancy and building projects broke ground at a rapid clip.

Today, occupancy rates hover around 80 percent, and gambling revenue is down. Vegas’ most prominent construction project, the $3.5 billion Cosmopolitan Resort & Casino, isn’t even finished, and it’s already in foreclosure. The company, which owns the famed Tropicana (and 10 other casinos), filed for bankruptcy in May.

All this adds up to a decline in our standard of living and a huge write-down of American wealth.

And it is yet another failure of President Bush that after 9/11, he encouraged Americans to go shopping instead of leading the charge for a gas tax.

A purely consumptive tax on gasoline - that is, a tax whose revenue was entirely refunded through income tax breaks - would have curbed our consumption, stimulated innovation in the energy sector, and kept much of our money at home.

But no one in the political class, Republican or Democrat, had the courage to start that conversation.

And now it’s too late.

The market will correct itself; markets always do. In the meantime, there will be pain in America while the countries of the Middle East - you’ll recall that some of the folks over there are not particularly friendly to our way of life - continue to get fat.

Jonathan V. Last is a columnist for the Philadelphia Inquirer. Readers may write to him at: Philadelphia Inquirer, P.O. Box 8263, Philadelphia, Pa. 19101, or by e-mail at jlast@phillynews.com.

(c) 2008, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

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Brian
Jul 15, 2008 11:32 PM
First of all DONT blame Bush for the energy crisis & High gas prices we are facing now. There are many reasons gas is 4$ and its an accumulation of these factors over a time span of decades that is hitting the world & the US now which is leading to the mess we face now. Bush is not perfect and I know most of those posting here blame him for many things and hate his guts but looking at the whole picture its not comepletely his fault. On to the history/economic lesson.
1. 1948-1973. In 1948 the UN created Israle in response to refugees of European jews who lost evrything to Hitler's holocaust and the overall destruction of Europe during WWII. The Palastinians were offered their own seperate nation as well but declined when other Arab nations (Egypt, Jordan, Saudi Arabia, Iran, & Iraq were the main ones, but ALL Arab nations were against the creation of a Jewish State.) told the Palastians to NOT take the UN deal. They would push the jews into the Med sea and then their land would be given to the Palastinians. In various wars in 1948, 1956, 1967 & 1973 the Arabs failed to destroy Israle. Israle survived due to help from Eurpean nations to start & later more heavily from the US for weapons, money, and other logistical support. Finally in 1973 the Arab world decided enough was enough and decided to punish the US by an oil embargo. Which had the ripple effect of hurting our economy in the 1970s. In time the embargo was lifted. 2.1989-1991 Ron Reagan's polocies during his years caused Communism collapse and the cold war ends with a whimper instead of a big bang of Nuclear war. At the time is was a joyus occasion as half the world under communism suddenly has freedom not known for 45-74 years. Because of this new-found personal & economic freedom caused economies to heat up. Slowly at first but it caused the demand for oil to skyrocket that no one could predict in 1991.
3. US energy policies were not changed drastically after the 1973 oil embargo. Arabs have always been hostile to us due to our support for Israle and the fact we are not a nation living under Muslim law. But we continued to buy oil from them. Since 1973, we had Nixon, Ford, Carter, Regan, Daddy Bush, Clinton, & now Baby Bush. Plus from 1973 to 1994 Congress was controlled by Democrats. From 1994 to 2006 the Republicans. Since then back to the D's. The Senate controll has gone back & forth to each party over the years, usally changing hands at the midterm elections.
When the 1973 embargo came WE_BOTH parties should have cut the bickering between themselves and put the nation first. Neither side did. A.We as a nation should have stopped importing Arab oil. B. We should have started drilling for oil any place it could have been found. C. Build more refineries, hydro elctric cams, nuclear plants. D. Started a masive effort to develope alternate energy plans such has electric cars or hydrogen based fuel. Or build synthetic oil out of coal. Germany did that in WWII I have pics of one such plant in a book on the air war. It was a target for our heavy bombers such as the B-17 or B-24s.
In time we could have been completely weaned off of arab oil by now (or any nation hostile to us such as Hugo Chaves government in Venzuala) BUT NOTHING Substancial was done by ANY administration R or D.
2001. 10 years after the final break up of the Soviet Union. Economies in Eastern Europe, India, China, S Korea and many other nations have heated up. Demand for oil is at an all time high. Arabs are making big money in oil as the author of this artical have stated above. Plus how much of this oil money has gone under the table to terror networks??? Where does Hezbola, Alquda, & the Hammas get their money for weapons, supplies, training & recruting???? Oil income. Economics 101. When demand climbs and supplies stay the same prices go UP!!!So today we have tripple digit oil prices.
During WWII we did not buy electronics from Japan or cars from Germany. They were declared war enemies. But we have spent the past 60 years supporting the Arabs by buying their oil even when they speak of hatred for the US & Israle. (I know my debating freinds in the tribube state that the world hates us for Bush going into Iraq. Wrong, The Arabs have hated us for supporting Israle since 1948.)
Btw when 9/11/01 hit our country was in an economic slowdown due to the "tech bubble" bursting in March of 2000. (before Bush was elected in November) So raising taxes in a struggling economy would have been the WRONG thing to do. The combination of the slow-down, fear of other terror attacks right after 9/11 and raising taxes would have made the slowdown & recession of 01-02 far worse than what it was.
Another factor is our weak dollar. The us has a very high national debt. I know people think that Clinton took care of the debt, but that is wrong. We had A BALANCED Budget in the 90s, but the national debt was still there. We became a debtor nation in 1985. I feel the worse thing Bush did during his 8 years of office was overspending domestically. But that was congress's fault as well. Both D's & R's need to eliminate eramarks. "pork barrel" spending it used to be called. But that will never happen for three reasons. 1. Politicians of both parties need to be re-elcted once in. So that means bribing voters with projects in their state or districts. 2. to get anything passed in Congress its a Ill scratch your back if you scratch mine so evryone votes for all other projects as well. 3. People of the US have become more and more demanding of big government & entitlements to fix evry problem that comes along. So our debt rises, dollar weakens, which contributes to increasing oil prices as well.
There is NO magic bullet that is going to fix the high gas prices or our wealth being transfered to the Arab or other nations of OPEC. BUT we have to act now as a nation BOTH parties. Stop the fighting and Save the country first. Its going to take time 4-5 years minimum. Some say 10 but I think thats an exageration. But either way GET OFF OF ARAB OIL anyway we can. So you see this is not some Bush jr evil plan for oil profits.

To evryone going through this and hurt by high energy prices, I wish you the best and good luck. Take care all & have a good day.
To the Tribune editors. Sorry if this post is too long. You all have a good day as well.
LSB
Jul 16, 2008 12:56 PM
Brian-- for once I agree with your post! People don't like to look at the big picture and expect a quick fix. Nobody wants to take any part of the blame and they don't want to change their own habits for the greater good. It is time for Americans to wake up and quit being so selfish and actually look beyond their front steps.
Bush is not to blame for the energy crisis, the war in Iraq is by no means any help in the situation, but it is not the sole cause.
Negative Ned
Jul 16, 2008 2:21 PM
Great post Brian.....very well written and truthful.
Its Congress and the Senate that have put us in this spot. We need to look at their voting records and start getting rid of most of them. They don't have a clue what they are doing.
Brian
Jul 16, 2008 10:15 PM
LSB & N.NED,
Thank you for your kind words, I do appreciate them. I know economic times are tough, I pay the same price for fuel that evryone else does too. Plus the increase in food prices as well at grocery time. I dont like it any more then the next person. But at the same time I am a history buff and try to look at the big picture as well as my little corner of the world and i am glad my post helped shed some light on some long term causes of this energy mess. This is one of those times we are just going to have to grit our teeth and live through these times and hope & pray the politicians of BOTH parties pull their head out and do the right things for our NATION as a whole for a change. take care and have a good day.
Bobo
Jul 18, 2008 6:42 AM
The answer to our oil problems should be left up to American auto manufacturers. They got us through the 70's oil crisis, didn't they? Doesn't anyone remember the Pinto, the Vega, and my personal favorite, the Gremlin?
Brian
Jul 18, 2008 12:53 PM
LOL!!!! Bobo!!!
Yes as a teen driver in the mid 80s many freinds of mine had those cars or like those! And the razzing they got from the motor-heads who fixed up older muscle cars as well. LOL! One of my sisters drove a 78 mustang 4 cylinder through high school. Seriously I do agree that the auto industry can help in that regard. But they have to make cars cheaper as well. The hybrids are nice, but at 30-40K not affordable new for many people. Anyway thanks for the reminder of cars from a bygone era, perhaps to be making a comeback like DISCO!!!! AHHHHHHH LOL~~~ Anyway have a good day!
Tex
Jul 18, 2008 2:13 PM
Brian, Don't agree with everything you said but mostly that was a good post.
Brian
Jul 18, 2008 9:04 PM
Tex,
Thanks for the compliment on the post! I do appreciate your kind words! No, we do not see eye to eye on evrything, but thats ok. Have a good day!
Bobo
Jul 18, 2008 11:29 PM
Yo, Brian:
I actually had both-a gas guzzling '66 390 Fairlane GT up 'til about '74 then I actually went with the Pinto. The Fairlane got about 7 mpg and the 4 cyl Pinto a whopping 16 mpg. My dad actually went through 2 Vegas (15 mpg) until he traded for an Austin Healey Sprite-and it got about 30 mpg. But the "economy" Vegas (and Pinto) were absolute junk. Horrendous cars.

And that's my point, and I know you got it. US automakers COULD have actually tried to produce a quality, economical product. American consumers COULD have demanded something besides Olds 88's. Politicians COULD have implemented even a semblance of an energy policy. But they didn't. Nobody did anything. Can you imagine where the nation would be (energy-wise) if the past 35 years hadn't been squandered?

I'm not a Bush guy cuz I don't vote-I feel its a waste of time cuz the vast majority of voters aren't qualified to make an informed decision (hence Bob Warner)-but that being said, Bush's biggest downfall was following Clinton-Bubba knew (as history has shown) that rarely do the policies of any sitting president see results during their term(s). So, it is intellectually weak for this columnist to put $4 gas on W.
What's more, he's an idiot to use Starbucks/Las Vegas as an example of failed policies or economy; though there is some truth. But he overlooked the proliferation of premium coffee outlets as a result of S/B's success; likewise the casino business (see Council Bluffs). Even a stink-hole like Fremont has 2 S/B's (soon to be 1) and 3 mom & pop's, and another has come and gone.

What to do now? I bought big-time the T. Rowe Price Middle East & Africa fund (TRAMX); primarily invested in Dubai, Qatar & UAE.

What to do next? Look for real estate in Venezuela. I know you're not Chavez guy. But hear me out:

Yeah, he's a megalomaniac. But so is W.
Hugo wants to be prez forever. So did Bubba.
Hugo wants to change Venezuela's constitution-but so will Obama with his court appointments.
Hugo took over TV. TV sucks anyway. Who cares.
Hugo is essentially a dictator. But that just improves the odds of an assassination-kind of a Latin American term limit.
Torrential rains & floods sometimes. Kinda like Nebraska.
Those are the negatives; about a wash.

Positives:
16 cent gas.
Did you SEE Miss Universe!?! I mean, come on!!! Does not Venezuela hold some kind of world record for Miss something-or-other winners?
Never snows. Except in the Andes. Where I'd never live.
They prefer baseball over soccer.
Beer is 25 cents a bottle. (although it is only an 8-ouncer). Stays colder that way.
They have an island named after a drink. (Margarita).
No Bob Warner.

The more I type, the better it sounds.

BTW, nice coherent post. Neutral on the HQ scale. So rare for Fremont.
Brian
Jul 19, 2008 12:21 PM
Bobo,
LOL! Good post. Entertaining with some truth to it! Have you seen the movie Bucket List? In it Morgan Freeman & Jack Nicholson race old fixed up Mustangs. Lets you & me race a couple of Gremlins!!! Disco MUST be played in the 8-track player!! And we must be wearing bright colored lesure suits!! LOL! First one with a car that actually completes a lap get a steak dinner with a Velenzuala Miss something. The winner gets a same dinner with Chaves as waiter!! LOL!!!
Seriously I'll look into the TRAMX fund. Take care & have a good weekend!
Consumer
Jul 20, 2008 10:46 AM
Nice history lesson Brian BUT...

Where is President's Bush energy policy? He's in year seven of the Presidnecy and I haven't seen or heard anything realting to an energy policy. Maybe you have; please enlighten us.

Why the reference to Israel? Are you saying America is being punished by the Arabs? Thats way out there.

The rise of the 3rd world countries and their oil consumption is due to outsourcing of American JOBS!!! Thank a Repbulican for that.

1979 Carter implemented numerous energy policy to reduce our dependacy on OPEC but Reagan abolished all of them. Why??? Big oil and car companies thats why.

Ever wonder how much FEMA disater money was given to Oil companies after Katerina? Unlike the home owners fighting to rebuild and get insurance money and needed support from FEMA, they got a blank check. Why? Because Bush signed the check; a fellow oil man helping out oil companies.
common sense Mary
Jul 20, 2008 12:43 PM
Why can't our country follow the example of Brazil? They import no oil from the Mideast, they use sugar cane alcohol and do very nicely with it in their vehicles. Why are we so stuck on importing oil and not insisting that every new vehicle made at least be flex-fuel ready? I understand that most vehicles made since the 90's can mix 50% gas and E-85, is that true? Alcohol can be made from many sources and is cheaper to make than ethanol.
Brian
Jul 21, 2008 7:19 AM
1. As for Bush energy policies, He and the R's have tried for years to open up drilling at Anwar in Alaska & off the coast of Florida, but the environmentalists lobbyists would pressure D lawmakers to not let them through. 2. But as I stated earlier, BOTH PATRIES are to blame over the course of 35 years and the point of the history lesson was to lay "the big picture". I am not saying Bush had his share to blame for this mess. But its FAR MORE the 35 years since the oil embargo then just Bush.
3. As for the rise of third world nations economies due to outsourcing of American jobs, I am not debating that, but if the Cold War had nevee ended, the jobs outsourcing would have never happend to the scale it has.
4. As for Israle, It is NOT that far out there. The whole point of the Arab Embargo from late 73 to early 74 WAS to punish the US for helping Israle in the 73 Arab-Israle war. From a historical perspective, the NUMBEr 1. reason Arabs have disliked or hated the US is our support for Israle the past 60 years. Now the more radical elements of the Muslim religeon have gone beyond the US support of israle as an excuse to attack us. The 9/11 attacks were NOT due to the US support for Israle, but a general hatred of the US and anything related to Western culture.
As for Bush & FEMA, the fed gove has spent Billions of dollars rebuilding huricane Katrina damage going to both private citizens & business alike.
Lets face it, your one of many people who are going to blame bush for todays economic problems (or any problem we are in now) wether its actually his fault or not. Anyway have a good day.
Brian
Jul 21, 2008 7:31 AM
BTW consumer,
I and others have stated many times that crude prices ARE due to supply & demand factors. Regardless of the reasons 3rd world nations economies heated up, the end of the cold war-ending most communistic govenments lead to the freedom for the economies to heat up. It lead to increased demand of crude which increaded price. Hence 4$ gas. Regan may have aboilished Carters energy policies, but remember regan had a D controlled Congress who could have overode a veto of Regan of laws passed by the D's. So it comes back to square one. BOTH parties are responsible for the US being on Arab oil over the past 35 years. We need for BOTH parties to quit fighting, use WWII type common sense and get us OFF arab oil. We cant make other nations stop using arab oil, but we can get OURSELVES off Arab oil.
If you want to go by the tired old conspiracy that the R's are just a bunch of greedy oil men, fine, but as far as I am concered the failed energy policies of 35 years are for BOTH parties to blame. The Rs have never had a dictatorship. have a good dayi90da
fremonter
Jul 21, 2008 8:58 AM
to brian:
i agree with you to a point. all the presidents, as far back as i can remember, are to blame. not one of them, except for a few lame moves like the one bush did by going to the arabs and telling them to pump more oil, in which their answer was NO, have done a thing to remedy the problem. there have been, over the years, many electric, hydrogen, as well as other cars out there, that the automakers have either bad mouthed or bought out or just plain ignored. now its all biting them as well as us the consumer in the butt. wake up people. now the automakers are scrambling to produce smaller cars as well as electric cars. my suggestion is that we buy foreign cars. they have electric cars now. the reason i say buy foreign is two-fold. one: the cars are made muce better. two: they would be cheaper if our government didnt gouge us with all the import and other taxes. another reason we pay way too much is do to unions. we dont need them. they are not here for their original purpose of protecting the workers. there are enough laws for safety and employee protection on the books. unions are killing the country. thats probably why alot of union locals are closing down. i am glad to see the unions fading away. over the years i have belonged to 4 different unions and none of them were worth their weight in manure. there is, i think, one good thing that has come out of all this. it has shown people in this country what its like to do without and to slow down on spending and cut waste. its about time dont you think?
Consumer
Jul 21, 2008 2:10 PM
Brian, don ‘t get me wrong, I’m a republican and I voted for Bush twice; buts that’s due to a conservative up-bring and voting for the lesser of two evils. I was there during the oil embargos, learned to drive 55, wore a sweater and turned down the thermostat. In fact, I found myself over the years preaching the same energy saving reiterate to my children.

I agree with you that the Ds & Rs in power have done nothing to reduce our dependency on oil. But neither has the American people!!! Look around and see all the single drivers, young kids out cruising and parents driving kids to school when there’s a bus going the same way. From the Feds to local gov’t, there is no effort to reduce or improve the situation. Mass transit? High speed rails? What has Fremont or Dodge County done? Is there even a plan?

I strongly disagree that prices have risen to “Supply & Demand” and I don’t see drilling as the long-term answer. The world-wide number of factories and cars has not doubled in the last 8 months – Speculators and the value of the US dollar is more likely the current problem. More drilling keeps us heading in the same direction; 32 years ago it was an oil embargo, today sky-rocking prices what happens in the next 16 years? I’m betting on the same old song and dance.

The answer is November!!! If everyone goes into the voting booth and votes down party lines or votes for the incumbent, then don’t whine or point fingers when it happens again. Until Americans stand up and shout enough is enough; then nothing changes AND I don’t mean an Obama change.
Brian
Jul 21, 2008 3:02 PM
Fremonter,
for once I agree with you on some things. I do agree Unions were important to the American worker decades ago, but lobbied for many laws to be passed which in turn made them outlive their usefullness. I have heard that the past couple of years that of each US made auto, 1500$ of the price (new) went to health care costs of UAW workers. I admit that is one peice of info I have not researched, but if it is true it would not surprise me. But the problem is Union lobbyists are so in the pocket of both sides of Congress, they wont be going away anytime soon.
Yes all presidents have failed in energy policies for the passed 35 years, but remember Congress makes the laws and approves spending projects and the allotment of federal dollars they get. In the past 35 years all but 12 years Congress was controlled by Ds and in the same time period the presidents except 12 years have been R's. So as far as I am concerned BOTH parties are to blame for failed energy policies of the past 35 years. Both parties need to quit fighting & finger pointing and do what needs to be done to get OFF Arab oil, Both short term by increaded drilling for oil & making refineries AND long term by developing more energytypes for transportation & stationary needs. Have a good day.
Bobo
Jul 21, 2008 4:26 PM
Anybody remember John Anderson and his 50-cent gas tax platform? Maybe he'll be Obama's running mate.

How about Ford's WIN buttons?
fremonter
Jul 21, 2008 4:37 PM
brian:
ok i will tell you that i totally agree with you. lol. i really do. its really the publics fault for any and all the problems we have today. the same politicians keep getting re-elected. why? because as i have said before, the people, in general, in this country are a bunch of idiotic morons. they believe the bull that comes out of the politicians mouths each election year. obama or mccain? dosent matter. neither one is worth his weight in spam. senate and congress? even if an honest person made the senate or house, he or she wouldnt stay honest because in order to get anything done they need the rotten politicians votes to get it done, so nothing gets done. we need to clean out all and i mean ALL politicians and start over. all politicians, including those of nebraska are nothing but a bunch of "whats in it for me"? politicians. things will always change with each election. they will get worse. if i could, i would sell my house and move to a different country. has anyone ever thought "why dosent other countries have the crime and corruption we have"? look into it people. it may really suprise you.
LSB
Jul 21, 2008 4:43 PM
Consumer-- I would just like to say I agree with you on the driving issue in Fremont and to the schools. When I would take my children to the middle school I would see many cars in line to drop off just one child. I have to admit I was one of them. I didn't know any other children in our neighborhood of the middle school age, we had just moved there. I did bring it up and address this issue to the PTA and suggest a car pool list. This would be a list of names and addresses of parents and students who would be willing to participate in a car pool. Different families from the same area of town could be paired up to make arrangements to the schools. It could save a lot on gas and time for many families. The problem today is so many of us lead such busy lives we don't know our neighbors and to know anyone who lives more than a block away is almost unheard of. Needless to say nothing became of this idea. I no longer have middle school age children, but would still like to see something like this happen.