America's Energy Future and Iran

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America's Energy Future and Iran

Iran recently declared that it would practice "shutting down" the Strait of Hormuz - the narrow passageway through which all Persian Gulf energy resources must flow on their way to world markets. The threat reinforced both Iran's potential for mischief and the possible economic costs of starting a war with the country. But how big of a threat is it really?

A recent piece by Daniel Yergin argues that America's energy security is in much better shape than commonly believed:

There are other changes in the world oil supply that can work in our favor. Many Americans have the impression that most U.S. oil imports come from the Persian Gulf region, or from hostile states. And it is true enough that Venezuela's Hugo Chávez, for instance, hardly hides his deep-seated enmity toward the U.S.

But the Persian Gulf represents 16% of our imports, and Venezuela 9%. By far the largest, and growing, source of imports is Canada, which supplies about 25%; Mexico is second, at 11%.

The main reason for Canada's large role is the expansion of output from its oil sands. Canada's oil sands now yield more output than Libya's total exports prior to its civil war. Current plans could double production to three million barrels per day by the beginning of the next decade. That would mean a higher share of our imports coming from our friendly neighbor and largest trading partner.

The point here isn't that a temporary closure of Hormuz wouldn't be a big deal. It would. But from a strategic perspective, America's economic and resource security needs are in a lot better shape than many would have it. The U.S. already has the military capacity to "re-open" the Strait should the need arise. The longer-term policy response to Iran's possible threat to energy resources is not to start a war with the country, but to green-light things like the Keystone Pipeline and boost the efficiency of the U.S. automotive fleet - i.e. things that would further marginalize Iran's potential for economic mischief.

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