With Venezuela's Oil, Trump Is Doing Exactly As Conservatives Desire

Donald Trump is doing exactly as modern conservatives should want him to do in Venezuela. Which speaks to how much conservatism has changed. To see why, pivot to Hong Kong.

American conservatives long revered it. And not just because its gleaming skyline born of rampant free market policies existed as one of the ultimate rebuttals of market skeptics on the left.

Arguably just as appealing to philosophical conservatives was that the “barren rock” spoke to the genius of the metaphysical over the physical. Exactly because Hong Kong had no natural resources of the steel, oil and cobalt variety, government had little that it could take. The genius was in the minds of the people in Hong Kong, and government couldn’t take their minds.

All of which explains why conservatives weren’t up in arms during the Ronald Reagan years, or even during the Bill Clinton years (lefty thinker Richard Reeves long ago quipped that Clinton’s presidency was Reagan’s third term) when oil was incredibly cheap (both presidents pursued a strong dollar), and by extension the U.S. mostly imported its oil. The economics of drilling stateside make no sense when the dollar is sound, and oil consequently cheap.

Much more important in explaining conservative pleasure with “energy dependence” could be found in the Hong Kong example. Brilliant as oil is, and essential as it is to life as we know it, it’s wealth from the earth. Better to import what is globally plentiful not just because the profit margins are slim relative to technology and other commercial pursuits, but because oil is much easier for governments to expropriate.

As Peter Maass observed in his 2009 book, Crude World, the bulk of the world's oil “is now in the hands of state-controlled companies like Saudi Aramco, Gazprom, Petroleos de Venezuela, National Iranian Oil Company, and China National Petroleum Corporation.”

More than most conservatives will admit nowadays, physical wealth empowers governments. So let others source the oil. No matter what, it will flow. That's because OPEC and others will never give up the U.S. market, nor did they in 1973. The Arab members of OPEC (Iran isn’t an Arab nation) didn’t cease selling into the U.S., they just sold to others who sold to the U.S.

Wall Street Journal deputy editorial page editor Daniel Henninger wrote in 2008 that so-called "energy independence" is "a ridiculous notion in an economically integrated world.” While Henninger favored more drilling, his implied point was sound: if we're producing, oil will reach us in the amounts we need.

Yet a few years later, the same Wall Street Journal editorial page ran “Saudi America,” an editorial that reveled in the U.S. eventually overtaking Saudi Arabia in oil extraction. Good? Not really. See Maass. Furthermore, extraction stateside is only possible insofar as the U.S. dollar is very weak, and oil nominally expensive.

Of course, the bigger mistake in U.S. energy autarky is that it's a sign the world’s most advanced country is directing precious resources to the extraction of what’s already globally abundant. Care of governments no less. Enter Trump's merger of the DoD with a "private" Venezuelan oil company.

About the combination, just this week the Journal’s editorial page rightly rebuked President Trump for his energy cronyism, while a newly market friendly Washington Post editorial page lamented Trump doubling down on government control of the industry. But isn’t this too little too late?

Trump seeks U.S. ownership and control of the world’s largest proven reserves. It’s the “energy independence” conservatives came to appreciate in recent years. Except it's ridiculous per Henninger, and really bad economics as conservatives used to know. Alas, conservativism long ago left Henninger. Trump’s playing to the new version.

Originally published on Real Clear Markets.