Energy Alarmism: The Myths that Make Americans Worry about Oil (PA 589)

Abstract

Many Americans have lost confidence in their country's energy security over the past several years. Because the United States is a net oil importer, and a substantial one at that, concerns about energy security naturally raise foreign policy questions. Some foreign policy analysts fear that dwindling global oil reserves are increasingly concentrated in politically unstable regions, while others allege that China is pursuing a strategy to lock up the world's remaining oil supplies through long-term purchase agreements and aggressive diplomacy. Many analysts suggest that even the normal political disruptions that occasionally occur in oil-producing regions (e.g., occasional wars and revolutions) hurt Americans by disrupting supply and creating price spikes. We argue that each of those fears about oil supplies is exaggerated, and none should be a focus of U.S. foreign or military policy. Our overarching message is simply that market forces, modified by the cartel behavior of OPEC, determine most of the key factors that affect oil supply and prices. The United States does not need to be militarily active or confrontational to allow the oil market to function, to allow oil to get to consumers, or to ensure access in coming decades.