Basic Oil Economics
By Arnold Kling
Holman Jenkins makes some useful points.
nowadays U.S. consumption of Persian Gulf oil totals about $18 billion a year, less than we spend on computer parts from Asia. The price mechanism works: Oil would flow in greater volume from higher-cost sources in the unlikely event of a catastrophic disruption of supplies from the Gulf. Canada, for instance, has 180 billion barrels in oil sands that are producible, judging by a new Shell project, at $15 a barrel.
Yet so ingrained are the false assumptions of energy insecurity that many pundits and politicians continue to insist that the U.S. has been remiss in failing to impose monumental costs on itself in pursuit of “energy independence.”
Jenkins is saying that the U.S. consumption of oil from the Middle East is neither large relative to our economy nor inelastic with respect to price.
For Discussion. Compare the benefits of achieving self-sufficiency in energy with the benefits of achieving self-sufficiency in computer parts or some other large industry. What would have to be sacrificed in order to achieve self-sufficiency in either industry?