Rising Oil Prices, Declining National Security

David B. Sandalow
David Sandalow, Inaugural Fellow, Center on Global Energy Policy, School of International and Public Affairs, Columbia University
David B. Sandalow Former Brookings Expert, Inaugural Fellow, Center on Global Energy Policy - School of International and Public Affairs, Columbia University

May 22, 2008

Chairman Berman, Ranking Member Ros-Lehtinen and Members of the Committee — Last year, more than 96% of the energy in our cars and trucks came from oil. This seems normal to us. We grew up in a world in which oil was the only fuel used to move cars and trucks. So did our parents. So did our grandparents. But it is fundamentally abnormal for the entire global transportation system to rely on a single commodity.

If I’m thirsty and don’t feel like a glass of water, I can have soda or orange juice. If I’m hungry and don’t feel like eating a hamburger, I can have a hot dog or pasta. But if I want to travel any significant distance in the world today and don’t want to use petroleum, I’m basically out of luck.

The overwhelming dependence of the global transportation system on this one commodity creates national security threats we ignore at our peril.

Today I’ll identify four such threats, noting in particular ways in which rising oil prices exacerbate them. I’ll conclude with a recommendation for the single most important step we can take to solve this problem.

First, oil dependence strengthens Al Qaeda and other Islamic terrorists.

The United States is in a long war. Islamic fundamentalists struck our shores and are determined to do so again. Like the Cold War, this struggle has many causes and will last for generations. Unlike the Cold War, oil dependence plays a central role in the struggle.

For more than 50 years, the need to protect oil flows has shaped U.S. policy and relationships in the Persian Gulf. During the Cold War, we supported the Shah of Iran in part to keep oil flowing from the region. In 1980, President Carter declared that attempts by outside forces to gain control of the Persian Gulf would be “repelled by any means necessary, including military force.” In 1991, with Saddam Hussein in Kuwait, President George H.W. Bush told Congress that war was necessary because “[v]ital economic interests are at risk…Iraq itself controls some 10% of the world’s proven oil reserves. Iraq plus Kuwait controls twice that.” After removing Saddam from Kuwait in 1991, U.S. troops remained in Saudi Arabia where their presence bred great resentment.

These steps to secure oil flows have come at a cost. By making us central players in a region torn by ancient rivalries, oil dependence has exposed us to resentment, vulnerability and attack. Osama bin Laden’s first fatwa, in 1996, was titled “Declaration of War against the Americans Occupying the Land of the Two Holy Places.”

Today, deep resentment of the U.S. role in the Persian Gulf remains a powerful recruitment tool for Islamic fundamentalists. Yet the United States faces severe constraints in responding to this resentment. With half the world’s proven oil reserves, the world’s cheapest oil and the world’s only spare production capacity, the Persian Gulf will remain an indispensable region for the global economy so long as modern vehicles run only on oil. To protect oil flows, the U.S. policymakers will feel compelled to maintain relationships and exert power in the region in ways likely to fuel Islamic terrorists.

Compounding these problems, the huge money flows into the Persian Gulf from oil purchases help finance terrorist networks. Al Qaeda raises funds from an extensive global network, with Islamic charities and NGOs playing an important role. Saudi money provides critical support for madrassas with virulent anti-American views.

The sharp increase in oil prices in recent months deepens these problems, further enriching those who fund terrorists committed to our destruction.

Second, oil dependence strengthens oil-exporting nations that oppose U.S. interests.

Several leading oil exporters pursue policies that threaten the United States. Today, the most serious threat comes from Iran, whose nuclear ambitions could put terrifying new weapons into the hands of terrorists. Yet efforts to respond to this threat with multilateral sanctions have often foundered on fears that Iran would retaliate by withholding oil from world markets.

Indeed Iran does not even need to withhold oil from world markets to play its “oil card.” The mere fear it might do so can cause oil prices to climb, as traders build a “risk

premium” into the cost of every barrel. This puts pressure on governments around the world to minimize “saber-rattling” against Iran, in order to help control oil prices. The result – an emboldened Iran, more confident in its ability to pursue policies that threaten U.S. national security.

In short, three decades after the first oil shocks — and a quarter-century after the humiliating capture of U.S. diplomats in Tehran – we remain hostage to the world’s continuing dependence on oil.

Other oil-exporting nations pose problems as well. President Hugo Chavez of Venezuela – the world’s eighth largest exporter — fans anti-American sentiments throughout Latin American. Oil revenues not only help maintain his grip on power, they allow him to finance policies that put U.S. assets at risk in countries such as Bolivia and Argentina.

Here again, rising oil prices enhance the wealth and power of those who wish us ill, putting all Americans at risk.

Third, oil dependence endangers our men and women in uniform.

Oil dependence jeopardizes the safety of our troops. In Iraq during the past five years, many brave men and women in have died in fuel convoys, which are often vulnerable to attack. Diesel generators display a heat signature easily detected by some enemies.

In July 2006, Major General Richard Zilmer, commander of coalition forces in western Iraq, made a “Priority 1” request for combat-ready renewable energy systems. Maj. Gen. Zilmer noted the need for frequent resupply convoys, in particular for petroleum, and wrote that without renewable energy systems:

“…personnel loss rates are likely to continue at their current rate…[with the] potential to jeopardize mission success.”

Rising oil prices also put budgetary strains on the Pentagon, a leading purchaser of petroleum products.

Finally, oil dependence undermines democracy and good governance around the world.

Oil wealth corrodes democratic institutions. This dynamic is not inevitable, but it is widespread. A growing body of scholarly work explores this topic, concluding that oil wealth is strongly associated with corruption and authoritarian rule. New York Times Foreign Affairs columnist Tom Friedman has written about the “First Law of Petropolitics” — that the price of oil and pace of freedom move in opposite directions.

A few examples underscore these trends. Bahrain, the Persian Gulf country with the smallest oil reserves, was also the first to hold free elections. As oil prices climbed in recent years, both Vladmir Putin and Hugo Chavez moved away from democratic institutions and toward more authoritarian rule. In Nigeria, oil abundance contributes to widespread corruption.


So what can we do about it? There are many solutions. In my short time today, I’ll highlight one – plug-in electric vehicles.

To reduce oil dependence, nothing would do more good more quickly than making cars that connect to the electric grid.

The United States has a vast infrastructure for generating and distributing electric power. However, that infrastructure is essentially useless in cutting oil dependence, because modern cars can’t connect to it. If we built cars that ran on electricity and plugged into the grid, the potential for displacing oil would be enormous.

Plug-in electric vehicles are a game-changing technology. They can break our oil addiction, cut driving costs and reduce pollution. To help end the United States’ oil dependence, there is no higher priority than putting millions of plug-in electric vehicles on the road soon.

And here’s the good news – these cars are on the way, soon. General Motors says its plug-in Chevy Volt will be in showrooms by 2010. Toyota, Mitsubishi, Ford and other automakers are close behind. Nissan is working with visionary entrepreneurs to convert the entire nation of Israel to plug-in vehicles.

Yet Congress needs to act, to pick up the pace of this transition. Tax incentives for the purchase of these vehicles would quickly build the market. The federal government should use its enormous purchasing power to help bring these cars to market as well.

Chairman Berman, Ranking Member Ros-Lehtinen and Members of the Committee,

I drove to this hearing in a plug-in electric vehicle. Each night I plug the car into a regular outlet in my garage. It gets 30 miles on a charge, which means I use almost no gasoline on a normal day driving back and forth to work. After 30 miles, the car automatically switches over to its gasoline engine, giving me all the driving range I want at any time.

And here’s some good news, in this era of rising oil prices – driving on electricity costs me the equivalent of 75 cents per gallon.

Thank you, I’d be delighted to answer your questions.