By Jonathan V. Last

The Philadelphia Inquirer

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. E-mail at [email protected]

Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.