Unstable Oil

Posted: March 29, 2014 in Uncategorized

Oil and security is often discussed in political arenas, typically with some controversy. I have often heard statements of opposition to the notion that security is a valid reason to cur our consumption of oil, and in this post I want to explore some of the facts that we have and look at what the implications could mean.

The United States has consistently spent resources to facilitate some form of structure throughout the Middle East. I am not going to get into whether this is for purely altruistic reasons or whether it is because of our oil greed, both of which are false at the tail ends but are most likely both included in thought processes. What I do want to assert is that if oil was no longer the fuel of the world, I think the costs associated with this would be much less for a number of reasons. An example of this spending would be the the amount spent to intervene in the Persian Gulf during the 1990s. A valuable way to look at this is that if the price of oil we imported from the Gulf would have included the costs of intervening with forces during that time, the price of oil per barrel would have been $77 higher, which is almost 3 times the cost of what we were paying. That is a huge change in price, and I think it is pretty logical to believe that at least some significant portion of all intervention in the region has to do with oil. When we add up the costs that are associated with military in the Gulf along with the oil dependence (not counting the actual cost of oil) it is 1.5 trillion dollars per year. That is a pretty high bill.

An important idea to consider is that much of the power the Gulf countries have is because of oil. Again, I am not asserting all Gulf economic profit is bad, because I don’t believe that. However, it is a large contributor to their power and therefore the cause of instability. Former CIA director, R. James Woolsey, has been on record saying that our spending on oil has funded both sides of the war. That is a depressing thought, but has real implications and should provide some real thought into why cutting oil dependence is so important.

More than that even is the potential threat that exists due to the importance that oil has on economic performance. Is it that far-fetched to think that a terrorist strike could take place on key supplies of world oil? I don’t think so. There have been attacks on important structures, and all it takes is success of one of them to cripple the global economy. For instance the Pentagon ran a study that concluded with saying a small group of people could cut-off roughly three quarters of the eastern US oil supply, in just one night without having to leave Louisiana.

Cutting dependence on oil is a long term goal. But in the short term, and we have improved, we should reduce the dependence on unstable oil as much as possible. It would be great if we could be a self-providing oil nation but even just relying on safer markets would provide some benefits immediately. Canada has been significant with that, as they have provided a significant amount of our imported oil. This is good, and we should continue to try to move in that direction. Comment if you have any insight into the topic and follow me on Twitter @devinxcombs.

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