Throughout the campaign that culminated in his inauguration
yesterday, President Barack Obama called America’s dependence on oil
its greatest threat and outlined ambitious plans for energy
independence – the American politician’s favorite buzzwords. His
energy plan has called for oil savings equivalent to the amount that
the United States imports from the Middle East and Venezuela, and he
expects these savings to eliminate entirely imports from the Middle
George Bush called on America “to replace more than 75 per
cent of our oil imports from the Middle East by 2025”. When he made
that call in his 2006 State of the Union speech, Democrats rose with
their Republican counterparts to applaud the president vigorously.
Obama and his erstwhile foe turned Secretary of State Hillary Clinton
compete with each other to bash Middle East oil producers. One of the
oft-heard phrases emerging from both camps – “We borrow money from
China to pay for oil from Saudi Arabia” – managed to encapsulate three
whipping boys in one sentence: China, high oil prices, and the Saudis.
Arabia takes the brunt of the criticism from American politicians and
the public, especially when fuel prices rise at the pumps. Every four
years presidential contenders take turns bashing Saudi Arabia, while
the American public nod their heads in agreement, wondering how it has
become “hostage” to Middle East “oil sheikhs”. A powerful strain of the
energy independence movement involves “freedom” from that nebulous,
amorphous, “dark and dangerous” Middle East land mass that “produces
oil and terrorists”.
There’s just one problem with this argument:
it’s not true. America is not nearly as “addicted” to Middle East oil
as its politicians claim. In fact, there is only one Middle East
producer – Saudi Arabia – in the top five source countries that account
for two-thirds of US oil imports, and Saudi Arabia is not America’s No
1 source of petroleum imports. Not by a long shot. That distinction
goes to Canada.
In 2007, only two Middle East oil producers made
the Top 10 of US oil importing countries: Saudi Arabia and Iraq. Saudi
Arabia came in at third, just ahead of Venezuela and behind Mexico and
Canada. Iraq came in at eighth. Kuwait did not make the Top 10, at
13th. The UAE is not even on the list. It does not export a single drop
of oil to the United States. Last year Kuwait slipped into the Top 10,
making it three out of ten from the Middle East.
Also last year,
Saudi Arabia surpassed Mexico as the second largest source of US crude
oil imports. In terms of total petroleum imports, however, it still
lags far behind Canada, by nearly a million barrels a day. If America
is addicted to anyone’s oil, it is Canada’s.
The United States
consumes about 21 million barrels of oil a day. Just over a third is
domestically produced, while the rest is imported from a diverse array
of sources from Latin America to Canada to Africa and the Middle East.
The top five sources are geographically diverse: Canada, Saudi Arabia,
Mexico, Venezuela and Nigeria. If Americans want to wring their hands
in fear of being held hostage to oil imports, they might worry about a
Big Five conspiracy: a secret Riyadh-Ottawa-Mexico City-Caracas-Lagos
cartel that turns off the tap one day. If that sounds impossible and
ridiculous, it’s because it is.
Long-time Opec watchers know that
Saudi Arabia has always been the leading price moderate, reining in
other members, including Venezuela, who constantly want to ramp up
prices. And given Saudi Arabia’s oil heft – it still owns the world’s
largest proven reserves and is the only swing producer able to ramp up
production quickly – it usually wins those fights with the price hawks.
any case, the days are long gone when Opec could set oil prices. It can
certainly influence them, but there are too many other factors
involved, from Chinese and Indian demand to futures markets volatility
to guerrilla warfare and terrorism to worldwide economic conditions.
told, the United States imports roughly six to seven per cent of its
oil from Saudi Arabia. That is hardly an addiction. Add the rest of the
Middle East and it becomes just over 10 per cent. In fact, the Middle
East is not even the largest regional supplier of oil to the United
States after North America. That prize goes to Africa. Nigeria, Angola,
Algeria, and Gabon will soon be joined by a new crop of West African
producers, eclipsing the Middle East even further. Then there’s Latin
America, where Brazil, Colombia and Ecuador fall into the top 15, and
of course Europe, where Russia makes the Top 10 and the United Kingdom
slips into the top 15.
While these numbers may surprise
Americans, who in several polls have revealed deep misunderstanding of
oil market dynamics and exaggerated notions of Middle East oil
domination, it doesn’t surprise anyone with a remote understanding of
the petroleum industry. Most countries ideally seek to diversify their
sources of energy. In fact, America has done well in this area. It is
not beholden to any one region. If anyone is “addicted” to Middle East
oil, it is Japan, which buys nearly 90 per cent of its imports from the
How will President Obama deal with these facts? Will he
maintain his campaign-trail rhetoric? Only time will tell, but there’s
an old adage about the presidency: your view of the world changes
dramatically behind the desk at the Oval Office. You learn that
countries such as Saudi Arabia, while socially flawed, are strong
petroleum allies, and if Washington decides to stop buying their oil,
dozens of countries would line up to do so. You learn that today’s oil
market dynamics are complex and volatile, and not easy to define with
Winning cheap political points by bashing
Middle East oil producers won’t get the President far in achieving the
goal that most Americans want: affordable fuel and cleaner energy. And
so you lower the rhetoric, seek to find pragmatic solutions, and
understand Saudi Arabia’s value as a price moderate. Well, at least
until the next election.