Many Americans have lost confidence in theircountry's "energy security" over the past severalyears. Because the United States is a net oilimporter, and a substantial one at that, concernsabout energy security naturally raise foreign policyquestions. Some foreign policy analysts fear thatdwindling global oil reserves are increasingly concentratedin politically unstable regions, and theycall for increased U.S. efforts to stabilize—or, alternatively,democratize—the politically tumultuousoil-producing regions. Others allege that China ispursuing a strategy to "lock up" the world'sremaining oil supplies through long-term purchaseagreements and aggressive diplomacy, sothey counsel that the United States outmaneuverBeijing in the "geopolitics of oil." Finally, manyanalysts suggest that even the "normal" politicaldisruptions that occasionally occur in oil-producingregions (e.g., occasional wars and revolutions)hurt Americans by disrupting supply and creatingprice spikes. U.S. military forces, those analystsclaim, are needed to enhance peace and stability incrucial oil-producing regions, particularly thePersian Gulf.
Each of those fears about oil supplies is exaggerated,and none should be a focus of U.S. foreignor military policy. "Peak oil" predictions about theimpending decline in global rates of oil productionare based on scant evidence and dubious models ofhow the oil market responds to scarcity. In fact,even though oil supplies will increasingly comefrom unstable regions, investment to reduce thecosts of finding and extracting oil is a betterresponse to that political instability than trying tofix the political problems of faraway countries.Furthermore, Chinese efforts to lock up supplieswith long-term contracts will at worst be economicallyneutral for the United States and may even beadvantageous. The main danger stemming fromChina's energy policy is that current U.S. fears maybecome a self-fulfilling prophecy of Sino-U.S. conflict.Finally, political instability in the Persian Gulfposes surprisingly few energy security dangers, andU.S. military presence there actually exacerbatesproblems rather than helps to solve them.
Our overarching message is simply that marketforces, modified by the cartel behavior of OPEC,determine most of the key factors that affect oilsupply and prices. The United States does not needto be militarily active or confrontational to allowthe oil market to function, to allow oil to get toconsumers, or to ensure access in coming decades.