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Oil Fueled Generosity

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By MICHAEL GERSON Washington Post Writer's Group

The Tampa Tribune

Published: June 30, 2008

WASHINGTON - WASHINGTON - High oil prices, like a walk under the summer moon, can drive normally rational people to do foolish things they later regret. For Barack Obama, it is a fling with a windfall profits tax on American oil companies - one of the most thoroughly discredited economic policies of the last few decades.

But it is also naive to believe this dependence will be addressed by the normal working of energy markets.

Those markets are currently producing what one economist calls the "greatest wealth transfer the world has ever known." In a single year, the revenues of oil- and natural gas-producing Persian Gulf states have nearly doubled - giving nations in the region hundreds of billions of surplus dollars to play with. Recent Saudi promises to increase oil production may help ease prices. It is also the profitable accommodation of an addiction.

How much money are we talking about? Because the Gulf monarchies are extravagantly secretive, the estimates vary. The Saudi Arabian Monetary Agency declares official reserves exceeding $300 billion, but the real number is probably much larger. And this does not include the wealth of individual royals.

And what do these countries do with this money? Mainly they buy bonds through Swiss and English financial intermediaries. But they are also trying to defuse world outrage at this massive wealth transfer through some high-profile charity work. Saudi Arabia recently pledged $500 million for the World Food Program. Late last year, members of the Arab League promised about $700 million to the cash-starved Palestinian Authority.

In both cases, there is less to this generosity than meets the eye.

Oil producing countries in the Middle East are large importers of food and declining producers (as water in the desert becomes too valuable for use on grain). So Saudi Arabia, the United Arab Emirates and others have begun using petrodollars to buy and rent farmland in other countries - nations such as Egypt, Pakistan, Cambodia and the Philippines - to ensure their own "food security." This may eventually lead to political instability in food producing countries, as citizens ask: "Why are we sending staples to the Saudis while we have our own food shortages and inflation?" On help for the Palestinians, the pledges of Arab countries have always come easier than actual donations.

And by far the most consistent form of Saudi "generosity" since the 1970s has been the promotion of Wahabism - a minority form of Islam that tends toward extremism and anti-Semitism - through the global distribution of madrassas, mosques and missionaries.

The massive transfer of wealth to some of the world's least responsible nations should disturb us. And confronting this problem - with rapid increases in auto fuel efficiency and the urgent encouragement of alternatives to oil - will involve a cost and commitment more general and more serious than a misguided windfall profits tax.

Michael Gerson's column is distributed by Washington Post Writers Group.

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