It Really Doesn't Matter If We Stop Buying Middle Eastern Oil

Saying we could be oil independent is just a nice way of saying we'll still be oil dependent.


There are many, many things that influence the price we pay for a barrel of oil. Terrorists. Weather. What people think might be happening inside China's black box of an economy. The whims of the Saudi royal family.

Here's something that doesn't much affect it, though: Where the oil comes from. Crude trades on an amazingly liquid international market, where price is determined by supply and demand across the globe. Unlike fine wine or cigars, buyers have no reason to care about oil's provenance.

Hence, there really isn't much to be excited about in the news that the United States may be weaning itself off Middle Eastern oil, as reported in today's Wall Street Journal. The paper tells us that rapidly expanding U.S. production, along with new resources in Canada and Brazil, may one day make our reliance on OPEC oil a relic of history. Here's the core of the story:

By 2020, nearly half of the crude oil America consumes will be produced at home, while 82% will come from this side of the Atlantic, according to the U.S. Energy Information Administration. By 2035, oil shipments from the Middle East to North America "could almost be nonexistent," the Organization of Petroleum Exporting Countries recently predicted, partly because more efficient car engines and a growing supply of renewable fuel will help curb demand.
The change achieves a long-sought goal of U.S. policy-making: to draw more oil from nearby, stable sources and less from a volatile region half a world away. "Whereas at one point there were real and serious concerns about the ability to maintain sustainable access of supplies to the United States if there were disruptions in the Middle East, that has changed," Carlos Pascual, the top energy official at the State Department, said in an interview.

Let's take a moment to unpack what Pascual is actually saying. At one point, Washington policy-makers were worried that if there were a catastrophic event that crippled Middle Eastern production (think revolution in Saudi Arabia), we might not be able to get all the oil we needed. Now, we're supposedly protected should disaster strike. Except that we're not. We would still have to pay a massive premium for whatever oil was coming out of the ground in North Dakota or Texas as companies adjusted their prices to match global levels.*

Don't get me wrong -- there are positive developments about our drilling boom. Expanded North American production is helping to keep a lid on crude prices. Oil drilling regions here at home are reaping the economic rewards. And importing less crude will improve our trade balance.

But saying goodbye to Saudi oil is not some sort of geopolitical panacea that will absolve us of our need to be involved in the Middle East. Nor does it mean we will be paying appreciably less to fill up our gas tanks. The ripple effects of whatever happens to production around the Gulf region will influence the price of oil in North Dakota so long as there are still tankers to ferry crude around the world.

Saying we could be oil independent is just a nice way of saying we'll still be oil dependent. The only way to fix that problem is to reduce our need for crude, regardless of where it comes from. Thankfully, that's already begun happening. Part of the reason the United States has been able to shift away from Middle Eastern oil is that we've restrained demand here at home by driving less and using more efficient vehicles while also producing more biofuels. That process of substituting away from oil is what we should be celebrating. Not the fact that we might be buying it in house, or from a friendlier country.


*An earlier version of this story suggested, erroneously, that oil drilled in the United States could easily be shipped abroad. For national security reasons, federal law in fact limits oil exports.