How Firm a Foundation?
While many factors have contributed to relative energy security for America since the oil crises of the 1970s, the foundation of this stability has been a free market and a diversified supply strategy focused on regional suppliers and away from the Persian Gulf. A pair of articles in the current Economist (subscription may be required) raise questions about the future reliability of two of the principal enablers of this diversification, Mexico and Venezuela.
Prior to the 1979 Iranian Revolution, the US imported roughly 8 million barrels per day (MBD) of crude oil, with two-thirds coming from OPEC and about a quarter of the total from the Persian Gulf. Last year, the volume of oil we bought from OPEC was about the same as in 1978, even though total imports have climbed to nearly 13 MBD. Persian Gulf imports are up about 10% from the late 70s, but still account for less than a fifth of the total.
If Mexico proves unable to increase its production to cover both its growing domestic market and the increased appetite north of the border, and if Venezuela accelerates its political shift from a "Bolivarian Revolution" to "Fidelism" (see my posting of 2/1/05) then even the current volumes we buy from these countries will be at risk. The consequence would be a rapid shift to dependence on imports from the Middle East, in direct competition with China and India.
The problem seems clear, but the solution is not. How much influence does NAFTA give the US in a Mexican political process rooted in sacred-cow nostalgia for a 1930s nationalization that is blocking needed foreign investment in the oil sector? Can we find a way to work with Venezuela's neighbors to contain Mr. Chavez's dogma, without returning the region to the instability it experienced a generation ago? And can we accomplish any of this while preoccupied with terrorism and the democratization of the Middle East? The alternative will require us to get serious about conservation.
Although it's unrealistic to imagine that the US can ever again be self-sufficient in petroleum, maintaining balance and diversity in our oil supplies is possible and desirable, even if our long-term goal is the creation of a non-oil-based economy. Preserving this balance in the face of new challenges, however, will require elevating its priority in our diplomacy and trade relations. That seems unlikely without a clearly articulated national energy policy.
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