Stable oil flow not tied to war
news.ft.com By John Tatom Published: March 3 2003 4:00 | Last Updated: March 3 2003 4:00 From Prof John A. Tatom.
Sir, Martin Wolf ("Stable oil supplies are worth defending from Iraqi aggression," February 26) reviews seven oil-related reasons for an attack on Iraq and rejects six of them. He suggests, however, that ensuring the stability of the Gulf oil supply is plausible: "How far Mr Hussein is a threat to security in the Gulf is debatable; but that securing stability of supply is a legitimate objective is not." I submit that the reverse is true.
The stability of the flow of Middle East oil has never been a reasonable military objective and is not now. It was not reasonable in 1973, when a brief Opec embargo sent oil prices soaring, and it was not subsequently, when Opec held up oil prices. Military intervention was also not a plausible response when Iraq's attack on Iran reduced that flow and sent oil prices up further in 1979-81 and kept them higher until 1986. The recent strike in Venezuela disrupted oil supplies temporarily but that also was not a cause for war. In the end, stability of an oil flow could not be assured by military action in any case.
The stability of long-term supply relies on competition and multiple producers and sellers of oil. It is against an oil owner's self-interest to forgo net revenue from oil production. Withholding oil artificially can even permanently impair the ability to recover reserves from an oil pool. Who controls the oil reserves in the Middle East should not be expected to affect production or price.
There is little that can be done to eliminate the risk of short-term disruptions, such as strikes or natural disasters. A military campaign cannot make more oil available. Long-term use of military force to secure production over a century or more is too extreme a commitment for a nation's military to carry out successfully. Markets ensure the stability of market supply and price. Governments do not and cannot do so.
Saddam Hussein's declared intention when he invaded Kuwait was to create (and control) an empire stretching from Morocco to Indonesia. He did not repudiate this goal in the ceasefire agreement or subsequently. Even if he were successful, he would not have any incentive to attempt to alter the supply or pricing of world oil. Instead, he threatens the political stability of an extensive region, comprising a large share of the world's population.
This is the dictator who launched a war against a neighbour with about three times the population and income of his country and prosecuted it for nine losing years, only to attack a much smaller but richer neighbour. Mr Hussein threatens the world and, first of all, his neighbours and the US, not the stability of oil supply.
John A. Tatom Department of Economics DePaul University Chicago, IL 60604, US