Friday, October 18, 2013

The Myth of U.S. Energy Dependence: What We Got Wrong About OPEC's Oil Embargo

By Gal Luft and Anne Korin, October 15, 2013, originally published in Foreign Affairs.

The first U.S. energy secretary, James Schlesinger, observed in 1977 that when it comes to energy, the United States has “only two modes complacency and panic.” Today, with the country in the middle of an oil and gas boom that could one day crown it the world’s largest oil producer, the pendulum has swung toward complacency. But 40 years ago this week, panic ruled the day, as petroleum prices quadrupled in a matter of months and Americans endured a traumatic gasoline shortage, waiting for hours in long lines only to be greeted by signs reading “Sorry, no gas.”

The cause of these ills, Americans explained to themselves, was the Arab oil embargo — the decision by Iran and the Arab members of the Organization of Petroleum Exporting Countries (OPEC) to cut off oil exports to the United States and its allies as punishment for their support of Israel in the 1973 Yom Kippur War. And the lessons they drew were far-reaching. The fear that, at any given moment, the United States’ oil supply could be interrupted by a foreign country convinced Washington that its entire approach to energy security should center on one goal: reducing oil imports from that volatile region.

But Americans were wrong on both counts. The embargo itself was not the root cause of the energy crisis. Contrary to popular belief, the United States has never really been dependent on the Middle East for its supply of oil — today only nine percent of the U.S. oil supply comes from the region. At no point in history did that figure surpass 15 percent. Rather, the crux of the United States’ energy vulnerability was its inability to keep the price of oil under control, given the Arab oil kingdoms’ stranglehold on the global petroleum supply. Nonetheless, for the last four decades, Washington’s energy policy has been based on the faulty conclusion that the country could solve all its energy woes by reducing its reliance on Middle Eastern oil.

Where did this conclusion come from? By the time the six-month embargo was lifted, in March 1974, the global economy lay in ruins. In the United States, unemployment had doubled and GNP had fallen by six percent. Europe and Japan had fared no better, and struggling, newly created countries in Asia and Africa took the worst hits. Countries completely dependent on energy imports found themselves heavily in debt, and millions of unemployed poor had to migrate from the cities back to their villages.

The crisis also dealt a blow to American prestige. At the height of the Cold War, the United States essentially proved that without oil it was a paper tiger. The worried secretary of state, Henry Kissinger, indicated that the United States was prepared to send military forces to the Persian Gulf to take over whatever country was needed to keep the oil flowing. Since 1973, the United States has sent forces to the Middle East time and again in the name of energy security. Moreover, the embargo created a deep sense of vulnerability from which the United States has never recovered. The country has been portrayed that way by its own leaders: in 2006, Senator Joseph Lieberman called it “a pitiful giant, like Gulliver in Lilliput, tied down and subject to the whim of smaller nations.” 

The only proper response, it seemed, was to stop importing so much Middle Eastern oil. Every U.S. president since the embargo, from Richard Nixon to Barack Obama, has sought the elusive goal of “energy independence,” either by increasing domestic oil supply (Republicans) or by constraining demand through a gasoline tax and improving the standards for cars’ fuel efficiency (Democrats). Americans have been led to believe that the vulnerabilities associated with oil dependence would be alleviated if only oil imports decreased. Furthermore, they have been promised that import reduction would yield lower crude prices and thus lower prices at the pump.

Those assertions were wrong 40 years ago and they are even further off the mark today. The long race for energy self-sufficiency reflects a systematic failure to grasp the meaning of the events of 1973 — specifically the exact role that OPEC played during this episode and over the subsequent four decades. It is time to take a fresh look at those events, to rethink the U.S. national fixation with energy self-sufficiency, and to focus on solutions that actually have a chance of getting the United States — not to mention the rest of the world — out of the mire.


GAL LUFT and ANNE KORIN are Co-Directors of the Institute for the Analysis of Global Security and Senior Advisers to the United States Energy Security Council. They are the co-authors of Petropoly: The Collapse of America’s Energy Security Paradigm.

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