Energy, the Environment, and U.S. Policy

ENERGY, THE ENVIRONMENT, AND U.S. POLICY Wilfrid L. Kohl The end of the Cold War reduces but does not remove threats to the nation's energy security. At the same time it allows us to assign a higher priority to national and global environmental threats, many of which are related to combustion of fossil fuels. The ability of the United States to confrontboth kinds ofthreatscanhavepositive implicationsforthe national economy and competitiveness. Thedisintegrationofthe Soviet Unionhasremovedthethreat ofSoviet intervention in the oil-rich Middle East. However, the potential remains for political instability in the region, which could easily lead to future disruptions in oil supplies. The "Bush doctrine," which provided defense assistance to oil-rich conservative regimes against outside threats, apparently remains in place.1 However, the relatively easy victory in the Persian Gulf war may cloud our view of the U.S. ability to intervene militarily in a faster-breaking, more politically complicated situation in the future. The Iraq-Kuwait case was unusual because the United Nations coalition had five months in which to build up its forces. By contrast, consider the consequences of an internal revolution in Saudi Arabia, or a protracted war between two major oil producers that interrupts the flow of oil. 1. See Edward N. Krapels, "The Commanding Heights: International Oil in a Changed World," International Affairs, 69, 1 (1993), pp. 71-88. Wilfrid L. Kohl is Research Professor ofInternational Relations at SAIS. He directs the IR-EEST subfield and the International Energy and Environment Program at The Johns Hopkins Foreign Policy Institute. 59 60 SAIS REVIEW U.S. oil imports from the Middle East are rising. However, Western Europe and Asia depend even more substantially on oil imports from that volatile region than does the United States. At the geopolitical level, the United States bears a heavy burden by its very possession ofthe exclusive combinationofresources and military capability toprotectaccess to Persian Gulfoil for ourselves and our allies. How often do we want to send troops to protect our oil interests and the role of oil in the world economy? Will we be as lucky next time? How many more lives might be lost? What will be the effect of contracting U.S. military capabilities? Perhaps reducing our oil vulnerability, which would also help the environment, would not be such a bad objective after all. Oil Let us consider the U.S. oil situation in greater detail. The U.S. economy remains hooked on oil for about 40 percent of its primary energy consumption. Domestic production is declining and our oil imports are rising. Once againmore andmore ofourimportsofoilarecomingfrom Saudi Arabia and other members of the Organization of Petroleum Exporting Countries. U.S. oil consumption amounts to about 17 million barrels per day, which is roughly one half the total consumption ofthe Organization of Economic Cooperation and Development nations. In 1992 about 41% of our oil was imported on a net basis (i.e. subtracting the small amount of exports to offshore refineries) and 10.4% oftotal oil consumption came from the Persian Gulf. Overall imports are projected to rise substantially in years ahead, and could double by the year 2010 to about 12/mbd. Europe and Japan rely even more heavily on Persian Gulf imports for 27% and 67% oftheir oil consumption, respectively. Transportation accounts for two-thirds ofU.S. oil consumption. Ofthis amount, about half is fuel for light duty vehicles (automobiles and light trucks.) The United States continues to enjoythe luxury ofverylowgasoline prices, among the lowest in the world, which encourages consumption. Even if President Clinton's original proposal for a BTU tax (a tax on the heat content ofvarious fuels) had passed, it would only have added around 7.5 cents to the cost of a gallon of gasoline. The revised budget package passed by Congress this summer included an increased tax on transportation fuels of 4.3 cents per gallon. Americans will still have low gasoline prices. The major economic threats inherent in U.S. dependence on oil comes not from a possible import cutofffrom any one particular country, but from the risk of an oil price escalation that would follow a market disruption, and from the effect of an oil price shock on...