Exploring the impact of U.S. oil consumption on international allies
Gabriel Thoumi, MBA1
Issue date: 10/10/05 Section: International
- Page 1 of 5 next >
The U.S. government has taken a strong stance against terrorism. This is important and I agree. But mismanagement of our oil demand is wreaking havoc and may destabilize our allies' governments. The U.S. largely determines the world oil market demand. World oil production is about 80 million barrels a day. The U.S., which is about four percent of the world's population, uses over 25 percent of the world's daily production. This means every one of us, on average, uses about 25 barrels of oil a year.
At the same time, current world oil supplies are at their historic peak of production due to oil well depletion. Also, our worldwide refining capacity has maximized at almost 100 percent. U.S. oil consumption is driving the world's oil demand and this may destabilize our allies in the war on terrorism.
Global interconnectedness, as a theory, means that one country's actions have repercussions on others across the world. For example, the two hurricanes that devastated the U.S. Gulf Coast have caused U.S. oil refining capacity to decrease by 1.5 million barrels a day.1 We can afford this, but it will hurt others much worse. When we look at the macroeconomic data published the week of September 26, we see U.S. initial jobless claims approaching 430,000 and U.S. credit card delinquency greater than 4.8 percent. But we should still be able to afford $4 per gallon gas and its correlated increase in commodity costs.
Making matters worse, global oil consumption is also increasing as China and India continue their torrent development pace. Like these countries, Indonesia is also increasing its consumption, but in aggregate, and on a per capita basis, these countries' respective oil demand is small relative to the U.S. But this still does not answer the question: Why does U.S. oil consumption potentially destabilize our allies and specifically Indonesia?
Indonesia is one of our strongest Allies in the War on Terrorism. With 90 percent of its 220 million citizens being Muslim, Indonesia is a valuable partner. However, the lack of an effective U.S. energy policy is possibly one of the causes impacting the Indonesian government's ability to govern. Indonesia's government decreased its retail oil subsidies by at least 126 percent on October 1.2 On the same day, three bombs killed over 23 people in Bali. Furthermore, there are increasing street protests demanding a change of government in Indonesia. Needless to say, President Susilo Bambang Yudhoyono's government is under duress.
At the same time, current world oil supplies are at their historic peak of production due to oil well depletion. Also, our worldwide refining capacity has maximized at almost 100 percent. U.S. oil consumption is driving the world's oil demand and this may destabilize our allies in the war on terrorism.
Global interconnectedness, as a theory, means that one country's actions have repercussions on others across the world. For example, the two hurricanes that devastated the U.S. Gulf Coast have caused U.S. oil refining capacity to decrease by 1.5 million barrels a day.1 We can afford this, but it will hurt others much worse. When we look at the macroeconomic data published the week of September 26, we see U.S. initial jobless claims approaching 430,000 and U.S. credit card delinquency greater than 4.8 percent. But we should still be able to afford $4 per gallon gas and its correlated increase in commodity costs.
Making matters worse, global oil consumption is also increasing as China and India continue their torrent development pace. Like these countries, Indonesia is also increasing its consumption, but in aggregate, and on a per capita basis, these countries' respective oil demand is small relative to the U.S. But this still does not answer the question: Why does U.S. oil consumption potentially destabilize our allies and specifically Indonesia?
Indonesia is one of our strongest Allies in the War on Terrorism. With 90 percent of its 220 million citizens being Muslim, Indonesia is a valuable partner. However, the lack of an effective U.S. energy policy is possibly one of the causes impacting the Indonesian government's ability to govern. Indonesia's government decreased its retail oil subsidies by at least 126 percent on October 1.2 On the same day, three bombs killed over 23 people in Bali. Furthermore, there are increasing street protests demanding a change of government in Indonesia. Needless to say, President Susilo Bambang Yudhoyono's government is under duress.
