I shall comment briefly on three particular kinds of political-military event that might overwhelm a mar-ket response to supply shocks. First, what if somebody conquered all of the Middle East? You would then have a better functioning cartel. Suppose the cartel’s supply got disrupted or suppose it chose to disrupt its own supply. There wouldn’t be any other suppliers in a position to bump up supplies.
Second, what if transportation were interrupted?
What if somebody, say Iran, tried to close the Strait of Hormuz, an inviting choke point, through which 17 million barrels of oil a day pass. There are other choke points. What if there was a military interruption of a huge oil producer as opposed to one of the smaller spigots that could be compensated for through an-other supplier?
Third, what if there was a civil war in a country that is a big supplier? A civil war in Nigeria, which is a moderate supplier, might cut off hundreds of thou-sands or maybe even a million barrels of oil a day.
Other suppliers could easily enough compensate for this. But a civil war in Saudi Arabia could cut off nine million barrels a day. It would be very hard for other suppliers to compensate for that. So you might be concerned with preventing a civil war in Saudi Arabia and might think of using the military to respond.
We therefore must inquire, How real are these threats? Is there a military response?
Conquest.
First, consider military conquest of a major oil pro-ducer. The fact that we are probably now at the lowest risk of conquest of one oil supplier by another of any
time in history. It used to be that Iraq posed a threat in the Middle East. But one effect of the U.S.-Iraqi war is that we wrecked Iraq’s military. There is no doubt about that. Iraq is no longer a serious threat to the other Middle Eastern oil producers.
The U.S. military is very good at coming in from afar using standoff weapons. We don’t have to have forward presence to stop one country from conquer-ing another. Our precision capabilities have gone up since 1991, so we can stop a would-be conqueror in its tracks.
Infrastructure Attacks.
The second issue that concerns us is an attack on the oil infrastructure such as disruption of transport.
Can somebody close the Strait of Hormuz? In fact, an oil tanker was once attacked and set afire off the coast of Yemen waiting to go into port. Stopped oil tank-ers are somewhat vulnerable but only somewhat. The good news about this tanker is that, even though it burned for 3 days thanks to a lucky shot, it sailed away.
It didn’t sink. It continued under its own power. It got repaired. It was not cheap to repair this particular tanker, but that tanker is sailing today delivering oil around the world. It’s very hard to sink and disrupt tankers using traditional weapons and military capa-bility. Tankers are very resilient targets. In some ways, they’re much more resilient than warships, and there are a zillion of them. Every day something like 22 su-pertankers pass through the Strait of Hormuz. If Iran were trying to disrupt global oil supplies by attacking tankers, it would have to hit lots of tankers every day on a sustained basis. It would have to continue do-ing that day in, day out, for months to sustain the
dis-ruption. That is a very difficult military mission. It’s way beyond the capabilities of Iran, even if the United States stood back and just took the punches, but we all suspect we won’t actually do that.
Internal Instability.
The last point is the scariest one. What about inter-nal instability? What if the Saudis had a civil war and couldn’t produce any more oil? That would be a real problem. The market couldn’t compensate, but what could we do? We would be faced with a really horrible situation where we could swallow the price increase, or we could use the military to try to stop a civil war in a country that is considerably bigger than other coun-tries we’ve intervened in. There are geographic and demographic reasons why it would be very hard to tamp down the civil war once it started.
So the real question is what should the United States do militarily to prevent a civil war in Saudi Ara-bia? The best answer is to stay out of Saudi politics.
When we have lots of soldiers deployed in the Middle East, particularly around the Gulf, it is a recruiting tool for radicals. Now it goes both ways. There may be reasons we want to do it anyway. There may be reasons we want to have troops deployed there, but we have to understand that the deployments increase the probability of instability in places where we’d really rather there not be instability. It’s a very risky and costly policy. Given that the market can handle most of these situations, it’s probably a bad idea to pay the costs of actually increasing the probability of the bad outcome, i.e., fomenting internal security that can actually threaten energy security. Thus, in the long view, not being forward-deployed in the Middle
East is probably the best energy security policy that we can adopt.
CONCLUSION
The bottom line is that threats to energy security are probably exaggerated. It’s very difficult to gener-ate sustained price spikes through political military supply interruptions around the world. The market compensates. The cartel compensates. This means that the military should play a particularly small role in trying to defend against these contingencies because it’s not a practical policy tool. Energy security policy based on the military is a bad response to lots of the energy issues that face us. Better to back away from the military option where feasible, and adopt an over-the-horizon posture in the Middle East, and engage in a policy of strategic restraint.
COAL, CLIMATE CHANGE, AND CONFLICT