Imported Oil and U.S. National Security

Abstract : In 2007, on a net basis, the United States imported 58 percent of the oil it consumed. This monograph critically evaluates commonly suggested links between these oil imports and U.S. national security. The major risks to the United States posed by its reliance on foreign oil are the economic costs of a major disruption in global oil supplies. On the other hand, the study found no evidence that oil exporters have been able to use embargoes or threats of embargoes to achieve key political and foreign policy goals. Oil revenues are irrelevant for terrorist groups' ability to launch attacks. The study also assesses the economic, political, and military costs and benefits of potential policies to alleviate challenges to U.S. national security linked to imported oil. Of these measures, the adoption of the following energy policies by the U.S. Government would most effectively reduce the costs to U.S. national security of importing oil: (1) Support well-functioning oil markets and refrain from imposing price controls or rationing during times of severe disruptions in supply; (2) Initiate a high-level review of prohibitions on exploring and developing new oil fields in restricted areas to provide policy makers and stakeholders with up-to-date and unbiased information on both economic benefits and environmental risks from relaxing those restrictions; (3) Ensure that licensing and permitting procedures and environmental standards for developing and producing oil and oil substitutes are clear, efficient, balanced in addressing both costs and benefits, and transparent; (4) Impose an excise tax on oil to increase fuel economy and soften growth in demand for oil; and (5) Provide more U.S. Government funding for research on improving the efficiency with which the U.S. economy uses oil and competing forms of energy.