Tuesday, February 05, 2008

Oil Importing And Exporting: A Complex Of Shared Interests

It is often stated that, in order to reduce the power of the Arab/Islamic world, we have to reduce our dependence on oil imports from the nations of the Middle East. On the surface this seems like a truism. However, let us think this over.

First, sorry to be pedantic, but oil is a commodity sold on the world market. The price of oil is dictated by supply and demand. If America buys its oil from the Middle East, Venezuela, Canada, Mexico, or any other nation, it is still a bidder on the open market, and its bidding offer effects the price of oil on the world market no matter which country it buys from. In other words, if Saudi Arabia can charge $100 per barrel of oil, then so can Canada, and so can Mexico and any other country selling oil on the open market.

It is a little known fact that, comparatively, the United States gets far less of its oil from Middle Eastern nations, as a percentage, than do the other largest oil importers in Europe and China.

The United States currently gets about 17% of its oil imports from the Middle East.

Europe and China respectively gets approximately 31% and 44% of their oil from Middle Eastern countries.

Ok, so now think for a second what would happen if America were suddenly to make it its policy to buy all of its oil from non-Middle Eastern countries?

First, as America would be limiting the pool of oil suppliers from which it could prospectively buy, the price of oil would immediately go up for American buyers.

Second, since America would then no longer be an importer of Middle Eastern oil, the amount of oil available on the Middle Eastern market would be increased, and the price from those Middle Eastern suppliers, would then drop for Europe and China.

Third, and this is the most important point, to my mind; because the United States would then no longer be a buyer of oil from Middle Eastern countries, whereas the Europe and China would be, the United States influence in the Middle East would decrease, and the influence of China and Europe would increase.

Think of it this way, if you own a shop, the opinion of the customers who come through your door and make purchases matters very much to you.

It is a very crude understanding of economics which says, the seller has the power. The truth is, the buyer and seller have shared interests in the success of each others business. In fact, the buyer and seller are, indeed, partners in the promotion of each others interests.

Were the United States to discontinue buying oil from Middle Eastern nations, our power to influence political decisions in the Middle East would also decrease. In so far as the United States is a force for good on the world stage, it would be dangerous to the world as a whole for our power to decrease in the volatile world of Middle Eastern politics.

All economics, and all sectors of the business world, are composed of groups of organizations who have shared interests. The sum total of these shared interests composes the direction of the economic system on an economic as well as a political level.

Therefore, we must continue to buy oil from Middle Eastern nations until the day that oil no longer matters to the world's economy.


me208 said...

The BIG point that you failed to mention/discuss is that the U S has plenty of its own oil.

If we stop importing oil by:
a) building a new(couple of) refinery(ies);
b) drilling our own in the rockies, ANWR, the coasts of the gulf of Mexico, etc.

the price will decline as soon as we announce our commitment

c) commit to ending oil as a source of energy (like a Manhatan project)

the price will decline as soon as we announce our commitment

Another effect will be that the available source of Terrorists funding will shrink.

and the possibility that some opponent can cut of our oil and damage our economy will also dissipate. We would be free to challenge the Saudis for their support of terrorists.

Except that the State Dept and who knows how much of our government bureaucracies are owned by the Saudis.

Pastorius said...

Correct you are. We have three times as much oil in the Rocky Mountains as exists in all of Saudi Arabia:


Additionally, we have a lot of oil in Alaska, and off the coasts of California and Louisiana.

And, you're right, if we ceased importing oil completely, that would have a deleterious effect on terrorist funding.

BUT, it would not dry it up completely.

AND, that is my BIG point.

My point is, until oil is no longer a major commodity on the world's market, it will always behoove us to buy oil from ME nations so that we still have that influence.