Dependence on Foreign Oil and Other American Economic Myths

David Saied, former Securities and Exchange Commissioner for Panama, wrote an interesting article for the libertarian think tank Ludwig von Mises Institute about America's economic myths. For example:

Myth # 1: "Dependence on Foreign Oil"

This myth basically suggests that the problem with oil prices is due to America's "dependence" on foreign oil. One of the worst economic myths, it plays on economic nationalism and on xenophobic feelings that are sometimes pervasive in the United States.

The high price of oil has nothing to do with its origin; the price of oil is determined in international markets. Even if the United States were to produce 100% of the oil it consumes, the price would be the same if the worldwide supply and demand of oil were to remain the same. Oil is a commodity, so the price of a barrel produced in the United States is basically the same as the price of a barrel of oil produced in any other country, but the costs of labor, land, and regulatory compliance are usually higher in the United States than in third-world countries. Lowering these costs would help increase supply. Increasing supply, whether in the United States or elsewhere, will push prices lower.

Importing a product does not mean you "depend" on it. This is like saying that when we "import" food from our local supermarket we "depend" on that supermarket. The opposite is usually true; exporters depend on us, since we are the customers. Also, importing a product usually means buying at lower prices, whereas producing in the United States often means consuming at higher prices. This point is proven when we see the cheap imports we can purchase from China and the higher prices of many of these same products manufactured in the United States. The amazing thing is that the protectionists claim, on the one hand, that America should be "protected" from cheap imports, but when it comes to oil, they say we should be "protected" from "expensive imported" oil.

Most, if not all, of the higher price of oil can be explained by the expansion of the money supply or the debasement of the dollar. The foreign producers are not at fault; our national central bank is the culprit.

Link - via Scribal Terror

Uh, we can't domestically produce all the oil we need. Therefore we have a dependence on foreign oil.

It's not complicated and has nothing to do with protectionism or the price of oil at all. And it definitely doesn't have anything to do with our national central bank, even though cooky libertarians love to rant about this.

This guy's just dumb. Or not addressing the question. Or both.
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Foreign oil is fairly cheap considering the demand and the whole 'dependency' on it is definitely a political maneuver used by both sides..although I do think many actually believe in it. It covers all bases, the xenophobes love it as well as the anti-war people. While I don't mind drilling here if people here want it, let's not fool ourselves into believing this would stop our import of foreign oil..too many people in power in the Western world would lose too much. Just look at their relationships with Saudi Arabia to see how desperate they are for it. If there's more, people will make more (not just switch sides) and we will use more.
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Liberatarian think tank.


Surely the point here is not "dependency" but the potential for volatility in the commodity pricing.

At the mercy of Opecs price/production decisions.

Also if the oil you pay the Saudis for in US dollars is then handed over in part to fund religious intolerance and terrorism whouldn't THAT be of greater importance than some semantic double talk about the myth of dependency?

Just a thought.
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Strictly speaking, not true. While the argument on foreign oil is true, speaking as someone who has lived through a couple OPEC production slowdowns that were designed to artificially raise prices, I can also see that that the fact that we import our oil does have an effect on the price we pay.
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We can actually produce all the oil we need. The majority of Alaska's oil can't be sent to the U.S.

And Canada is the biggest importer of oil into the U.S., NOT Suadi Arabia. Check the US sources for imported oil.
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Byrd, I think that's part of his point. Despite the non-correlation, though, desire for lower oil prices is often used (or at least, I've seen it often used) as a political talking point by both major parties as a means of playing on the concerns of people (read: voting demographics) who are otherwise apathetic. Both sides twist the argument to their own platforms, but essentially the outcome of both sides is to provide a pretext for intervention under the guise of saving the American economy, which the U.S. government seems to invariably bungle when it comes to the region of the world in question.

In the following page, the U.S. department of energy blames OPEC's adjustments to oil prices as the catalyst for recessions:

But recessions are the result of the prices of *all* commodities being retroactively adjusted for inflation. Therefore, the adjustment of oil and other major industrial sectors right before a recession is to be expected. Does OPEC have an effect on our economy? Of course. But addressing OPEC over the devaluation of the dollar as ways to prevent recessions is like treating a runny nose on a patient who has cancer.

There are other, more valid arguments against importing oil from certain regions. Not wanting to indirectly bankroll terrorist groups through oil producing nations is another argument altogether (which doesn't have much to do with "dependence"), as is the argument of energy sustainability (which doesn't have so much to do with dependence on *foreign* oil as it does dependence on all oil, foreign or domestic.) But this guy is addressing the argument that the American economy is floundering under the pressures of foreign influences, when that is a drop in the bucket compared to what we do to it ourselves.
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