Originally Posted by Villages Kahuna

It's pretty clear to anyone who tries to follow world news that there is a strong interrelationship between the world economy, the supply and price of oil and foreign policy -- ours as well as that of other countries.

Considering how oil could and should effect foreign policy, consider this...

86% of the world's oil reserves are owned by countries, not companies. The largest owners of oil reserves are the countries of Saudi Arabia, Russia, Iran, Venezuela, Kuwait, etc. Even Canada and Mexico, two of the three largest suppliers of oil to the U.S. have nationalized oil companies. These countries band together in cartels, such as OPEC. The principal goals of these cartels is the determination of the best means for safeguarding the interests of the cartel members, individually and collectively. It also pursues ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating fluctuations in both supply and price; giving due regard at all times to the interests of the producing nations and to the necessity of securing a steady income to those producing countries.

While OPEC, as an example, is an economic cartel, it's very clear that each of the member countries conduct their own foreign policy with a constant eye towards using their oil as leverage to accomplish their political objectives. In 1973, the Arab members of OPEC plus Egypt and Syria launched an oil embargo against the U.S. in response to our decision to supply the Israeli military during the Yom Kippur war. We can all remember the long lines, closed gas stations and general disruption of our economy that resulted, I'm sure.

The U.S. and U.S. corporations own or control only 3% of the world's oil reserves, yet we consume almost 25% of annual world production, consuming at a rate which has grown steadily for at least two decades. Obviously, we cannot drill our way to energy independence. We simply do not have adequate oil reserves to supply the needs of our economy. Even if we were to have instantaneous access to all of the U.S. oil reserves, at the rate we consume oil we would exhaust our reserves completely in about ten years.

At the same time, other large oil consumers have developed. Both China and India have rapidly developing economies and their huge and growing consumption of oil has contributed to the escalation of oil prices. Their demands for oil are only expected to increase dramatically in coming years and decades.

The problem doesn't get any easier. The world population is currently about 6.7 billion people. By 2050 that is expected to grow to 9.0 billion. That means the world will have the equivalent of two more Chinas to feed, clothe, provide energy to heat their homes, cook their food and power the factories where they work. That will happen by the time our grandchildren reach middle age. While China has a program to build and start up one 500 megawatt coal-fired electric generating plant every week for the next ten years, we have special interest groups advertising on TV that there is no such thing as clean coal and that we shouldn't be building any coal-fired plants.

The situation raises the obvious question of how the U.S. should conduct our foreign policy as it relates to assuring an adequate and reliable supply of oil to our country at a reasonable price. We have refused to maintain foreign relations with some of the countries who have large oil reserves for various reasons: they don't hold the same human rights values as we do; they have a form of government which we don't agree with--dictatorships as an example; or they have done other things which we disagree with -- Iran's nuclear program comes to mind. Now there is conversation in some quarters that the U.S. remove us from NAFTA, where the other two largest participants also happen to be two of the three largest suppliers of oil to the U.S.--Canada and Mexico.

So the question of the relationship between our foreign policy and our economy, particularly as it is effected by oil, is apparent. Should the U.S. continue to refuse to have diplomatic relationships with countries with whom we have major differences, even though the result might be that those countries might be unreliable sources of the oil on which our economy depends? Should we refuse to conduct diplomacy with countries like Iran or Venezuela? Should we stiffen our position on a European anti-missle defense, knowing such action will cause deterioration in already fragile relations with Russia? Should we reverse our position on free-trade and become more protectionist of our own economy by withdrawing or substantially weakening the terms of NAFTA, knowing that both Canada and Mexico would be hurt economically, raising the question that they might turn to new trading partners like China and India to sell their oil?

Just what should our foreign policy be? Should the U.S. maintain its standards on human rights, personal freedoms and dictatorships, refusing to enter into diplomatic relationships with countries who differ with us? Or should we establish diplomatic relations with those countries, trying to convince them to share our objectives, but in the end cutting the best deal that we can in the interest of maintaining an adequate supply of oil needed to sustain our own economic growth? What should our ongoing relationship with Israel be? Are we willing to trade oil supplied to us by OPEC oil for our support of Israel, if it comes to that?

It's an interesting but very real question. What do you think?