[R-G] Obama, Gulf oil and the myth of America’s addiction

[Anthony Fenton]

Obama, Gulf oil and the myth of America’s addiction

Afshin Molavi

     * Last Updated: January 21. 2009 9:30AM UAE / January 21. 2009  
5:30AM GMT

http://www.thenational.ae/article/20090121/OPINION/319347384/-1/NEWS

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 favourite 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 East.

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.

President 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.

Saudi 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.

In 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.

All 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 region.

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 simplistic assertions.

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.

Afshin Molavi is a fellow at the New America Foundation, an  
independent Washington think tank.