Protecting U.S. Oil Interests?: News Releases: The Independent Institute

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News Release
September 4, 2007

Protecting U.S. Oil Interests?
Why Military Force Can’t Secure Cheaper Oil

OAKLAND, Calif., Sept. 4, 2007—With an increasing need for oil, what must the United States do to ensure that future supplies continue to meet demand? Is it reasonable to fear that a hostile foreign oil producer in Latin America or the Middle East will be able to damage America by withholding oil? The Left urges less consumption, the Right advocates Arctic drilling, and both seem to think that the only alternative would be war.

In his new Independent Policy Report, Do We Need to Go to War for Oil? (September 2007 / The Independent Institute), Independent Institute Research Fellow David Henderson argues “there is no good case for going to war for oil.” Whatever President Bush’s motivations for war in Iraq, attempts to secure oil through military force conflict with economic laws.

“Many people believe that foreign oil producers who export large quantities of oil can compel U.S. consumers to line up for gasoline,” says Henderson. “While this belief became popular in the 1970s after OPEC reduced supply, it is false.” Only American-imposed price controls can have this effect.

Henderson explains that the fear of “selective embargoes” demonstrates “a fundamental misunderstanding of how energy markets work.” If, for example, Venezuelan President Hugo Chavez reduced his exports to the United States, he would have to find new buyers or scale back production to the detriment of Venezuela’s economy. If he sold his oil elsewhere, it would simply free up another supplier’s product, making it available to the United States.

War for oil is unnecessary in a world market. Even if it were a feasible strategy, Henderson shows that the costs would quickly exceed the benefits.

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