Can We Do Without Saudi Oil?
Nov 19, 2001, Vol. 7, No. 10 • By IRWIN M. STELZER
When we look further down the ranking of countries blessed with significant reserves, we find that Iraq is followed by the United Arab Emirates and by perhaps the world's most famous ingrate, Kuwait, each with a bit more than 9 percent of the world's known reserves. We have less than 3 percent of the world's known reserves, about the same portion as neighboring Mexico. Canada, although rich in natural gas, has relatively small known reserves of oil that are economically recoverable at anything like current prices. Russia, the new "hot" area for oil exploration, has substantial reserves and, with large-scale investment, can significantly expand its production. But lacking sufficient pipeline capacity, Russia can't increase exports significantly before several billions are spent and at least five years pass. Besides, it is not unreasonable to question the wisdom of developing a new energy policy that markedly increases our reliance on a country that has yet to establish itself as a reliable geopolitical partner.
Even these figures understate our dependence on the Saudis. Enough oil is known to exist in the United States to maintain current production levels for about 10 years, and in Canada for about 8 years; the Saudis can tap their reserves for over 80 years without slowing output. There is worse: It is well known that the Saudis haven't really attempted to explore for new reserves because they already know precisely where some 260 billion barrels are located. "You don't plant potatoes when you have a cellar full of spuds," a grizzled denizen of America's oil patch once told me. Not only are the Saudis sitting on the world's largest known reserves, they are also the only country with existing excess capacity, and therefore the only country in a position to increase production quickly should some other supplier withdraw from the market or be knocked out of action.
In short, Saudi Arabia is and will remain the kingpin of the oil world, able to pump enough oil to satisfy America's thirst if it chooses. But should this regime come to believe that its survival requires unsheathing the oil weapon, or should a regime less wedded to cash flow come to power, supplies might be cut off. In the latter case, analysts would suddenly find themselves following the words of a bin Laden oil minister more closely than those of Alan Greenspan when they prepare their forecasts of the course of the American economy.
IN THE LONG RUN, then, if things continue as they have, we will increasingly be dependent on a shaky, despotic regime that uses the proceeds of its oil sales to support the gangs that aim to destroy us, and to educate its young to hate us, after skimming off enough to support its princes' penchant for yachts, women, and Johnny Walker Black Label. In a worse case, we will see our supplies controlled by a regime driven more by hatred than by greed.
This is not a new problem. Post World War II history is replete with efforts by administrations, Democratic and Republican, to free America from dependence on Saudi Arabia and its cartel colleagues. As I have noted in an essay for the Hudson Institute, when the Arabs first unsheathed the oil weapon in October 1973 in response to America's support of Israel during the Yom Kippur War, President Nixon responded: "Let us set as our national goal . . . that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign sources."
Not to be outdone by his predecessor, President Ford pursued the illusory goal of self-sufficiency by attacking both the supply side--encouraging greater use of coal and providing greater incentives for domestic exploration--and the demand side (auto fuel efficiency standards), while at the same time creating a Strategic Petroleum Reserve as a buffer against another shortage.
Jimmy Carter proved that failure to craft a successful "energy policy" is bipartisan. He created the Department of Energy to wage what he unfortunately termed "the moral equivalent of war" (which quickly became known by its acronym, MEOW, and didn't strike terror into the hearts of OPEC). The usual mix of supply-side subsidies and demand-side constraints followed, notwithstanding the failure of such efforts in the past, as President Carter appeared, sweater-clad, to urge Americans to shiver a bit more in the winter and sweat a bit more in the summer--and to do without hot water in federal facilities such as the restrooms of airports.