NEW YORK (Dow Jones)--Slashing oil imports from the Middle East is echoing as a catch phrase in the final weeks of the U.S. presidential election, even as volumes are on the rise. What's unsaid is that reducing such dependence won't bring lower prices.
In the first eight months of the year, crude oil imports from Persian Gulf members of the Organization of Petroleum Exporting Countries accounted for 24.5% of U.S. crude imports, compared with 20.8% in the year-ago period and the most since 2003, when the U.S. launched the war on Iraq, in which oil has emerged as a central theme. In a twist that shows the complexity of the issue, the increases come largely from Iraq and Saudi Arabia.
The U.S. is assisting Iraq in rehabilitating its oil industry, and President George W. Bush twice publicly called on King Abdullah of Saudi Arabia this year, pushing for increased oil output. The king publicly declined to honor the Bush request, but, in the interest of meeting rising customer demand and out of concern about the impact of higher prices on the developing world, ordered output lifted to a 25-year high of 9.7 million barrels a day.
Saudi Arabia, the de facto leader of the OPEC, is said to have scaled back output on lower customer demand in the wake of the global financial meltdown that has chopped oil prices in half from their record highs of near $150 a barrel in July.
The Saudis haven't tipped their hand ahead of an emergency meeting of OPEC set for Oct. 24, but Iraq is among OPEC members calling for an output cut to avoid a further collapse in prices.
Rhetoric on energy independence has been a staple of presidential politics since the Arab oil embargo that followed the Yom Kippur War 35 years ago. President Richard Nixon launched Project Independence in late 1973, calling for the U.S. "to meet our own energy needs without depending on any foreign energy sources."
Price Rises Fuels Import Angst
Imported crude oil prices tripled in 1974 from a year earlier, in the first oil-price shock and as Nixon's 1980 target date for energy independence neared, prices doubled from 1978 as the Iran Revolution ignited the second oil-price shock. The U.S. hasn't imported oil from Iran, OPEC's second-biggest producer, since then.
After the attacks of Sept. 11, 2001, in which many of the perpetrators were Saudi nationals, the desire to cut imports from the Middle East region was further stoked, and calls have grown louder still as oil prices mounted a punishing rise from below $33 a barrel to 4.5 times that level this summer, at above $147 a barrel.
Bush cranked up pressure on the issue in his State of the Union speech in early 2006, when he made dramatic call for an endeavor "to replace more than 75% of our oil imports from the Middle East by 2025." The dramatic plan played to the American public, but caught the Saudis by surprise.
A day later, Bush's top energy and economic aides were recasting the comments, saying they related to an aim to reduce oil imports by volume of oil that comes from the region, not a complete end to supplies from the Middle East. Oil analysts give the presidential candidates, Sen. John McCain, R-Ariz. and Sen.
Barack Obama, D-Ill., points for calming the claims from the early days of the campaign, in which some candidates hammered on the notion of fuel energy independence. That notion is fanciful, given that 66% of all of the crude oil refined in the U.S., and 58% of all oil consumed, are imported.
Venezuela Cuts Eyed, Too
"Energy independence - gimme a break. Break away from Middle East oil - oh please," said William Ramsay analyst at the Institut Francais des Relations Internationales, a Paris-based think tank, who served as deputy executive director of the International Energy Agency for 10 years. "Let's see who the winner choses to govern, instead of who writes campaign scripts."
Both McCain and Obama said they want to cut imports not only from the Middle East, but also from Venezuela, where President Hugo Chavez has been a thorn in the U.S.' side. That issue is complex, as much of the Venezuelan oil to the U.S. fuels the extensive Citgo refining and marketing network owned by the Venezuelan government.
When Bush made his comment about trimming U.S. imports from the Middle East, the implicit volume at the time was about 1.5 million barrels a day, or about 15% of U.S. crude imports. The candidates' target of ending imports from the Middle East and Venezuela, tallies to about 3.55 million barrels a day currently, or about 35% of crude imports.
McCain and Obama answered a debate question in similar fashion, steering away from a specific target of oil-import reduction by the end of a first four-year term in 2013, but citing the goals further at 10 years out in Obama's case and a rough timeframe of seven to 10 years for McCain.
McCain favors an aggressive campaign to build 45 new nuclear plants "right away," which analysts called overly ambitious. Both candidates favor increased domestic drilling, but a lack of available rigs limits near-term prospects, analysts said. Clean coal technology, wind, solar, alternative fuels play into the campaign talk, too.
"Canadian oil is fine," McCain said, referring to the U.S.'s biggest crude oil and petroleum products supplier for the past several years. But that implies increased use of oil-sands crude oil, which carries a high cost and produces more lifecycle greenhouse gases than conventional oil.
Obama said there were some elements of the North Atlantic Free Trade Agreement signed by the U.S., Mexico and Canada that need to take into account environmental issues, but didn't specify in the recent debate if he referring to oil sands development, which has come under increasing fire from environmental groups.
David Pumphrey, deputy director of the energy and national security program at the Center for Strategic and International Studies in Washington, D.C., said it's difficult to figure out the costs of the candidates' energy strategies or the per-barrel oil price involved.
"The key question is what is the cost," he said, noting that new oil sands projects in Canada carry a price tag of $80-$90 a barrel, but if energy costs come down, the expenses of those energy-intensive projects could be reduced.
He noted that all the talk about cutting reliance on foreign oil may carry an implicit price reduction in the mind of the average consumer. But even if the U.S. trims Middle East oil use, "we can't be isolated from the world market," he said.