Breaking The Chokehold Oil Has On Our National Security (A Commentary)

Oil choke-points

How To Break The Chokehold Oil Has On Our National Security -- Stephen A. Cheney, Aol Defense

Oil is a global commodity--it is easy and cheap to ship it around the world. That means that the security of its distribution network is just as important as the security of its supply. This distribution network--including port terminals, huge oil supertankers, and lengthy pipelines--is vast and costly. It is also vulnerable to conflict, piracy and terrorism.

About one fifth of America's oil imports come from the Persian Gulf, passing through the Strait of Hormuz as it is shipped to our shores. Over 15 million barrels of oil per day pass through the Strait, a 21 mile-wide body of water vulnerable to Iranian anti-ship missiles. Iran has repeated its threats to close the Strait and is well positioned to carry out attacks on oil tankers in transit. The very threat of closing the Strait of Hormuz to shipping is enough to give the Iranian regime more leverage in the region than they are due.

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My Comment: Reducing oil consumption sounds great in theory .... but .... not easy to implement. Bottom line .... we are going to be dependent on oil for a very long time, and we can only hope that as alternative energies are found and developed, it will be enough to minimize our dependency on oil supplies and the security issues that it raises.

Oil Supply And Prices -- Biggest Threat To World Peace

From The L.A. Times:

Maybe he was just playing politics, painting himself as a hawk to take on his battered rival. Maybe he was revving up the world for war against the country of his birth.

In any case, an Israeli cabinet minister's remark calling a war against Iran "unavoidable" has had global repercussions, sending oil prices to record highs and drawing condemnation today at the United Nations and by the chief of the International Atomic Energy Agency.

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My Comment: The remarks that were made by an Israeli Cabinet Officer was enough to send prices for oil to record levels ... imagine if Israel actually bombed Iranian nuclear sites. Such an action will result in $200/barrel.

But the question needs to be asked .... in the event of $200 per barrel will this price last, and what are the security/war/instability issues that will arise. In the immediate term, Iranian production will be impacted, and their surrogates will be active throughout the Middle East and abroad. Some countries may even openly sympathize and restrict oil exports, Venezuela is one country that comes to mind. But a few months later, oil exports will resume to the same level as before. While many countries are dependent on oil imports, the oil exporters are dependent on their oil revenues to fund their governments. Interruptions hurt everyone in the long run.

But it is in the short term that pain will be felt by everyone, and the danger of escalation presents itself. In particular .... for the world's poor and the fast developing Asian giants. Countries such as India and China are now developing a foreign policy that revolves around obtaining oil and resource products at any cost. Any price instability or product limitation will make these governments openly antagonistic to anyone that is responsible for disrupting their supply. What threats they will use when so many millions of their citizens are suffering ... your guess is as good as mine.