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I just finished a really good paper by Greenstone and Looney on the “True Costs of Our Energy Choices.” There is however much to pick apart from it. Early in the paper they hit on my of my all-time worst political-economic bugaboos: citing foreign policy arguments as reasons to intervene in a particular market. On p13 of the article the authors detail a list of activities that result from our use of oil and related energy sources that are not fully priced into the use of oil, and hence promote over-use of oil and related products.

Among those things includes “higher military expenditures and foreign policy constraints” which they discuss as a real cost we impose on ourselves and on future generations. What is wrong with such an exclamation? It sounds entirely plausible, right? Barring the fact that the #1 importer of oil to America is Canada, it seems compelling to suggest that since we get so much oil from Iraq, Saudi Arabia, Nigeria and other “unfriendly” places that doing so requires a large military expenditure. But this raises two questions for me, at a minimum.

(1) Wouldn’t the military presence lower the cost of obtaining oil from these places? Or in any event, could someone explain to me what model we have in mind about what the military does to help us secure our oil from these places? It would seem to me to be cheaper and easier to do a one-time invasion of all of the Middle Eastern countries and just take their oil, than to do whatever costly thing we appear to be doing now. But the right question rather is what is the incremental use of the military going to be because we purchase oil from unfriendly places as compared to what else we might be doing. If we used all “renewable” technologies and resorted to relying on piles and piles of rare earth metals from China, would that eliminate our military needs? That seems laughable – indeed we have a huge military presence in Asia already and it has nothing at all to do with the oil that we importing from there. Similarly, if we never again consumed a drop of Middle Eastern oil, how many of you would bet even so much as $10 that our military presence and expenditures would drop significantly (I know, we need to define what significantly means).

(2) I vaguely remember some of my elementary and high school American history. Wasn’t the U.S. Navy established in part to protect the commercial interests of American businesses? Were we importing oil from all corners of the globe in 1797? And by that account, then we might as well argue that the true costs of ALL of our consumption choices are much higher than the nominal costs because we need a Navy and Army and Coast Guard to protect our ships transporting cotton, microchips, bicycles and everything else that is traded all over the world.

One Response to “The National Defense Red Herring”

  1. Goldman Sachs recently released a report saying that by 2017, the US will no longer need to purchase oil from other countries and will become the largest exporter of oil in the world. This is only one report, but I have read several articles about this. Also Walmart, UPS, and many other companies with large transportation fleets are switching their trucks over to natural gas, reducing their oil consumption.

    So if the US does become the largest exporter of crude oil, there is no need to have a military presence abroad anyway…

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