DON'T BELIEVE THE HYPE: We are NOT funding both sides in the War on Terrorism
Sunday, February 5, 2006 at 4:51AM ARTICLE: "Bush's Latest Energy Solution, Like its Forebearers, Faces Hurdles," by John J. Fialka and Jeffrey Ball, Wall Street Journal, 2 February 2006, p. A1.
It's Tom Friedman's latest sound-bite ploy, and it's totally nonsense. But someone with his media power says it, it can have a lot of impact.
Friedman says that when Americans use oil, we really fund global terrorism, in addition to funding the war to stop it.
He's wrong on both counts.
The reality is, if America can't float it's sovereign debt, then we can't fund the Defense Department in this war at a level that keeps us active overseas. Who buys that debt? It gets bought by old security allies (like the Europeans) and heavy trade partners (like Japan and China, both of whom now hold close to $1 trillion in U.S. debt, making them the leaders by far). These countries fund our Global War on Terrorism because they have neither the will nor the wallet to make it happen on their own, so they outsource this essential global function to the Americans. This is why it's important that we make them happy with how we conduct it. No happy, no funding.
Americans also do not fund the terrorist side in this war by using oil. Let's remember some key facts here.
First, oil is about 40 percent of our energy consumption.
Of that 40%, we import about 60%, meaning imported oil accounts for about 25 percent of our total energy use.
How much of that imported oil supports terrorism?
The vast bulk of our imports come from the following countries: Canada (#1), UK (#10), Russia (9), Mexico (2), Venezuela (4), Nigeria (5), and Angola (8). These countries, none of which can be described as funders of radical Salafi jihadists, account for 37% of our oil consumption. Three Muslim countries (Saudi Arabia, Iraq and Algeria) collectively now account for 12% of our oil consumption. That's a whopping 5% of our total energy consumption. Let's posit, just for the sake of argument, that 5% of that money is spent on promoting radical Islamic ideals harmful to global stability, and that 5% of that 5% might actually make it in the hands of terrorists who would use it to harm Americans and their interests in this world. Now we're down to 1/100th of one percent of U.S. energy spending somehow being used against us, and even that figure probably overstates reality several fold.
Then realize that energy spending is only a fraction of the U.S. economy.
Then compare that calculation to the amount of economic connectivity America had with other enemies in other wars throughout history and tell me that somehow this situation is profound or ironic or sad or hypocritical.
And then tell me that our only reasonable answer is to launch some "man to the moon" like effort to recast our energy profile.
Our economic and political-military interaction with the outside world is a profoundly complex thing, deserving of seriously ambitious attempts at explanation, visioneering, and grand strategizing.
And guess what? Journalists aren't the answer, though they provide a lot of good questions. Outsourcing strategy to people whose main skills come in describing current affairs and critiquing current responses is a mistake, because what you will get, time and time again, are simplistic answers like this.
Plenty of op-ed columnists do this well, taking their analysis right up to the point of advocacy but not pretending that they're offering comprehensive grand strategy upon which major policy turns should be based, much less major government interventions into the private sector (how come we so often advocate huge socialist answers to the problems we encounter because our form of capitalism is being so damn successfull in spreading itself around the planet?).
My advice: you want to be a strategic thinker, then lay off the junk food. Friedman's a brilliant describer of our complex world, and when he sticks to that amazing skill he's a huge help in promoting understanding, probably doing more to educate Americans about globalization than any other thinker in this age. But please, no swallowing this Kool-Aid.
Reader Comments (5)
some debt is held/bought by muslims, too ?
Data source: Crude Oil and Total Petroleum Imports Top 15 Countries
Energy Information Agency, a statistical agency of the U.S. Department of Energy
This is the kind of thing that drives economists nuts. Someone should ask Tom Friedman the following question:
"Say the US currently satisfies 10% of its oil demand with imports from Saudi Arabia. By what percentage must the US reduce its consumption in order to be 100% independent of Saudi oil?"
If he answers "10%", his op-ed lisense gets revoked and he is never allowed to talk about energy economics again. The correct answer is in fact "100%", because oil is fungible*. The way to look at the world oil market is like a giant vat where some countries are constantly dumping oil in and some are constantly scooping it out. Friedman and his ilk are doing the equivalent of putting a chickenwire barrier around one part of the vat and labelling it "bad" oil. If the US reduces domestic oil demand by 10%, it'll only reduce domestic demand for "Saudi" oil by 10%.
*This isn't precisely true, actually. Saudi oil is currently cheaper to extract and refine than other oil (though that's changing). So if the US cuts its oil consumption, the effect will likely be felt by the other higher-cost suppliers before it's felt by the Sauds. So yes, Friedman is proposing punishing Canada for Saudi Arabian sins.
Friedman grossly over-simplifies the reality of our oil consumption, but I think there's still a recoverable part of his argument: we should create a Manhattan Project-style effort to end oil consumption, not for any immediate impact it'll have (doing this is the work of decades), but to send a clear signal to the Saudis and other Islamist states that their days of relying on their oil revenues are coming to an end, and must thus diversify their economy and encourage more DFI in other sectors beyond oil.
And the possibility of going cold turkey on oil is a non possibility - oil countries are a single income countries with hardly any diversification of income - to just cut them off would do more harm then good. What it seems like we are doing is threatening them with out media so that their policies might change under pressure from the populace. This provides a sort of warning, a flare, so that they might prepare for the future - Dubai and the UAE are examples, and now the Saudis.
Just my humble opinion.