Saturday, August 06, 2005

Saudi Oil

This is quite ignorant, but riddle me this: Why do we care about Saudi oil? Given that there is a world market for oil and Saudi Arabia needs to sell oil to stay alive, it doesn't matter if they are willing to sell it to us, or if they'll only sell it to other countries. For let's say that they only sell it to China and refuse to sell it to the U.S., then China is buying less oil from Canada and so there is more Canadian oil for the U.S. to buy. And since it all happens at world prices, who cares who you are buying it from?

Several reasons why we might care:
  1. If Saudia Arabia cut off production, world oil prices would sky-rocket. Thus we should be friendly to Saudi Arabia.
  2. If we are mean to Saudi Arabia, then U.S. businesses won't get contracts from Saudi Arabia either in the oil fields, or in shipping. Thus we should be friendly to Saudi Arabia.
  3. There is an envisigeable a scenario in which the world fractures and you can only buy oil from close friends. In which case there isn't enough oil among close friends of the U.S., so the U.S. has to gain more close friends. Thus, we would want Saudi Arabia as a close friend.
Am I missing some piece of geo-strategic logic? Or else is this an odd kind of outdated neo-mercantilist logic.

Update: See comments for a very helpful remark by Aaron Boyden.

2 Comments:

Anonymous Protagoras said...

Because of the international market for oil that you mention, those who are remotely clear-thinking do not care exactly how much U.S. oil comes from Saudi Arabia specifically (though this is one of the areas the conservatives focus on, since apparently that one specific number has declined a bit over the past decade or so). The point is, rather, that the U.S. is heavily dependent on oil, regardless of where it comes from. And the largest exporter of oil is Saudi Arabia. And Saudi Arabia is very much at risk. Were anything to happen to reduce Saudi exports, world oil prices would go through the roof. Since the U.S. is the biggest importer of oil, an increase of oil prices in the world market is a major problem for us.

Other countries also export oil, but few are as politically at risk, and none export as much, so the Saudis are the prime example of possible threats of declining exports.

So, one could say that in one sense we should say the problem is just oil. But the specific threats concerning oil on the horizon tend to be concentrated in the area of Saudi Arabia, which is why people speak of the problem of Saudi oil. But by this they do not mean the threat that the U.S. will be cut off from Saudi Arabia; rather, they mean the threat that Saudi exports will decline (due to terrorism or whatever), making everybody worse off, and the U.S. especially so because we're such a huge oil importer.

7:09 PM  
Blogger Isaac said...

Ahh...That makes sense. Thanks!

11:13 PM  

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