The Wrong Way to Think About Oil

In his recent State of the Union address, President George W. Bush declared, “America is addicted to oil.” He announced a program of energy research that would reduce American oil imports from the Middle East by 75% over the next two decades. But even if his program succeeds, it will not do much to increase America’s energy security. The United States gets only a fifth of its oil from the Persian Gulf.

Americans are not alone in worrying about oil as a security problem. China and India, the two largest countries in the world, realize that their high rates of economic growth also depend upon foreign oil. While the two countries together consume slightly less than half as much oil as the US, their consumption is increasing faster. When poor countries consume as much per capita as rich countries, will there be enough oil to go around?

China and India have been crisscrossing the globe making financially and politically costly deals to try to lock up the output of new oil-producing countries. For example, when Western countries discouraged their oil companies from dealing with Sudan’s government because of its inadequate response to the genocide in Darfur, China was quick to buy up the country’s oil.

Some petroleum experts argue that world oil production will peak in a decade or so. Others reply that new discoveries and improved technologies for extracting oil from existing fields make such projections too alarmist. Because accurate statistics about reserves in countries like Saudi Arabia are not available, it is impossible to settle the dispute definitively. But the majority of experts agree that the world will not run out of oil anytime soon – even with growing Chinese and Indian demand. Over a trillion barrels of reserves have been proven, and more are likely to be found.