It should be clear to any sensible person that facts matter. Yet it is astonishing that with oil at the center of many media presentations after the defeat of Saddam Hussein’s army, leading journalists still do not have a clear understanding of oil reserves.
In article after article it has been stated that Saudi Arabia with 19.4 percent or 261.7 billion barrels has the world’s largest reserve; in second place is Iraq with 8 percent and 112.5 billion barrels of the globe’s oil reserves.
Overlooked in all these analyses is the nation with the largest pool of oil: Canada. If one were to include tar sands or oil sands, Canada has almost 23 percent and over 300 billion barrels of deposits. Remarkably not one report in the newspapers of record make mention of this fact.
Why do I assume it is important? Obviously the cost of extraction from tar sands is higher than extraction from Saudi oil fields which is, at least, a partial explanation for the oversight. But if one factors in externalities such as the cost of defending Saudi Arabia or tolerating its effort to promote radical Islam worldwide, Canadian tar sands begin to make sense.
Moreover, despite the unfortunate comments of Prime Minister Chrétien during the war in Iraq, Canada has been an ally, its physical and emotional propinquity to the United States is obvious and it is clearly a substitute for Saudi oil.
If one combines oil from OECD nations, Russia, non-OPEC producing states, Mexico and the U.S. the total is a mere 232 billion barrels or just over 17 percent of the world’s reserves. In other words, Canada can meet all of the U.S. needs and then some.
What should be calculated is the cost of extraction compared to the total cost of maintaining the Saudi Arabian pipeline. Let’s say for the sake of argument that the price of oil plummets to $23 a barrel in the next several months based on expectations of Iraqi oil coming on line. Would it make sense for the U.S. to pay Canada $25 a barrel in future payments for the extraction of oil from tar sands, assuming this is a realistic estimate?
The purpose of this calculation is to suggest that the U.S. has options outside the Middle East that are worthy of consideration. American energy needs should not be held hostage to a form of territorial determination. Clearly this may mean a nominally higher price of oil, but if in the end it reduces military risk and offers bargaining leverage, the tradeoff may be worthwhile.
Surely energy economists are right to consider price before other considerations. But price in this case is affected as much by externalities as supply and demand.
Saudi Arabian influence on the world stage is due to its oil. If that oil card cannot be played, Saudi Arabia becomes a desert of sand and debauched sheiks.
As I see it, the time is right to consider alternatives to Saudi oil. There isn’t any justification for putting American lives in harm’s way for a royal family that underwrites hateful views of the United States and Israel.
I don’t know whether Spencer Abraham, the Secretary of Energy, has given any thought to this scenario, but in my opinion the timing for such consideration could not be better. This is the time to broker a deal. The world is watching and Saudi Arabia may be in shock and awe at developments in Iraq. It may well be that the Canadians will be receptive to our overtures as well.
President Bush has described the war in Iraq as “historically transformative.” It may turn out to be even more dramatic than he suspects.
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