Tom Friedman continues his reversal on oil prices. Last week he said we need lower oil prices to combat Iran’s growing power. Now he says Russia would be better off with oil at $15 a barrel. But his new hope for lower oil prices contradicts his old hope for high oil prices in America — a minimum of $40 to $50 per barrel, he has long said. Higher if possible. He wants high prices here to reduce consumption, and low prices abroad to reduce profits for Putin and Ahmadinejad. How to reconcile these views? It’s impossible. He simply doesn’t believe in the price system.
So here’s my prediction: You tell me the price of oil, and I’ll tell you what kind of Russia you’ll have. If the price stays at $60 a barrel, it’s going to be more like Venezuela, because its leaders will have plenty of money to indulge their worst instincts, with too few checks and balances. If the price falls to $30, it will be more like Norway. If the price falls to $15 a barrel, it could become more like America — with just enough money to provide a social safety net for its older generation, but with too little money to avoid developing the leaders and institutions to nurture the brainpower of its younger generation.
Friedman is right that natural resource wealth can divert a nation’s attention from more fruitful economic pursuits like entrepreneurship and technology. But intervening massively in the world energy markets, with price caps and floors and subsidies and taxes, isn’t good for entrepreneurship and technology anywhere. These high-end pursuits need energy just like any other. Friedman’s schizophrenic policies would throw energy — and the world economy — into disarray, thus setting back all the clean, green, technology-based eco-advances he celebrates.