Our Oil Policy Isn’t Immoral

The allegation by Bob Woodward in his new book about the Iraq invasion -- that Saudi Arabia promised to give President Bush a preelection boost in the fall by increasing oil production, so as to lower gasoline prices and rev up the U.S. economy -- has sparked a fresh round of recriminations in Washington, with John Kerry muttering darkly about conspiracies at work.

The charges have been given particular weight because of the Bush family’s well-documented stake in the oil industry and its close relationship with Prince Bandar ibn Sultan, Saudi Arabia’s powerful ambassador in Washington. If true, Woodward’s claim -- that Bush traded something (perhaps advance warning of the Iraq war) for cheap Saudi oil -- would indeed be disturbing. But even if it’s not, his charge should force U.S. policymakers to reconsider U.S. dependence on foreign oil, a dependence that limits the nation’s short-term policy options, leaves it acutely vulnerable to overseas influence and forces it to court unsavory regimes like Saudi Arabia’s.

Before making any changes, however, it is first important to see just how oil factors into U.S. foreign policy.

Going back at least to the 1991 Gulf War, critics have blamed successive White Houses for placing too much emphasis on the value of petroleum and for, in the words of many protesters, being prepared to spill “blood for oil.� It’s not clear, however, that Washington has any alternative in the near term.

To understand why, you need to know, first, where the United States gets its oil. Contrary to popular belief, the U.S. imports only 60% of the oil it uses -- and the majority of this does not come from Saudi Arabia or the Persian Gulf. In fact, according to the Department of Energy, last year the U.S. imported just 14% from Saudi Arabia and just 20% from the entire Persian Gulf. That’s about the same amount it got from Canada (18%). Meanwhile, fully one-half of U.S. oil imports came from the Western Hemisphere (Mexico and Venezuela are both big producers). The United States is thus not dependent on Saudi oil -- at least not directly.

But the true picture is more complicated than that. Despite the fact that most U.S. oil imports come from regions other than the Middle East, the world oil market works as a unit. This means that prices are set by total output; shortfalls in one area affect prices everywhere. Which is where Saudi Arabia comes back in.

The desert kingdom produces 15% of the world’s total oil supply, and the Persian Gulf sits on a staggering two-thirds of the world’s proven oil reserves. Stability in the region is thus vital to U.S. national interests. Why? Because an interruption in the flow of Saudi oil would cause the price of our Canadian, Mexican and other oil imports to skyrocket. In the words of Ken Pollack, a former CIA analyst now at the Brookings Institution in Washington, “If Saudi oil production were to vanish, the price of oil in general would shoot through the ceiling, destroying the American economy along with everybody else’s.�

A surge in oil prices would hurt everyone: consumers, by making transportation and heating far more expensive; and producers, by increasing the cost of their energy and other raw materials. This would raise the price of finished goods, decreasing sales and hitting consumers yet again. Worse, as we saw in the 1970s, a sudden jump in oil prices could also cause interest rates to skyrocket, setting off a dangerous inflationary spiral.

Thus critics who charge that Washington is immoral for worrying so much about Persian Gulf oil get things precisely wrong: Washington would be immoral not to worry about it.

In the long term, of course, all of this is an argument for reducing American dependence on petroleum, period. The fact is that the United States will never become self-sufficient in terms of oil, and contrary to what some Republicans claim, new drilling in Alaska and elsewhere will barely pay for itself. The only chance we have of reducing our dependence on foreign oil is by reducing our dependence on oil itself -- something best achieved by a huge Manhattan Project-style investment in renewable energy sources (such as hydrogen or others) that the U.S. can produce locally.

But in the short term, it means that Washington must do what it can to ensure a secure supply of oil. Unfortunately, that often means cozying up to unpleasant governments, including Saudi Arabia’s. Of course, the U.S. can and should do much more to pressure the Saudis to end their financial support for terrorist organizations and to improve their miserable human rights record.

But until the United States makes a serious effort to wean itself off petroleum altogether, it will remain dangerously vulnerable to the kind of manipulation Woodward alleges. And thus whether it actually happened in this case is almost irrelevant. Unless the United States makes major changes in the kind of fuel it uses, it’s only a matter of time until it does happen.