Once again, the U.S. has deployed military troops to defend its interests in the Middle East. As always, those interests revolve around petroleum.
Much will be said about this in the coming weeks and months, even if--as appeared to be the case last week--the showdown on the border between Iraq and Kuwait doesn't escalate into combat. The oil and gas industry should tread carefully in these discussions. They contain a trap.
FRETTING OVER IMPORTS
Inside and outside the industry, the tendency will be to fret too much over U.S. dependence on imported oil. Imported oil is a fact of economic life in the U.S. Nothing can change this situation without doing more economic harm than good.
It would be nice if the U.S. produced more crude than it does now and imported less. The country's trade accounts and gross domestic product statistics would look better. Government tax revenues would be higher. More Americans would have jobs.
But the U.S. is not going to produce more crude; at best, under present conditions of leasing and taxation, it might slow the production decline. There will be impressive discoveries and production enhancements. But they will not offset natural declines in output from a mature resource.
The U.S. will not use significantly less oil, either. It is a big country with a big economy. It depends on ready access to the most convenient and efficient energy available. In most uses, that means oil. And in all uses, oil's country of origin doesn't matter.
Between these two perspectives on oil imports lies the trap for industry: Any government effort to cut oil imports likely would favor lower consumption over higher production. This political inclination is evident in the way candidate Bill Clinton's mutterings about an oil import fee became President Clinton's proposal for a stiff BTU tax. In fact, the U.S. will continue importing oil no matter what the government does.
The bright side of these stark realities is that plenty of oil is available from a great variety of countries. Most important exporters now care more about long-term sales than they do about using production to pursue political goals they can't agree on anyway.
The chief U.S. interest, and the reason U.S. troops hurried to Kuwait, is access to as much oil as is needed at the best possible price. Geology dictates that some large and probably rowing share of U.S. oil supply must come from non-U.S. sources. What the U.S., as the world's foremost military power and oil consumer, must assure is safety of international oil trade.
This would be no less so if U.S. import dependency were half its current level, or a fourth. Even if the U.S. imported no oil at all, it would have a compelling economic interest in the preservation of international trade in crude-preservation via military force, if necessary-because its trading partners need oil, too.
ECONOMIC INTERDEPENDENCY
The world's economic interdependency has reached this crucial and altogether healthy stage. Most oil exporters seem to recognize the ramifications of interdependency better than some importers do. With trade as open as it is now, claims about "excessive" or "dangerous" levels of oil imports by any single country just don't mean very much.
If nothing else, roles in this confluence of commercial interests should be clear. Companies--privately owned or otherwise--make money producing and selling oil or find other pursuits. Governments keep trade open and markets free. And trigger-happy despots who would work their wills in any other way stay on the brink of ruin.
