Elgar original reference
Edited by Joanne Evans and Lester C. Hunt
Chapter 16: The Oil Security Problem
Hillard G. Huntington* 1 Introduction Oil trading was suddenly curtailed after the nationalization of the Suez Canal in July 1956 and the subsequent invasion of Egypt by Israel, France and Britain. During the first three months of 1957, US oil prices rose at a quarterly rate of 7.6 percent (more than 30 percent on an annual basis) at a time when the Texas Railroad Commission effectively fixed oil prices. An economic recession ensued. Since that event, Middle Eastern oil has played a critical role in the military strategies, foreign affairs and the economies of many Western nations for more than five decades. The fundamental economic problem has been how to balance the large gains from free and open trade with oil security policies that may limit dependence upon Persian Gulf energy supplies. This chapter brings together several important recent strands in the energy security literature and evaluates their contributions. Although these studies emphasize the US oil security problem, the methodologies and basic principles apply to many European and Asian countries, too. The chapter does not survey the literature, because Bohi and Toman (1993, 1996) and Toman (1993) have already provided excellent reviews and raised important reservations about how governments implement the security principle. Improving oil security in this chapter will refer to reducing an oil-importing country’s reliance on insecure sources of foreign oil. Section 2 discusses when private markets may fail to provide appropriate signals for economic efficiency and public policy might be considered. Section 3 reviews a recent effort...
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