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Boycotting one's self bankrupt
An American boycott of hostile oil-producing nations will hurt us and empower them.

[October 9, 2006]

"It's about time!" seemed to be the general consensus when news broke of 7-Eleven dropping Citgo as its gasoline supplier. After all, the firm is a fully-owned subsidiary of Venezuela's state-owned oil company – the same Venezuela whose leader, Hugo Chavez, had just denounced our President as "the Devil" during a petulant tirade at the United Nations.

In addition to his now-famous outburst, Chavez has a long history of similar anti-American pronouncements, and of both financing an oppressive regime at home and meddling throughout Latin America with petrodollars largely derived from American patronage of his company. Chavez is not just a loudmouth. He is an enemy.

The American public, tired of seeing their country frustrated by tin pot dictators like Chavez, have had enough. Many not only support the move by 7-Eleven, but are prepared to boycott Citgo themselves. This anger has not gone unnoticed, and other entities, such as AIG Baker Shopping Center Properties and the State of Florida, are considering new fuel suppliers as well.

While I strongly sympathize with the desire to boycott Citgo, I doubt that even a successful boycott would have much of a long-term effect on the Chavez regime beyond a temporary reduction of its cash flow while Venezuela looks for other customers. Indeed, Chavez has frequently in the past threatened to cut off oil flow to the United States altogether and already has deals with China – whose rapid economic expansion has helped drive oil prices upward -- to purchase its oil and natural gas. A boycott might do nothing but secure a dependable oil supply for China – while forcing America to find other, possibly more expensive sources of fuel for itself.

And if the utility of a boycott against Venezuela is dubious, it should give one pause to learn that those who regard some form of oil boycott as a general policy towards hostile regimes are hoping to jump on the Citgo bandwagon. These would-be boycotters of Middle Eastern oil are staging a media blitz on the heels of Citgo.

At least two nationwide organizations (Terror-Free Oil and Set America Free) and notables from across the political spectrum, such as Middle East expert Daniel Pipes, former CIA Director R. James Woolsey, and conservative radio host Glenn Beck are uniting to urge us to "forget Venezuela [and] stop buying Saudi oil". In other words, if a regime funds terrorism, we should stop purchasing its oil.

In order for America to become able to boycott the Middle East, these advocates hold, it must increase its own energy production. But since America does not possess sufficient reserves of crude oil to replace all its imports, the government will likely find it irresistible to step in, doing things like mandating higher fuel efficiency standards for cars (regardless of the fact that many Americans prefer their larger cars), or encouraging the production of currently uneconomical sources of petroleum like oil shale and ethanol, or even re-imposing 1970’s style gas rationing.

Thus, this boycott, if we carried it out, would completely backfire. The U.S. would no longer be able to avail itself of crude oil which, even at its current prices, is a bargain compared to the less-economical sources of energy we would have to use instead. This will harm our economy by increasing the cost of anything that requires energy. And although we will no longer be "funding terrorism" through the money we pay for oil, other countries, like China and India, will happily purchase Middle Eastern oil instead. This means that funding for terrorism will, at the very best, be slightly reduced without the demand of the United States to support high crude oil prices – and that's only if OPEC fails to ensure prices it finds satisfactory.

In other words, we are being called upon to re-live the Carter Era with a twist: In addition to imposing government controls on the economy and wasting tax money on projects already declared profitless by the private sector, we would impose an "Arab Oil Embargo" on ourselves. Perhaps the folks at Terror Free Oil or Set America Free could explain how damaging our economy and continuing to allow the flow of petrodollars into the coffers of hostile regimes will enhance our national security.

The idea of cutting off the flow of petrodollars to the various hostile regimes in the Middle East is not without merit, but there is a far better way to accomplish this goal than to honor the pretense that any repressive regime has the right to exist or to hold property, let alone to fund terrorists, harbor them, or give them aid of any kind. It is to end states that sponsor terrorism, or at least to end their control of the oil fields that permit them to fund our destroyers. To provide aid of any kind to a terrorist organization is an act of war against the United States, and we should respond accordingly. We should punish our enemies directly—not impale ourselves through a fundamentally flawed boycott.

Gus Van Horn is the nom de plume of a popular Objectivist blogger.

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