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The Cost of Protecting Oil in the Persian Gulf



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With the United States bogged down in the war in Iraq, rancorous debate continues in the halls of Congress regarding the political and economic costs of America’s involvement in the Persian Gulf. Many contend that U.S. interests center primarily, if not exclusively, on the region’s huge reserves of oil, and that, as a result, U.S. military expenditures amount to a massive “hidden cost” of oil use by the United States. Some have argued that these hidden costs, estimated to range from essentially zero to upwards of a $1 per gallon, are, in effect, a subsidy that should be recovered by taxes on motor fuel. The figures vary widely because analysts disagree profoundly about whether military expenditures are related at all to oil use (specifically transportation fuels), and about the magnitude of any expenditures that putatively are related.

Here I want to look at this debate from a slightly different perspective. What might happen if U.S. consumers and companies hauling freight curtailed their oil use? Would the federal government reduce its military commitment in the Persian Gulf? To evaluate this, the first step is look at the mechanism – if X happens, what happens to Y? – and the second is to examine the motives of the key decisionmaker, the U.S. federal government, which determines whether resources are available to address those risks, and (presumably) authorizes military spending accordingly.

Suggested Citation:  M. A. Delucchi, “The Cost of Protecting Oil in the Persian Gulf,” RFF Weekly Policy Commentary, Resources for the Future, Washington, D. C., November 5 (2007).