Tag: oil shocks

Debunking the Myth of Oil Dependence

An article in today’s Boston Globe might help to debunk one of the more pervasive myths that distorts U.S. foreign policy: the belief that access to oil from the Middle East is a vital national security issue for the United States.

I discuss the issue in my book, The Power Problem (pp. 107-114). In addition, the Cato Institute and/or Cato scholars have published no fewer than five papers and articles over the past two decades documenting the many reasons why access to oil – or any other natural resource, for that matter – should not be cast as a national security threat. (See, e.g. here, here, here, here and here).

An article in the journal Security Studies expands on the last of these papers, published by Eugene Gholz, at the University of Texas, and Daryl Press, at Dartmouth College. (Justin Logan deserves credit for locating an early version of this paper, and working with Gholz and Press to publish the paper in Cato’s Policy Analysis series in 2007).

But the Gholz/Press plea that U.S. policy not fall victim to ”energy alarmism” isn’t particularly controversial. Or, at least, it shouldn’t be. Writes the Globe’s Jeremy Kahn:

Gholz and Press are hardly the only researchers who have concluded that we are far too worried about oil shocks. The economy also faced a large increase in prices in the mid-2000s, largely as the result of surging demand from emerging markets, with no ill effects. “If you take any economics textbook written before 2000, it would talk about what a calamitous effect a doubling in oil prices would have,” said Philip Auerswald, an associate professor at George Mason University’s School of Public Policy who has written about oil shocks and their implications for US foreign policy. “Well, we had a price quadrupling from 2003 and 2007 and nothing bad happened.” (The recession of 2008-9 was triggered by factors unrelated to oil prices.)

And yet, the idea that is rejected by most economists is almost universally believed by politicians, and hyped by interest groups who stand to gain by stoking public fears. Auerswald explains: 

“This argument is like the familiar old jeans of American politics,” he said. “They are nice and cozy and comfortable and everyone can wear them. Because of ethanol, the farm lobby loves it; for coal, well it’s their core argument; for the offshore drilling folks, they love it.” Even the environmental movement relies on it, he said, because they use it as bogeyman to scare Americans into taking renewable energy and energy conservation more seriously. As for the US military, “The US Navy is not interested in hearing that one of their two main theaters of operation has no justification for being,” Auerswald said.

Here’s hoping that Jeremy Kahn’s article will help to set the record straight.