The Risks of Oil Independence

America must wean itself from foreign oil—that’s the common wisdom on both sides of the political aisle. Entanglement with Middle Eastern oil kingdoms is a “source of strategic vulnerability,” and policymakers have spent “lives and treasure” defending America’s access to foreign reserves. But here’s a thought experiment: If the United States and the rest of the developed world no longer needed foreign oil, what would become of oil-exporting countries? Gregory D. Miller, a political scientist at the University of Oklahoma, says it would not be a pretty picture, nor would the ramifications for the United States be pleasant. Many of the oil powers are unstable, and may spiral into crisis if revenues from oil disappear.

As the only current nuclear state with a significant oil sector (eight to 20 percent of its economy), Russia is one potential trouble spot. “Neither the United States nor Russia’s neighbors can afford the risk of a nuclear Russia suffering economic instability,” Miller writes. And, of course, oil-rich Iran is likely to join the nuclear club soon. For five countries—Angola, Iraq, Kuwait, Libya, and Saudi Arabia—oil exports make up more than one-half of gross domestic product. All five already suffer from internal tensions and border conflicts.   Some oil-producing states could try to make up for lost income by trafficking in narcotics and arms, with massive implications for global security if countries with ties to groups such as Al Qaeda and Hezbollah got involved. In Venezuela, Miller says, many poor people may try to make some money by trading in drugs, even if the government stays clean.   None of this is to suggest that the United States ought to remain hooked on oil for the sake of stability. Instead, it should encourage oil-exporting countries to diversify by promoting greater foreign direct investment in non-oil industries. The United States isn’t going to reduce its consumption of foreign oil overnight. Policymakers should use their time wisely, and make sure the process is smooth both here and abroad.