Benjamin Juul, Editor, Foreign Affairs Review
In his 1980 State of the Union address, President Jimmy Carter announced a new doctrine for American foreign policy, saying, “…let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”
It would be hard to argue that President Carter was being hawkish here. Carter was notorious for having very little interest in armed conflict, at least compared with the presidents who followed him. He also wasn’t particularly enamored with the Persian Gulf monarchies, certainly not enough to guarantee their security. Carter simply saw the political reality of the moment. An attack on an oil-producing states in the Persian Gulf would be tantamount to an attack on the world economy.
Carter was operating based on experience: US support of Israel through the Yom Kippur War led to an oil embargo by many countries in the Persian Gulf, more than doubling the cost of oil within the year. Also in his recent memory was the Iranian Revolution, which took Iran’s oil production from five million barrels a day to zero. This lead to constant paranoia about oil price volatility amongst the American foreign policy community for decades following the oil shock. This fear was so strong that during the Reagan Administration, the United States would reflag Kuwaiti ships as American and escort them through the Strait of Hormuz to prevent Iranian attacks. When an Iranian mine blew a hole in the side of an American ship, Reagan sank the Iranian Navy. This move preempted the first Iraq war, when President Bush invaded Iraq to prevent them from taking Kuwaiti oil fields.
During this period, US oil production began to decline substantially. In 1985, the United States imported 25% of its oil. By 2005, imports reached 60% of total US oil consumption. On top of this trend, frustrated by the United States’ ease and willingness to slash oil prices, Saudi Arabia, Venezuela, and Iran, as well as other key oil producers, agreed to coordinate to defend oil prices. Their agreement created the Organization of the Petroleum Exporting Nations, or OPEC, which now controls about eighty percent of world crude oil exports. These nations also all began to nationalize their oil industries, so that by the end of the 1970s, international oil companies saw their access to world oil reserves decline from 85% to just 7%. This had the effect of making oil a much more viable economic weapon, particularly against the United States.
Despite these nearly forty years of precedent, an Iranian attack on the Saudi Abqaiq oil processing facility, which destroyed more than half of the country’s production capability, compelled basically no response from President Trump. This attack followed months of attacks by Iran against oil tankers in the Persian Gulf and halted production at the largest oil processing plant in the world, causing a 5% drop in global production.
The president initially tweeted that the US was ‘locked and loaded’ and ready to strike Iran after confirmation from the Saudis. These tweets were then quickly played down by senior aides and by Trump himself, saying that he ‘doesn’t want war with anybody’ despite implicating Iran. The turnaround occurred becausePresident Trump is extremely sensitive to financial markets as a metric of his presidency’s success, and these comments were made while oil prices had their largest spike since the first Iraq War. The administration was forced to quickly backpedal any threats made against Iran, for fear of further destabilizing markets.
While in the short term, the decision not to strike Iran may have settled investors, in the long term it gives Iran a pass for its aggression, which may destabilize oil prices even more down the road. The attack, if it does not make a compelling case for the Carter Doctrine, at least harkens back to a time where protecting the internal security of the Middle East seemed like a worthwhile task. Each American consumer will have to pay an additional $18 a month as a result of the attacks on Saudi Arabia, which represent the largest oil disruption in history by barrels per day.
The Saudi oil strikes presented a larger disruption by volume to global markets than the Arab oil embargo and the Iranian Revolution, but there are a few reasons it wasn’t as painful. Firstly, the Saudis claimed they could get oil pumping again within the month, limiting its impact on the sale of oil futures. Additionally, President Trump opened up the US’s Strategic Petroleum Reserve, the largest reserve oil fields in the world, to try to moderate the price increase. These actions are coupled with the fact that the oil market is simply much larger than it was in the 1970s, meaning that a five million barrels per day drop represents a smaller disruption by percentage of all oil pumped. However, one of the biggest reasons, and perhaps why we have abandoned the Carter Doctrine, is that the United States is very close to being a net exporter of crude oil.
The United States, through a combination of investment and new technologies like fracking and the use of shale oil, has moved from the third-largest oil producer in the world to the first by about three million barrels per day. This move has occurred in the last ten years and has had large ramifications for US foreign policy. In fact, the Vice President’s Chief of Staff Marc Short cited it while discussing the president’s thinking about the attack, telling Fox Business “I think locked and loaded means several things, one thing it means is that America today under the President is far better prepared to handle these sorts of events because we’re now a net exporter of oil.”
There is also the added benefit of Canada, whose new mining of tar sands (an unconventional petroleum deposit made of sand, clay, and water) now provides the US with 40% of its oil imports. It would appear that the United States is on the cusp of its long-awaited energy independence when it can free itself of having to protect Persian monarchies for the sake of protecting global oil prices and simply live off of North American oil.
Energy independence would hopefully disentangle the United States from some of its Middle East conflicts, to the relief of a very Middle East fatigued American public. It would also mean the complete end of the Carter Doctrine and the United States shielding global oil prices. This would make sense, as China is a much larger consumer of Persian oil than the United States, and does very little to earn its price security. It would also free up the United States to lend human rights issues in the Middle East the platform they deserve, instead of simply sweeping the Crown Prince’s beheaded relatives under the rug.
Unfortunately, the dream of energy independence remains a dream, despite our new hegemony in production. This is true for a variety of reasons. To start, because oil is priced based on how it sells on the global market, the United States will never be completely insulated from global fluctuations. To make matters worse, ‘OPEC+’ a group that includes Saudi Arabia, Iran, and Russia, seemingly deciding that the influx of US oil has driven the price too low, has begun coordinating decreases in production. In fact, in 2017, this group overshot their goals in decreasing production, leaving a sizeable effect on oil prices. On top of this, Saudi Arabia continues to hold the largest spare capacity of oil in the world. Spare capacity is oil that can be very easily mined if necessary, allowing swift adjustments in price that can change the world market very rapidly. The fact that Saudi Arabia holds the power to increase or decrease production by 1.5 million barrels per day makes them a ‘swing producer’ with strong control over oil prices, giving the country added power over US consumers. The Arabian Peninsula is full of swing producers, especially because with nationalized oil industries, the government can typically control production unilaterally, increasing US dependence on the region.
Despite these more dismal features of the global oil market, the fact remains that both the US’s energy independence and its over policing of global oil markets are both improving. That being said, we are a long way from being able to produce enough oil to keep ourselves out of all Middle Eastern conflict. A substantial oil shock, like a $25 per barrel increase, would mean an extra $45 a month for the typical American family. That level of increase would mean the political demise of any American president. Thus, most presidents would still intervene militarily to prevent this kind of shock, meaning the United States is in a sense eternally in service to the global oil market.
Nevertheless, there is an answer that doesn’t involve bombing Iran or pumping our way to freedom, and it’s found in the other moves the Carter Administration made to insulate Americans from oil shocks. They created the SPR, which holds more than 650 million barrels of oil reserves. They increased fuel economy standards for cars and began financing clean energy sources produced in the United States. Outside of policing the world, the other way to become more energy independent is to become less oil-dependent. Moves like increasing fuel efficiency standards, which were rolled back by the Trump administration, would do an enormous amount to disentangle the US from foreign oil. Increasing our SPR would also be wise, as it is now able to be tapped in times of economic recession and may risk falling too low in the future if overutilized. Finally, a move towards green energy would secure both the environment and the US’s energy independence and allow the United States to operate unmoored from oil prices while its competitors, like China, remain at the whim of cranky despots and fluctuating prices.
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