U.S. Dependence on Foreign Oil: A 2005 Perspective
Original reporting by Robert Gibbons (Reuters, May 2005).
NEW YORK (Reuters) – U.S. dependence on imported crude oil was expected to keep growing. That’s despite efforts to spur domestic production, as demand in the world’s largest energy consumer outpaces output, industry and government experts said at the time.
“Most people expect that over the next couple of weeks we might see crude inventories begin to fall, because to maintain 10.5 million (barrels per day of imports) or more would be a high level,” he said.
The Economic Cost of Oil Dependence
A bipartisan report discussed the economic costs associated with oil dependence:
Estimates of the oil premium have fallen over time as the oil-intensity of GDP has declined. Meanwhile, price volatility and oil market disruptions are less pronounced than twenty years ago.
The report suggested the private sector could respond more flexibly to supply shocks. Recent estimates put the total premium at between around $0 and $14/barrel, equivalent to between 0 and 30 cents/gallon of gasoline; our best assessment is that the premium is around $5/barrel.
At the time, the report noted uncertainty about future oil premiums and projected that oil’s share of U.S. GDP would decline even as the imported share of U.S. petroleum rose.
However, such estimates might understate geopolitical risks that are difficult to quantify.
These risks included disruptions to oil supply sabotage by terrorists or the takeover of Saudi Arabia. As well as other oil rich nations. Finally and by extremist governments willing to sacrifice oil revenues. Especially to inflict economic damage on the US.
