Experts Mull Threat of Another Oil Embargo

Some experts are saying the United States could face an energy crisis on the scale of one 30 years ago, when an oil embargo by Arab nations sparked an economic downturn, long lines at the gas pump and the fear of oil rationing.

“Our dependence [on foreign oil] is growing, and, worse, our dependence on Middle East oil is growing,” said Gal Luft, executive director of the Institute for the Analysis of Global Security (search).

According to the Department of Energy's 2003 Annual Energy Outlook (search), net oil imports accounted for 55 percent of total U.S. demand in 2001, up from 37 percent in 1980 and 42 percent in 1990.

By 2025, imports are expected to account for 68 percent of U.S. demand. Oil imports from the Middle East have doubled since the 1970s, and now are about one-fourth of total imports. By 2020, the share of imports from the Middle East is expected to rise to one-half, the Energy Department's report states.

Because of America’s increasing reliance on Middle Eastern oil, some experts warn that the United States is no better insulated from the political instability of that region now than it was in October 1973, when Arab nations, angered by U.S. support for Israel in the Arab-Israeli war, announced an oil boycott of the United States and some other Western nations.

At that time, America imported a relatively small amount of oil from the Middle East, but the nation's economy buckled anyway. Service stations throughout the country began running out of gas. Gas prices doubled overnight as motorists waited for hours to fill up their tanks.

Refueling was regulated by the day of the week and whether the last digit of motorists' license plates was odd or even. Some gas stations flew red or green flags to indicate whether they had gas; others imposed a 10-gallon limit.

The prices of many products skyrocketed because of the boycott's effect on industry. The embargo, which lasted into 1974, ultimately led to stagflation, an economic condition where persistent inflation is combined with low consumer demand and high unemployment.

“Oil is the lifeblood of America’s economy. Currently, it supplies more than 40 percent of our total energy demands and more than 99 percent of the fuel we use in our cars and trucks,” the Department of Energy said in the report.

Though Luft suggested that conventional wisdom leans against the likelihood of another boycott, it would be a mistake to dismiss the threat, in part “because the oil-producing countries have an astounding record of acting against their own self interests."

After the 1973 embargo, Arab nations saw demand for their product fall because of the volatility of supply. New, higher-cost oil fields were developed in the North Sea and elsewhere, conservation programs were implemented and new energy sources were explored.

“There is an oil weapon and the Arab nations used it very effectively in 1973. It is called the ‘boomerang.’ It came back and cut their throats,” said former CIA Director James Schlesinger, who held that post during the embargo.

Although it is difficult to use oil as an effective weapon, since targeted boycotts don't work and oil countries rely on the income, that does not mean the Middle East is a reliable energy source, said Heritage Foundation Fellow Jim Phillips.

“Today we’re likely to see the threat to energy security coming from political instability and sabotage," he said.

"Things are not going to get easier as long as people who don’t like us hold the key to our prosperity and security," Luft said.

Increasing the reliance on oil from the Middle East makes it easier for those nations to use oil as a weapon. Leaders of countries — including Malaysia, Libya and Iran — have already made threats in the last two years to use their resources against the United States.

"The oil belongs to the people and can be a weapon against the West and those countries who support the savage regime of Israel," Iran's supreme leader, Ayatollah Ali Khamenei, said last year.

“The fact that key political leaders are still openly discussing using the oil weapon raises questions about our energy security,” Luft said

Luft suggested the United States improve relations with the Middle East or lead the way to an economy that is not dependent on oil, both moves he considered unlikely to happen without the impetus of another crisis.

Phillips said bolstering America’s long-term energy security will require the continuing buildup of the Strategic Petroleum Reserve (search), which can ameliorate oil shocks and the expansion of domestic oil production and use of the Alaska National Wildlife Reserve (search).

Finally, the experts suggested that America work to stabilize the Middle East by continuing to rebuild Iraq and pursue Al Qaeda terrorists.

“The idea of so much oil concentrated in the hands of so few does not cause many to lose sleep in Washington, but it should,” Luft said.