Ken Blackwell
The ongoing conflict in Iraq has serious
implications for vital U.S. interests, the extent
of which are difficult to decipher at this early
stage. Who ends up holding the keys to power
within Iraqi territory? What happens to the
regional balance of power? How will Iran’s
pursuit of nuclear weapons—and our efforts
to stop them—be affected?
One immediate effect of the turmoil,
however, is painfully obvious: oil prices have
already hit a nine-month high. Brent crude
reached $115 per barrel this week, a level our
country has not experienced since the height
of U.S. tensions with Syria in September
2013. As a result, a number of market
analysts now expect U.S. gasoline prices to
surpass their highest levels for the month of
June since 2008, rising from today’s level of
$3.68 per gallon to as much as $3.80 per
gallon by the end of the month.
If that were not troubling enough, Iraq’s vital
importance to the global oil market could
mean that today’s rising prices may be just
the beginning . Markets are already reeling
from a series of oil production outages in
countries across the globe—from Nigeria,
Libya, and South Sudan to Iraq, Iran, and
Syria. Any additional loss of supplies from
Iraq could stress the system to its limit and
send oil prices to levels that many of
America’s political leaders had hoped were a
thing of the past.
A recent analysis by the Commission on
Energy and Geopolitics, a group of former
high-ranking military and civilian
government officials, found that a partial
disruption to Iraq’s oil supplies—1 mbd, or
about a third of Iraq’s current production—
would cause oil prices to rise by more than
$30 per barrel, amounting to an approximate
50 cent per gallon increase at the pump for
American consumers. With the United States
consuming close to 20 million barrels of oil
per day, it doesn’t take a trained economist to
understand that we would take a serious
economic hit.
At today’s oil price levels, the average U.S.
family is already spending more than twice
as much on gasoline as they were a decade
ago—a total of $2,700 per household in 2012
compared to $1,200 in 2002 according to the
Bureau of Labor Statistics. An oil price spike
of the magnitude described by the
Commission and other analysts would send
spending on oil to record levels and have an
immediate, damaging impact on economic
growth.
We need to take back control of our economic
fate. We shouldn’t accept as fact the idea that
our overall prosperity and economic well-
being are held hostage to the kinds of
violence, extremism, corruption, and
mismanagement that are endemic to the
global oil market. We can do better, and we
have options.
Part of the answer can be found in rising
domestic oil production. The U.S. oil boom
has provided significant benefits, including
an improved balance of trade and hundreds
of thousands of new American jobs. That
should be embraced and supported. However,
no matter how much we produce at home, oil
will be priced in a global market, meaning
that geopolitical events beyond our control
will still have the ability to send our economy
into a tailspin.
Energy security starts and ends with oil
consumption, and that means we have to do
something about transportation. About 70
percent of the oil America consumes is used
in the transportation sector, and 92 percent
of all fuel used to power that sector is derived
from oil. Reducing oil dependence in the
transportation sector is a tremendous
opportunity to de-link the American economy
from the global oil market and the various
events—like the crisis in Iraq—that impact
that market.
The solutions have already begun to be
implemented. More than 200,000 electric
vehicles and 140,000 vehicles powered by
natural gas are currently on America’s
roadways. Simply converting the nation’s
fleet of heavy-duty, long-haul trucks to
natural gas would save 2 million barrels of oil
every day. The widespread adoption of
passenger vehicles powered by electricity
would have an even greater impact, and such
vehicles are selling at a crisp pace and
earning rave consumer reviews.
Still, more must be done to accelerate this
progress. The country needs to increase its
investment in oil-displacement transportation
technologies so that we can more quickly
sever our ties to the global oil market and
shield our economy from its volatility. Doing
so will also benefit our national security, as
decreasing our economic exposure to oil price
spikes will provide foreign and defense
policymakers with expanded options.
Time and time again, we’ve learned the
lesson that oil dependence makes us
vulnerable to flare-ups in the Middle East
and around the globe. Of all the serious
fallout that will stem from the current crisis
in Iraq, all we can predict with confidence is
that any resultant high oil prices will harm
our economy at a time when our families and
businesses can hardly afford another setback.
Let this latest lesson be the one that motivates
us to embrace the solutions that are now at
our fingertips.
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