Abstract
Falling oil prices have brought welcome relief to American consumers, but lower oil prices should not lead to complacency about U.S. energy security. Growing global demand for oil, particularly from China and India, and declining spare oil production capacity have increased the global oil market’s vulnerability to sudden shocks. Natural disasters (Hurricane Katrina), political instability within oil-producing countries (Nigeria), violent insurgencies (Iraq), or a regional war (the 1973 Arab-Israeli war) could trigger an oil supply crisis.
The Islamic Republic of Iran poses one of the most troubling threats to energy security. Because of its recent military buildup, Iran now has a much greater ability to interdict the flow of Persian Gulf oil exports than it had during the Iran-Iraq War. Iran’s arsenal now includes sophisticated mines, anti-ship missiles, submarines, and aircraft procured from China, Russia, and North Korea that will make defending the Persian Gulf a much more difficult task for the U.S. military.
If the growing crisis over Iran’s nuclear program leads Iran to interfere again in the flow of Persian Gulf oil as Tehran has openly threatened, the resulting disruption could severely damage the global economy. The price of oil could easily double from current levels (about $60 per barrel), threatening global security and prosperity.
While the Bush Administration fashions a strategy to escalate international pressures on Iran to halt its suspicious nuclear activities, it is crucial to understand that Iran’s “oil weapon” is a significant piece of leverage in the confrontation. To have any chance of diplomatically halting Iran’s pursuit of a full nuclear fuel cycle, the U.S. must demonstrate that it can counter a potential Iranian disruption of Persian Gulf oil exports.
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