The oily truth about America’s foreign policy

May 14, 2008

With the oil price heading upwards and President George W. Bush heading for Saudi Arabia, as part of a Middle Eastern tour, it is time to accept the truth. The pursuit of oil is fundamental to U.S. foreign policy.

The importance of oil to American foreign policy is both obvious and curiously difficult to acknowledge in public. In the run-up to the Iraq war it was left to the left to make the argument that this was a “war for oil”. Establishment people -- those in the know -- rolled their eyes at this “conspiracy theory”.
Yet in recent months, both Alan Greenspan, former chairman of the Federal Reserve, and Senator John McCain have come close to saying that Iraq was indeed about oil. In his memoirs Mr. Greenspan said he regretted that it was “politically inconvenient” to acknowledge that “the Iraq war is largely about oil”.
Earlier this month Mr. McCain, who will carry the Republican banner in this year’s presidential election, promised an energy policy “that will eliminate our dependence on oil from the Middle East” and so “prevent us from having ever to send our young men and women into conflict again in the Middle East”.
Both Mr. Greenspan and Mr. McCain subsequently issued “clarifications”. Mr. McCain now says that the conflict that he was thinking about was the first (Persian) Gulf war of 1991. As for the Iraq war of 2003, that was about ... whatever he said it was about at the time: weapons of mass destruction, probably.
It is unfair to mock. The Iraq war was about lots of things: WMD, remaking the Middle East, democratization, human rights, Israel, terrorism, the desire for a massive demonstration of American power. But oil was certainly among the motives. It is common to say that the Persian Gulf is a “vital strategic area”. “Strategic” is shorthand for saying that it is home to two-thirds of the world’s known oil reserves.
However, if the invasion of Iraq was partly motivated by oil, it was a failure -- in this respect, as in many others. In 2003, just before the invasion, the oil price was $26 a barrel. Today it is $126 a barrel, with reputable analysts discussing the prospect of $200 oil by the end of 2008.
Mr. McCain’s promise to eliminate American dependence on Middle Eastern oil is hardly original. Barack Obama and Hillary Clinton have made similar pledges. President Bush himself swore to end America’s “addiction to oil” a couple of years ago. President Richard Nixon made similar promises after the first oil shock of the 1970s. The reality is that things are moving in the opposite direction. In 1973 the U.S. imported 33 per cent of its oil; today it imports about 60 per cent and this figure could rise to 70 per cent by 2020. America’s transport system is still completely dependent on oil.
American politicians have, so far, responded to this problem with a mixture of wishful thinking and anger. The calls for “energy independence” are all but universal. Money has been poured into the production of biofuels, which has helped push up food prices. But no leading politician is yet prepared to say that Americans may have to adjust their lifestyles to a world of permanently higher fuel prices.
Last week Senator Pete Domenici, a Republican, issued a plaintive appeal for “more oil and lower prices”. The Democrats are pressing for the U.S. attorney-general to bring price collusion charges against members of the Organization of the Petroleum Exporting Countries. But any such action significantly overrates America’s power over the world’s oil producers. OPEC members could retaliate by selling some of their huge reserves of dollars -- which would hit the dollar and U.S. consumers very hard. The world’s main oil producers have no shortage of potential customers. More than 50 per cent of Saudi oil is now exported to Asia.
Competition for the world’s oil supplies is intensifying. Chinese oil consumption doubled between 1994 and 2003 and will have doubled again by 2010. China’s foray into Africa is largely driven by its own search for “energy security”. The International Energy Agency predicts that in 2010 China will become the world’s largest consumer of energy. The IEA also thinks that the world’s energy needs will be 50 per cent higher in 2030 than they are today -- and that we are going to become more, not less, reliant on fossil fuels.
This seems all too plausible. At present there are about 10 cars in China for every 1,000 people; there are 480 cars per 1,000 people in the U.S. But by 2015, China could be the world’s largest market for new cars.
While western politicians routinely worry about globalization, they have yet to focus on a more plausible threat. It is not the outsourcing of well-paid jobs; or the inflow of cheap goods: it is the globalization of western patterns of consumption. If the Chinese and Indians eventually eat and drive like Americans and Europeans, the current inflation in fuel and food prices could be just the beginning. The environmental implications are also obvious -- and alarming.
So although the search for energy security is now central to American foreign policy, as it is for both the European Union and the main Asian powers, in the long run there is no real foreign policy fix for the problem. A future dominated by conflict over scarce oil resources -- or truckling to oil-rich dictators -- is not attractive.
The only plausible routes to “energy security” lie at home in the U.S. -- in the development of new technologies and in a change of lifestyles. Americans may have to drive their cars less. But it will be a brave presidential candidate who says that.
(The Financial Times)