Awkward realities of oil 

Paul Krugman / New York Times 27sep01

AS THE SHOCK of Sept. 11 has receded, we've started to hear a few old slogans. A handful of people on the left claim that we are about to start a "war for oil." A larger group on the right seems to agree, though these people draw a different conclusion: that the terrorist attack means that we should drill in the Arctic National Wildlife Refuge.

It's true that oil is part of the back story to the terrorist attack. Apparently the greatest single-motivating factor for the terrorists was not the Israeli-Palestinian conflict; it was the continuing presence of American soldiers in Saudi Arabia. That presence is a legacy of the Persian Gulf War. And while the war did involve defending a small nation against aggression, we probably wouldn't have waged that war if it weren't for oil.

But when people suggest that this is in some sense a war for oil, what they are in effect arguing is that by doing something different -- drilling for oil,

driving more fuel-efficient cars, whatever -- we could have avoided putting ourselves in this position. Are there any energy proposals on the table that would remove this flashpoint -- that is, make it a matter of no great concern to the United States who controls the oil fields of the Persian Gulf. And the answer is no.

Drilling in Alaska would make no difference worth mentioning. Right now, the United States produces less than half the petroleum it consumes, making us highly vulnerable to disruptions in world oil markets. At its peak, the wildlife refuge would supply only about 5 percent of our consumption. So with it we would depend on imports for 45 percent of our needs instead of 50 percent. Somehow, that doesn't sound like an impressive reduction in vulnerability.

Strong efforts at conservation, which could reduce U.S. per capita oil use to European levels, would make us roughly self-sufficient. But even so, the strategic importance of the Persian Gulf would be only minimally reduced. The reason is that even if the United States became self-sufficient, our allies in Europe, Japan and elsewhere would still be highly dependent on imported oil. And if this crisis has taught us one lesson, it is that the United States cannot go it alone; we need to protect not just our own interests but also those of our allies.

So the bottom line is that as long as oil is important to modern economies, the Persian Gulf will remain strategically crucial. This presumably means that the West will have to maintain a military presence in the region, with all the tensions that creates. And I haven't heard any proposals, whether they involve increasing domestic oil production or reducing oil consumption, that would change that bottom line.

In fact, reduced oil dependence, by putting downward pressure on oil prices, could actually be destabilizing. A quick, unfair summary of the political analyses of the Persian Gulf region I've read over the last few days is that oil revenues, which allow the Saudi monarchy to buy off potential opposition, are pretty much the only thing that keeps Saudi Arabia from turning into another Afghanistan.

So what is the answer? For the present and for some years to come there is no way to escape the awkward reality that the oil reserves of the Middle East are crucial to the world economy. If that dependence is ever to end, we will have to do more than drill in a few more wilderness areas, and it won't even be enough to drive more fuel-efficient cars. We'll have to find a way, through some combination of technological innovation and radical policies, to wean not just the United States but the world economy from its dependence on oil.