Do we need to go to war for oil?
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Authors
Henderson, David
Subjects
Advisors
Date of Issue
2015-05-15
Date
Publisher
Monterey, California: Naval Postgraduate School
Language
en_US
Abstract
Many people fear that a hostile foreign oil producer will be able to damage Americans and, for that reason, think that the U.S. government should ensure U.S. access to oil. But a foreign government cannot cause Americans to line up for gasoline. Only price controls imposed by U.S. governments can do that, which is what they did in the 1970s. A hostile foreign oil producer cannot inflict more than a small amount of harm on Americans by refusing to sell oil to Americans, unless this oil producer is willing to cut its own output. If a hostile foreign oil producer maintains output but cuts exports to the United States, it initiates a game of musical chairs in which the number of chairs equals the number of players. Different buyers will be linked with different sellers, with a cost to Americans of only about $1 per person per year. The only way a foreign oil producer can harm Americans is by cutting output, but that producer will then harm itself and will also harm all oil users, not just U.S. consumers. This harm is likely to be well under 0.5 percent of U.S. GDP. Ironically, war for oil could well drive the price of oil higher, not lower, thus costing Americans twice: as taxpayers and as oil users.
Type
Article
Description
Defense Energy Seminar
Series/Report No
Department
Economics
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.