No War for Oil

oil and deathThe one prominent issue that both American political parties can seemingly agree on is that the U.S. should be less dependent on foreign oil. And Santa Claus has apparently listened and granted their wish.

The United States is in the midst of a mini-oil boom, which has reversed, at least temporarily, the country’s increasing dependence on foreign sources of oil. Oil extracted from shale deposits in North Dakota, Montana, and Texas has reversed years of decreasing American oil production, leading to increased domestic extraction and thus reducing dependence on overseas oil from 60 percent of U.S. consumption in 2005 to a little less than half now.

Add to this the exports from Canada of oil from tar sands for refining in U.S. refineries (some of which will come through the future Keystone pipeline), and the United States will be, for the first time since 1949, a net exporter of petroleum products, such as jet fuel, gasoline, diesel fuel, and heating oil.

Shouldn’t the two parties pat themselves on the back? After all, under their stewardship, aren’t we reducing dependence on the terrorist nations and dictatorships of the Persian Gulf? Not really. Dependence on foreign oil is not the problem that conventional wisdom makes it out to be. As a corollary, all the wars we have fought over oil—for example, two with Iraq and the threat of such with Iran—have been largely unnecessary and immensely expensive.

Of the less than half of U.S. petroleum consumed that is imported, about half of that comes from the Western Hemisphere. Only about 18 percent of imports originate from the Persian Gulf.

But it would not matter much if the United States produced 100 percent of what it consumed or whether it all came from the Persian Gulf, because the price at the pump is determined by the worldwide oil market. If more oil is put on market from anywhere around the globe, the price will go down; similarly, if oil production is cut anywhere in the world and not offset by increases elsewhere, the price will go up.

Thus, this American mini-boom will not likely make much of a difference in what the U.S. consumer pays for gasoline, diesel fuel, or heating oil.

But at least we don’t have to buy as much oil or petroleum products from Persian Gulf autocracies or terrorist-sponsoring nations, right? Maybe so, but it doesn’t reduce our imports from those nations that much. Also, if the United States is now a net exporter of petroleum products, shouldn’t we stanch this flow and buy from the Persian Gulf even less? No.

Even if nations such as Iran and Saudi Arabia didn’t sell to the United States (come to think of it, the U.S. hasn’t bought oil from Iran in decades), they would simply sell to other, more than willing buyers. The rapidly growing countries in the developing world—such as China and India—care a lot less about the political nature of the countries supplying their oil than do the United States and Europe. So embargoes, boycotts, and efforts at becoming oil-independent have little effect. Supplies just reorder around obstacles in the world market.

But didn’t world oil production peak in 2006, as the International Energy Agency concluded probably occurred? Doesn’t this condemn the world to fighting more future wars over dwindling petroleum resources?

No. First of all, “experts” have been repeatedly predicting the depletion of the world’s oil reserves since the late 1800s, but it never seems to happen. New technologies and periodic higher prices make previously uneconomic deposits viable—such as the tar sands and shale oil that have recently become economic—thus sustaining world production.

Second, academic research has indicated that conflicts are much more likely over allocation of money received from abundant natural resources (for example, fighting in Nigeria over who gets proceeds from oil exports) than conflict over scarce resources that can be priced in a market. That is, it is cheaper to pay the market price than to go to war.

Ivan ElandSo if that is true—and it has been true since the classical economists discovered in the late 1700s that empire didn’t pay—then why has the U.S. military, over the years, essentially become an oil-protection force? Could it be that the U.S. is not aggressively employing military power to ensure that it has oil supplies—as the Imperial Japanese did before and during World War II—but is instead using the threat of armed force to keep a thumb on the oil lifelines of other nations (for example, China)?

Ivan Eland
The Independent Institute 

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Comments

  1. says

    If you consider the net economics on a national level, it is cheaper to buy oil than it is to fight for it. However, that is not how policy decisions are made. Instead, as always, we have concentrated benefits, and dispersed costs. The oil companies favored by the U.S. government benefit mightily via conquest, while the costs of war are paid by the taxpayers and those who become casualties.

  2. Joe Weinstein says

    Thanks to commenters BoxNDox and Scott for being both coherent and cogent. Meanwhile, it seems commenter Ryder’s Xmas present for us is to utterly go bonkers. According to him, if you so much as sneeze environment you are automatically off-topic and moreover must be an obsessive leftist.

    But let’s indeed look for a moment at Eland’s supposed topic – not oil in general but oil in relation to US military policy and posture. And after diverting us with economists’ truisms (or supposed truisms) about oil being supplied and priced as a global commodity he finally gets around to writing on topic: .”…why has the U.S. military, over the years, essentially become an oil-protection force? Could it be that the U.S. is not aggressively employing military power to ensure that it has oil supplies—as the Imperial Japanese did before and during World War II​—but is instead using the threat of armed force to keep a thumb on the oil lifelines of other nations (for example, China)?”

    Well, COULD it be? Maybe. But if Eland wants to be (or anyhow sound) so insightful, why doesn’t he answer his own key question – or anyhow summarize for us what he sees as the main evidence pro and con.

    • Ryder says

      Of course, “according to Ryder” no such thing was said. So, according to you, any discussion about oil is automatically a discussion on the environment!

      Wow, selecting the views of others is so fun and easy! Let’s do it some more… It doesn’t cost anything… Words, after all, are so very cheap….

  3. Ryder says

    The reason that the article may not have mentioned environmental catastrophe is because the author is someone who can actually stay on topic, and is not a leftist robot that has to color everything he says with a leftist agenda. Also it might just be that that catastrophe and decimation we have been told about has just not been happening.

    A more serious problem is the one that leftists forgot…. Nuclear war. Leftists were wrong about western propagation of nuclear weapons. Reagan did not start WW3. So the left went on to climate catastrophe theories…

    In the mean time, the progressive left shut down Americas electric infrastructure decades ago by stopping CO2 free nuclear electricity using the same fear tactics it is using now with climate change. Now that the world has seen multiple reactor core meltdowns, the fears were obviously overblown… With the side effect that we are still dependent on fossil fuels. We’d be all electric by now on our nations highways were it not for anti- nuclear leftists..

    Not satisfied with forcing dependence on oil, the left made sure we were heavily dependent on foreign oil by strangling US oil production….

    These two accomplishments by the left keep our eyes fixed on oil prices and market disruptions, and keep us mired in oil related conflict… as well as keeping our energy use in a high CO2 release mode.

    And that is one big barrel of fail.

  4. BoxNDox says

    Scott, I agree completely. The enormous economic impact of climate change will – inevitably at this point – make the present geopolitical games being played over oil production seem like little more than a sideshow.

    That said, the one thing I do agree with is the implicit dismissal of the impact of Keystone XL. Those tar sands are going to be produced irrespective of whether Keystone XL is built – in fact there is likely to be an excess of piping capacity once it is constructed. It may make a difference in local environmental impact – which is reason enough to oppose it – but don’t kid yourself that blocking Keystone is a win on the climate change front, because it just isn’t.

  5. Scott Peer says

    Wow, a whole article about oil without a word about pollution, climate change, and decimation of the landscape? The writer claims that tearing up and destroying vast tracks of our nation to extract ever more oil and tar is based solely on ability to do it and oil prices, without regard for the devastation left there, as well as consequences of processing and burning it? And not a single word about alternative energy?

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