The United States is the
largest oil importer in the world, bringing in 13.5 million barrels
per day (mbd), which accounts for 63.5 percent of total U.S. daily
consumption (20.6 mbd). [1] Oil from the Middle
East (specifically, the Persian Gulf) accounts for 17 percent
of U.S. oil imports, and this dependence is growing.
There is a broad consensus
in America, from the President to the man on the street, that this
situation is detrimental to the country's economic health. In his
2006 State of the Union address, President George W. Bush said,
"[W]e have a serious problem: America is addicted to oil, which is
often imported from unstable parts of the world." [2]
While recognizing the problem is laudable, however, little has been
done to solve it.
Limiting the hold of
Middle Eastern oil on the U.S. economy will require creativity and
genuine effort. Specifically, the Administration should:
-
Prepare for contingencies in which
oil-rich countries become destabilized;
-
Assist friendly Persian Gulf
states in enhancing the security of their oil facilities;
and
-
Diversify U.S. energy sources and
oil imports to reduce dependence on Persian Gulf oil.
-
Beyond these general guidelines,
it is crucial that the U.S. follow through with these specific
measures:
-
Boost efforts to roll back Iran's
subversive ideological, terrorist, and military
threats;
-
Expand military contingency plans
and prepare a rapid reaction force;
-
Diversify the energy basket by
expanding domestic production of oil and gas and by lifting the
bureaucratic barriers that prevent greater use of nuclear
energy;
-
Encourage expanded methanol and
ethanol production and imports; and
-
Expand the Strategic Petroleum
Reserve.
Source: U.S. Department of Energy, Energy Information
Administration.
Growing
Dependence on Imported Oil: A National Security Threat
The U.S. government
predicts that by 2025, the country will import 68 percent of its
oil.[3] At best, the measures in the
Energy Policy Act of 2005[4] will slow the growth rate of
U.S. dependence only slightly.[5]
Many have suggested, quite
correctly, drilling for oil in the Alaska National Wildlife Refuge
(ANWR), a small part of Alaska's remote Arctic slope. However,
even opening ANWR would add only 1 mbd to U.S. production-barely 5
percent of America's growing oil consumption, which currently
stands at 20.6 mbd.[6] Table 1 lists the world's
largest oil producers and consumers in 2004. Map 1 illustrates
the sources of U.S. oil imports.
Sources: U.S. Department of Energy, Energy Information
Administration, "International Petroleum (Oil) Imports
and Exports," at (March
21, 2006). Map based on R. I. Gibson,
"Some Interesting Oil Industry Statistics," Gibson Consulting, at
(March 21,
2006).
However, there is a more
pressing problem. Two-thirds of the world's oil reserves are
concentrated in the increasingly unstable Middle East and are
controlled by members of the quasi-monopolistic Organization
of Petroleum Exporting Countries (OPEC).[7] Over the years,
OPEC has been quick to cut supply and slow to increase production,
bringing oil prices to today's high levels.[8] Most OPEC
member countries and other oil producers have high levels of
government economic regulation and corruption, as documented in the
Index of Economic Freedom, published by The Heritage
Foundation and The Wall Street Journal.[9] Thus,
consumers are effectively paying two premiums on oil: one for
security and one for suppliers' economic inefficiency and
monopolistic behavior.
The countries listed in
Table 2 and Table 3 produce about 61 mbd, or about 73.5
percent of world production. OPEC countries account for about 33
mbd, or 40 percent of world production.
Source: U.S. Department of Energy, Energy Information
Administration.
Source: U.S. Department of Energy, Energy Information
Administration.
Global fuel consumption is
projected to increase by 100 percent to 150 percent over the next
20 years, driven largely by the rapidly growing Chinese and Indian
economies, and this increased demand will force prices even higher.
The supply of conventional light sweet crude oil is likely to
dwindle, opening the door to expanded market shares for heavy oil
and oil with high sulfur content, as well as oil extracted from oil
sands and alternative fuels.[10]
Threats to
Key Suppliers
The oil market operates
today without cushions of additional production capacity or
significant strategic petroleum reserves beyond the U.S. reserves.
For example, al-Qaeda's February 24, 2005, attack on the Aramco
facility in Abqaiq, Saudi Arabia, sent shock waves through the
world's financial markets. On the same day, the price of oil on
international markets jumped nearly $2, despite the attack's
complete failure. (The terrorists and two security guards were
killed.)[11]
Most analysts agree that
this attack and an averted attempt on March 28 were merely trial
runs in a much longer campaign designed to disrupt the global
economy, particularly the oil and gas industry.[12] As the September 2001 World
trade Center attacks demonstrated, al-Qaeda tends to return to the
scene of the crime, so another strike on Abqaiq and other oil
targets is likely.
Both Osama bin Laden and
Ayman al-Zawahiri have repeatedly called for attacks on key Western
economic targets, especially energy sources.[13] In a
tape aired by Al Jazeera, Zawahiri said:
I call on the mujahideen
to concentrate their attacks on Muslims' stolen oil, most of the
revenues of which go to the enemies of Islam while most of what
they leave is seized by the thieves who rule our countries.[14]
The unfortunate reality is
that the Middle East remains the strategic center of gravity of the
global oil market-a position that is not likely to change in the
medium term. As long as radical Islam, China, India, and Europe
continue the struggle for the world's limited oil supply in the
Middle East, the region will remain unstable. If the U.S. is to
protect itself from these economic and political threats, it must
reduce its dependence on Middle Eastern oil as quickly and
efficiently as possible.
Oil as a
Weapon
Many Arab leaders
understand the dynamic of this dependence. For example, as early as
1990, the late Yassir Arafat said:
When the North Sea oil
dries up in 1991, the United States will want to buy Arab
petroleum. And when the American oil fields themselves run dry and
oil consumption in the United States increases, the American need
for the Arabs will grow greater and greater.[15]
This observation has not
been lost on the current generation of politicians and terrorist
leaders. However, bin Laden and Zawahiri are not satisfied with the
unwieldy weapons of oil boycotts, threats of boycotts, and buying
political influence in the West. Instead, they are clearly zeroing
in on the oil-rich kingdoms of Saudi Arabia and the Gulf as their
principal targets. They also appear increasingly interested in
attacking the entire global oil industry, from wells to
wheels.
The failed February strike
and the prevented March attack on Abqaiq were not the first times
that al-Qaeda has targeted energy assets in the region. In October
2002, al-Qaeda attacked the Limbourg, a French oil tanker,
off the coast of Yemen with a suicide boat filled with
explosives. In 2002, American and Saudi intelligence agencies
uncovered a plot by al-Qaeda sympathizers inside Saudi Aramco to
destroy key Saudi oil facilities. In 2003-2004, al-Qaeda attacked
the Saudi port of Yanbu and murdered five Western engineers
working there.[16]
Indeed, terrorist attacks
against energy infrastructure are not the exception, but the
rule, as an examination of the three primary regional
challenges to energy security in Iraq, Iran, and Saudi Arabia
illustrates.
Iraq. While the removal of
Saddam's regime may have been a positive factor for energy security
because it freed Iraq from the U.N. sanctions that restricted oil
exports, the postwar turmoil in Iraq is hindering the foreign
investment that could help to expand Iraqi oil exports. This makes
building a politically stable and peaceful Iraq all the more
important.
Meanwhile, pipeline
sabotage by foreign and domestic insurgents has crippled Iraqi oil
production. Today, Iraq produces 800,000 to 1.3 million
barrels per day less than it produced before Operation
Iraqi Freedom in 2003.[17] According to the Iraqi oil
ministry, the 186 insurgent attacks on the oil industry cost the
country $6.25 billion in lost revenue during 2005 and claimed the
lives of 47 engineers and 91 police and security guards.[18]
Poor U.S. postwar
planning, coupled with Iraqi corruption, mismanagement, lack of
investment, and inept technological exploitation of the existing
fields, has clearly had a detrimental effect on production.
However, terrorism, sabotage, and sectarian violence are at
the heart of Iraq's reduced oil production.
Oil export routes are
hampered as well. With both the Saudi-Iraq pipeline to the south
and the Syrian pipeline to the west off-line,[19] Iraq
is vitally dependent on two pipelines: one from Kirkuk to the
Mediterranean port of Ceyhan in the northwest and the Basra
pipeline in the south.
Escalating violence is
further impeding oil production and cash flow for the central
government in Baghdad. The fear that the situation may
deteriorate further has fueled speculation that the
Kurdish region in northern Iraq may decide to pursue
independence-a development that might invite both Turkish and
Syrian military involvement. If this were to happen, Iraq's oil
fields in the north (the largest in the country) and the strategic
Kirkuk-Ceyhan pipeline would likely remain under a security threat
for the foreseeable future.
Iran. Despite Iranian President
Mahmoud Ahmadinejad's earnest and ongoing attempt to project the
image of an irrational leader of what international relations
theorists have called a "crazy state," many analysts have yet to
recognize fully the dire ramifications of Iran's professed
intention to develop a nuclear weapons program.
If diplomacy fails, Iran's
pursuit of nuclear weapons will leave the U.S. and its allies
with few choices, similar to the options that President John
Kennedy faced 40 years ago during the Cuban missile
crisis.
On one hand, the U.S. and
its allies could choose the military option, deciding that a
nuclear-armed Iran that sponsors global terrorist organizations
like Hezbollah, Hamas, and Palestinian Islamic Jihad is
incompatible with the post-9/11 world.
Yet, the economic
consequences of a military strike on Iran's nuclear facilities to
the world energy market would likely be significant, if not
disastrous. Immediately following military action, uncertainty
about Iran's ability to sustain oil production at the current
level of 4.05 mbd could drive oil prices above $80 per barrel.[20] If Iran retaliated and
escalated by shutting down the Strait of Hormuz, which would merely
require placing anti-ship mines in the strait,[21] the
temporary loss of more that 15 million barrels of oil to the
international market could drive oil prices above $83 per
barrel, the historic height of the 1970s (adjusted for
inflation).[22]
On the other hand, Iran's
aspirations in the region are far-reaching. Allowing Iran to join
the nuclear club introduces the possibility of Iranian interference
throughout the Middle East, especially given Iran's location near
so many of the world's largest oil fields. (See Table 4.) The large
Iranian military, amply supplied by Russia and China, would be in a
position to dominate the Persian Gulf under a nuclear umbrella,
with U.S. ground forces pinned down in Iraq.
Currently, Iran enjoys the
support of some Shi'a in Iraq, especially Muqtada Sadr's Mahdi
Army, and in the Shi'ite-populated Ash Sharqiyah (Eastern)
Province of Saudi Arabia. This appeal could facilitate the takeover
of some of the largest oil fields in the world. In a worst case
scenario, a nuclear Iran could threaten the United Arab Emirates
and Kuwait. If this were to happen, the Islamic republic could
quickly secure a sizable part of the world's oil supply, bringing
the nuclear-armed militant Shi'ite Muslim state close to a virtual
monopoly over the world's energy market.
Saudi
Arabia.Saudi Arabia not only is
the world's largest exporter of oil, but also has the biggest share
of unused oil production capacity, which is crucial for cushioning
oil markets from supply disruptions elsewhere. Thus, the political
stability and future of Saudi Arabia's oil industry remain
paramount to forecasting trends in the oil economy of the Middle
East in the next 15 to 20 years.
If Saudi Arabia remains
stable or even increases production, the world has a couple of
decades to make the transition to new fuels, probably a combination
of hydrocarbons and non-hydrocarbons. This transition needs to be
manageable and not too disruptive so that industries can
adjust and raise the capital necessary to create new technologies
and distribution networks. However, a combination of security
factors and economic policies is making this kind of "soft
landing" less likely than an escalating energy shortage, rife
with international security and economic crises. A successful
attack on the Saudi oil facilities could cut Saudi supply and
neutralize Saudi Arabia's 1.5-2 mbd surplus oil producing
capacity, which in turn would destabilize world oil markets,
undermining international energy security.
Internally, the Saudi
leadership has spent much of its recent existence on the knife's
edge. The balancing act between supplying the United States
with oil on one hand and financing radical Islamists on the
other was always a tremendously risky feat for the monarchy. The
attack on Abqaiq demonstrates the potentially disastrous
consequences of a misstep.
The attacks on Abqaiq most
probably signal an escalation of a low-intensity terrorist war
between the oil-rich Saudi monarchy and the jihadis in which oil
fields, pipelines, pumping stations, ports, and terminals are soft
targets, vulnerable to the types of asymmetric attacks that are
already the bloody hallmark of al-Qaeda. According to
Newsweek, a successful strike on Abqaiq could have cut
Saudi output by more than 4 mbd for two months or more, with
disastrous consequences for the global economy.[23]
Even more frightening is
the prospect of jihadis mounting an outright takeover of the
country. Under such a scenario, radical Islamists dedicated to
overthrowing the Al Saud regime would slowly build up their
forces until they could exploit a revolutionary situation created
by a succession struggle, a political assassination, or some other
circumstantial trigger.
Uprisings, if not checked,
could lead to the regime's overthrow and political turmoil, which
would deeply affect oil production capacity and immediately and
directly threaten Western experts and workers in Saudi Arabia.
Osama bin Laden has stated his belief that oil should cost
$145-$200 per barrel.[24] If radical Wahhabis succeeded
in taking over Saudi Arabia, they would likely drastically reduce
production. The radical regime's anti-Western policies, including
the pursuit of nuclear weapons, could trigger Western economic
sanctions, which would likely include limits on investment and
spare parts for the oil industry or even an outright trade boycott.
Furthermore, if the survival of the world's economy is threatened,
military action to remove an al-Qaeda-type regime could not be
ruled out.
Source: : U.S. Department of Energy, Energy Information
Administration.
Implementing
a Three-Pronged Strategy
The United States and its
allies need to pursue a three-pronged strategy by preparing for
contingencies in which the oil-rich regimes become
destabilized, assisting friendly Persian Gulf states in
enhancing security of their oil facilities, and diversifying
U.S. energy sources and oil imports to reduce dependence on Persian
Gulf oil. Specifically, the United States should:
-
Boost efforts to roll back
Iran's subversive ideological, terrorist, and military
threats to Iraq and
other Arab states of the Persian Gulf through close cooperation
with those governments. It is crucial that the United States
deter, contain, or disarm Iran through cooperation with its allies,
particularly those oil-producing states that are most directly
threatened by Iran. The U.S. defense and intelligence community
should build capacity in Iraq, Turkey, and other border states. The
U.S. should ascertain that these countries are staffing their
intelligence and internal security agencies with reliable
personnel.
-
Expand military contingency
plans and prepare a rapid reaction forcein cooperation with U.S. allies in the
region to secure and protect the Persian Gulf oil infrastructures
if terrorists attempt to seize or destroy them. Such a force should
be fully interoperable with the Gulf Cooperation Council
militaries. U.S. military and intelligence agencies should support
countries and companies in the region in efforts to increase
their defenses against terrorist attacks on oil
facilities.
The Administration should
also ensure that U.S. intelligence and law enforcement agencies
receive full cooperation from the Persian Gulf states, particularly
Saudi Arabia, in the war against terrorism. An integrated and
computerized real-time operations center is needed to
integrate intelligence and operations to protect oil and gas
infrastructure in the Gulf. The U.S. should pressure Persian Gulf
states to intercept and disrupt all financial support for al-Qaeda
and similar organizations around the world. These efforts should
include using financial controls and improved banking
transparency to cut funding for virulently
anti-American/anti-Western clergy, radical Islamic academies
(madrassahs), and those elements of private or state-run media
that incite terrorism.
-
Diversify the sources of U.S.
energy importsaway from
the Persian Gulf, importing more oil from other sources such as
West Africa and Eurasia, more natural gas from Canada and Mexico,
and more liquid natural gas (LNG) from Russia and Africa. The Bush
Administration should direct the Departments of State and
Energy to provide economic aid incentives and technical assistance
to non-Middle Eastern oil-producing countries to simplify
regulations and speed up the licensing process for expanding and
building new pipelines and refiners.
-
Diversify the U.S. energy
basketby expanding
domestic production of oil and gas and by lifting the bureaucratic
barriers to greater use of nuclear energy. The White House and
Department of Energy should actively lobby Congress to expand
domestic petroleum and gas production, such as in ANWR; to allow
states to override the federal limitations on continental shelf
exploration and exploitation; and to speed up licensing and
construction of LNG terminals.[25]
-
Encourage expanded production
and imports of methanol and ethanol.Congress should work with the U.S.
Department of Commerce to lift import tariffs on foreign ethanol
produced from sugar cane.[26] The U.S. should
also encourage research and development of market-based
alternatives and enhanced technologies to help meet the
nation's future needs without dependence on foreign
oil.
-
Expand the Strategic Petroleum
Reserve(SPR) and create
a U.S. Strategic Gasoline Reserve. Currently, the U.S. SPR is
sufficient for only 90 days. It needs to be expanded gradually to
180-250 days. The U.S. Department of Energy should cooperate with
the European Union, China, India, and Japan to encourage all
oil-importing countries to build up their strategic reserves
to at least six months.
Conclusion
It is only a matter of
time until America's energy security, including its economic health
and defense capabilities, will be jeopardized by the growing
political instability, terrorism, and potential warfare in the
Middle East. Over time, the U.S. needs to limit its dependence on
foreign oil, especially from the Middle East, shifting to other
sources of supply and eventually to new types of energy sources.
Limiting U.S. dependence on Middle Eastern oil will be a major
strategic challenge for the U.S. in the coming
decades.
Ariel Cohen,
Ph.D., is Senior Research Fellow in Russian and
Eurasian Studies and International Energy Security in the Douglas
and Sarah Allison Center for Foreign Policy Studies, a
division of the Kathryn and Shelby Cullom Davis Institute for
International Studies, at The Heritage Foundation. The author
wishes to thank research assistant William Schirano for assistance
in preparing this paper.