Energy Alarmism: The Myths That Make Americans Worry about Oil

Many Americans have lost confidence in their
country's "energy security" over the past several
years. Because the United States is a net oil
importer, and a substantial one at that, concerns
about energy security naturally raise foreign policy
questions. Some foreign policy analysts fear that
dwindling global oil reserves are increasingly concentrated
in politically unstable regions, and they
call for increased U.S. efforts to stabilize—or, alternatively,
democratize—the politically tumultuous
oil-producing regions. Others allege that China is
pursuing a strategy to "lock up" the world's
remaining oil supplies through long-term purchase
agreements and aggressive diplomacy, so
they counsel that the United States outmaneuver
Beijing in the "geopolitics of oil." Finally, many
analysts suggest that even the "normal" political
disruptions that occasionally occur in oil-producing
regions (e.g., occasional wars and revolutions)
hurt Americans by disrupting supply and creating
price spikes. U.S. military forces, those analysts
claim, are needed to enhance peace and stability in
crucial oil-producing regions, particularly the
Persian Gulf.

Each of those fears about oil supplies is exaggerated,
and none should be a focus of U.S. foreign
or military policy. "Peak oil" predictions about the
impending decline in global rates of oil production
are based on scant evidence and dubious models of
how the oil market responds to scarcity. In fact,
even though oil supplies will increasingly come
from unstable regions, investment to reduce the
costs of finding and extracting oil is a better
response to that political instability than trying to
fix the political problems of faraway countries.
Furthermore, Chinese efforts to lock up supplies
with long-term contracts will at worst be economically
neutral for the United States and may even be
advantageous. The main danger stemming from
China's energy policy is that current U.S. fears may
become a self-fulfilling prophecy of Sino-U.S. conflict.
Finally, political instability in the Persian Gulf
poses surprisingly few energy security dangers, and
U.S. military presence there actually exacerbates
problems rather than helps to solve them.

Our overarching message is simply that market
forces, modified by the cartel behavior of OPEC,
determine most of the key factors that affect oil
supply and prices. The United States does not need
to be militarily active or confrontational to allow
the oil market to function, to allow oil to get to
consumers, or to ensure access in coming decades.