War and Cheap Oil: A Second Look

[jpak]

http://www.nytimes.com/2007/01/07/weekinreview/07basic.html?_r=2&oref=slogin&oref=slogin

For years, many conservationists argued that the government was subsidizing gasoline by spending billions of tax dollars to keep ships in the Persian Gulf and troops on the ground to assure the flow of oil.

But some oil experts say the picture may be more complicated now that war is raging in the Middle East: these days, they say, the military commitment doesn’t just hide the real price of oil, but also has become a factor in pushing the price up.

Milton R. Copulos, who is president of the National Defense Council Foundation, a nonprofit group based in Washington that lobbies for less reliance on foreign oil, laid out the more familiar case when he testified before the Senate Foreign Relations Committee in March. The “hidden costs” of gasoline imports in 2005, he said, include $780 billion in military costs, a figure that, if acknowledged and spread over all imports, would add $4.05 to the price of each gallon of gasoline.

But a few days ago, in a telephone interview, Mr. Copulos said the picture was even bleaker: the basic market price, he said, was being pushed up by the damage Iraq’s oil industry has sustained during the current war and by the threat that the conflict could spread. For each barrel of oil sold, “there has been up to a $20 premium that is directly tied to what’s going on over there militarily,” he said.

<more>