The Real Price Of Oil...

There's an incredibly thought-provoking piece out now from Time.com's military-focused blog Battleland on United States policy in the Persian Gulf. It talks about an analysis put together last year by Roger Stern, an economic geographer at Princeton University, who, after an exhaustive study, calculated the cost of the United States' military presence in the Gulf from 1975-2010 - a cost he puts at a whopping $8 trillion. Yes, that's trillion with a “T”. According to those calculations, the United States now spends as much each year ensuring that the oil from the Persian Gulf keeps flowing as it did in fighting the Cold War. And to make matters worse, Stern argues that it is not money well spent.

US policy towards the Gulf boils down to this: Thanks to the bottleneck created by the Straits of Hormuz, a military force could conceivably block the narrow shipping channels, cutting off the supply of oil and sending the world into an oil-fueled economic shock; therefore we must maintain a robust presence in the region to ensure that this does not happen (the US Navy's Fifth Fleet is currently based in the Gulf kingdom of Bahrain). Stern thinks this is nonsense. While it is conceivably possible that the Straits of Hormuz could be blocked by strategically sinking a few very large ships, the states of the Persian Gulf are too reliant on oil exports to ever do this, and countries outside of the Gulf (like China) are too dependent on oil imports ever to do it either.

History shows that Stern is probably right. Iran and Iraq spent eight years in the 1980s engaged in a brutal war with each other that featured, among other things, ballistic missile strikes on each others cities, the use of chemical weapons and suicide attacks carried out by children on the Iranian side. Yet neither the Iranians or Iraqis ever seriously tried to shut down the Straits of Hormuz, and oil prices were not only largely stable during the period of the war, they were also at near historic lows. If the Straits weren't shut down during that conflict, it is hard to imagine when they ever would be.

Yet much of current US foreign policy is built around just this scenario. Stern argues that this leaves the US overfocused on the Middle East while ignoring strategic threats in other parts of the world – say from China. I absolutely agree with him, especially since this is a point I've been arguing here for some time now. Consider for a moment that by the middle of this decade the United States will likely get as much oil from Africa as from the Persian Gulf, yet our investment/interest in Africa pales in comparison to our focus on the Mid-East. Unfortunately for as compelling as Stern's arguments are, they're not likely to change the minds of many decision-makers in Washington; his report originally came out in April 2010, a full year ago, to little public notice.