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Keeping oil flowing to the US is expensive

  • Author: Peter Porco
  • Updated: September 29, 2016
  • Published April 4, 2009

Of every gallon of fuel that Americans pour into their cars and trucks, how much of its cost can be said to cover U.S. military expenditures incurred solely to safeguard the supply of oil from Persian Gulf producers that's used as fuel?

Put another way, what part of the overall American defense budget is paying for the Persian Gulf oil that ends up in all of our vehicles?

Two economics researchers have taken an "accounting snapshot" of this link between the Pentagon's budget and the price of motor fuel.

They conclude that the yearly segment of the U.S. defense budget used to guarantee a stable flow of Persian Gulf oil for this country's road vehicles is between $6 billion and $25 billion.

That amounts to between three cents and 15 or 20 cents per gallon, depending on the number of miles driven annually, according to the researchers, Mark Delucchi, of the Institute of Transportation Studies at the University of California at Davis, and Jim Murphy, who holds the Rasmuson Chair of Economics at the University of Alaska Anchorage.

Congress could therefore cut the military budget by $6 billion to $25 billion if our motor vehicles did not use petroleum-based fuel or if the oil came from a source that needed no military protection, say Delucchi and Murphy. Not that Congress would necessarily cut that much, but it would have to find another reason to spend the money, they say.

The cardinal assumption behind their study is that the American interest in the Persian Gulf overwhelmingly comes down to protection of the region's oil supplies.

"The reason for this is straightforward," the researchers write in "US military expenditures to protect the use of Persian Gulf oil for motor vehicles," a report published last year in Energy Policy, an academic journal:

"Oil is the major source of energy for every industrialized economy in the world, and as a result, the price and quantity of oil in the world market directly affect economic output."

The Gulf being notoriously unstable, price and output of oil can vary suddenly due to causes that have nothing to do with market fluctuations.

"If these risks (of quick changes in output and price) were low, then arguably there would be relatively little need to police oil supplies," Delucchi and Murphy write.

The authors also estimated the cost of Persian Gulf oil for non-motor-vehicle uses like heating and manufacturing, but they zeroed in on cars and trucks. (Their estimate of the military costs that support all U.S. Persian Gulf interests is as much as $98 billion.)

Delucchi and Murphy examined military costs every year from 1991 through 2007 and projected future expenditures.

They weighed the enormous costs of the Iraq War (put by some estimates at more than $1 trillion thus far). They assumed that such a war would occur every 35 years. And they averaged the annual cost of all.

"I think we ended up underestimating, but not by too much," Delucchi said from California.

They arrived at a range instead of a single figure (common to previous studies) because rigorous precision is not possible when poring over statements from the U.S. Joint Chiefs of Staff, said Murphy. "At the end of the day, ours is an educated guess. We're trying to tie it all together."

Clearly, the $6 billion to $25 billion figure (in 2008 dollars) does not seem like a dramatic number -- not when the national conversation today includes routine figures in the hundreds of billions of dollars.

Delucchi and Murphy are modest about their conclusions.

They said theirs is just one more in a history of similar studies dating back more than 20 years.

"Our estimate is smaller than what other published estimates have been," said Delucchi. "If you took a (spectrum) of previous estimates, ours would be a range down at the low end."

Nevertheless, their study provides a valuable, workable number, even if some organizations say it's so small as to be negligible.

Peter Porco writes for UAA and does an occasional article on research at the university for the Daily News.


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