Blood for Oil

The War on Terror and anti-American sentiment in the Middle East has raised our gasoline prices to an all-time high. Or has it?

Everyone knows that most of our oil comes from the Middle East, which is why we're so heavily dependent upon them for our energy. And when they don't like us, for example when we bomb them, they jack up our prices to hit us where it really hurts. Or so I've always heard. But is any of that really true?

More than a third of our petroleum, about 37% of our total usage, is produced domestically by our own oil companies. I'm not sure why people seem to forget about those guys, ExxonMobil and Chevron and all of them; you may resent them but they are the principal source of our non-foreign-dependent energy. So this means that only a bit less than two thirds of our petroleum is imported. That still means most of our petroleum comes from OPEC, right? Wrong. Most of our petroleum imports come from non-OPEC countries; 56% of it, in fact. Of that 56%, the majority is from Canada and Mexico, who are about as far removed from the Middle East as can be. The rest of it is from other random places like Angola, Russia, the Virgin Islands, and Brazil, all of whom are friends of ours. So exactly where is all this leverage from anti-US exporters coming from?

You probably assume that it comes from the OPEC countries, who provide the remaining 32% of our petroleum. Well, here's the next monkey wrench. Of that 32%, almost none comes from hostile Middle East countries. The biggest supplier is Saudi Arabia, a relatively Westernized country (economically if not in human rights) that's our biggest ally in the region. Number 2 is Venezuela (in more ways than one); their president may be headed for a rubber room but they're hardly a Middle Eastern terrorist nation. Number 3 is Nigeria, and I'll bet you didn't know that they had an industry other than sending emails promising millions. Number 4 is Algeria, and what's left comes from Iraq, which isn't allowed to hate us any more now that we occupy them. In fact, less than 1% of our petroleum comes from hostile Middle East countries.

No blood for oil, say the anti-war protesters. I'm against the war too, but I'm interested to hear that particular claim defended. Yes, the United States does launch some pretty unpopular military actions in this world, but not against anyone who provides any significant part of our oil. No blood for oil. Looks great on an anti-war protest sign. Sounds great on 60 Minutes. But what's it based on? I don't know.

So I don't understand. Since none of our oil supply is dependent on these Middle Eastern countries we're always fighting with, how come that fighting affects our gas prices? Sounds like a smoking gun to me. Clearly, we wouldn't be fighting them if we weren't getting some oil out of it somewhere, say the conspiracy theorists. Maybe the Saudis are behind it. Maybe attacking Iraq is a way to please Saudi Arabia. Well, if it is, the fighting sure didn't improve our gas prices much. From what I can see, we've gained nothing by attacking Iraq. We certainly haven't won any free oil or earned any favoritism discounts. So why do the conspiracy theorists draw this connection? I don't know. None of it makes any sense to me.

Yet, something has driven up the gas prices. Whose word do we accept unconditionally: the government's, or that of the anti-US conspiracy theorists? Maybe a liberal dose of skepticism is due. Maybe all of these people are speaking with an agenda, rather than with responsible critical analysis.

An advertisement in the New Yorker magazine costs a lot more than an advertisement in People Magazine, despite the fact that People Magazine reaches many more readers. A Porsche Turbo costs almost twice what a Porsche Carrera costs, even though they're 98% identical. A Rolex contains the same parts as a Timex but costs a hundred times as much. Has the world gone mad? When did prices suddenly jump off the sanity wagon? Since when do companies charge a penny more for their products than their production cost?

Prices are driven by markets. Markets are driven by human beings. Human beings are driven by emotions. Emotions, like fear, explode when we get into a war. When we get into a war in an oil-producing region, petroleum markets in those regions go insane. Stockholders get nervous. Traders freak out. Prices climb the tree like mad to escape the tsunami. Everyone between you and the guy who connects the hose to the well in Yemen becomes terrified, and oil becomes the most prized commodity on the planet. It's simple, it's obvious, it's organic, and it's Economics 101. It's not blood for oil and it's not a Halliburton conspiracy. It's a fact of world economics, and the tidal force of the world economy is the strongest superpower on Earth: greater than Dick Cheney, greater than Osama bin Laden, greater than anti-war protesters. The US administration wishes it could control oil prices like this.

I'm well aware that this little outburst of mine is not going to change the mind of anyone who believes that the war in the middle east is all about oil. I know that plenty of listeners are going to find fault with my research and point out that we did in fact get seven barrels of oil from a hostile country ten years ago. I know that many listeners are going to drag out the tired old adage that if Iraq produced pencils instead of oil, the Gulf War would never have happened. I know that many listeners are going to point out that regardless of short-term price hikes, it's essential for the US long-term energy strategy to have a strong military presence in the Middle East. I know I can't change your mind. What I can do is to encourage you to be skeptical for a moment. What I can do is to encourage you to look up, on your own, where our oil actually comes from. When you see how little of it comes from the Middle East, and especially how almost none of it comes from the hostile parts of the Middle East, I hope that you will at least re-examine the blood for oil claim. Is that small percentage of oil truly more important than virtually everything else about our country, to the point where we'd infuriate everyone in the world, plus most of our own people, to wage a war? I'm not a politician and I don't claim to know what the war is really about, but when I look at the oil question skeptically, it just doesn't emerge as a logical cause. I'm not claiming to have the answers and I'm not even claiming to be right, but I am claiming to have thought about it more, and personally done more independent research into the sources of our petroleum, than most people who simply parrot the blood for oil slogan because it's a great sound bite and because it's an easy and trendy way to be anti-Bush. I'll give you a great starting point for your own research, an article by the engineering editor of Road & Track, and you'll find the link for it in the online transcript of this episode.

I fully expect this episode to be among the least popular, and the most criticized. It's always more popular to be skeptical of the government, than to be skeptical of those who doubt the government. So go ahead, I'm all through talking now; bring it on.

By Brian Dunning
Follow @BrianDunning