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“America lacks leverage in the Middle East because we are addicted to oil. … When we import $28 billion a month in oil, we can’t say to the Saudis … [pound sand]” – so says Tom Friedman in a recent New York Times column. This common narrative frequently underpins energy policy proposals and investment macros. (I can’t count the number of times it shows up in energy tech business plans I’ve seen.) The problem is that the narrative doesn’t hold up to scrutiny. Nonetheless, there are directionally useful lessons if you unbundle this oft-repeated narrative, and two other closely related macros appearing in the same Friedman column.
First, regarding U.S. dependence on Saudi Arabia: about 5 percent of what we burn, and thus about 10 percent of what we import, comes from the Saudis. America’s number one (and rising) source of imported oil is Canada – over double the amount we get from Saudi Arabia. It’s hard to sustain a good rant about depending on Canada. (Although it is true that Canadians do rant about depending on the American entertainment industry, but that’s another story.) America could stop importing every drop of oil from the Saudis without much difficulty, by ramping up imports from elsewhere (or even ramping domestic production, if we really wanted to). It’s not the U.S. that is particularly dependent on the Saudis per se, but the world. To the extent that we make the world’s problems ours, well then so be it. But facts are facts.
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