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Oil: U.S. Middle East Policy & Oil

by Mitchell Bard (Updated April 2015)

In 1973, the Arab oil embargo dealt the U.S. economy a major blow. This, combined with OPEC's subsequent price hikes and a growing American dependence on foreign oil, triggered the recession in the early seventies. However, reliance on foreign oil continues to increase.

In 1973, foreign oil accounted for 35 percent of total U.S. oil demand. By 2010, the figure had risen to 63 percent, and Arab OPEC countries accounted in 2010 for 22 percent of U.S. imports (with non-Arab countries Angola, Venezuela, Ecuador and Nigeria, the figure is 42 percent). Saudi Arabia ranked number three andAlgeria (#6), Iraq (#7) and Kuwait (#13) were among the top 15 suppliers of petroleum products to the United States in 2010. The Persian Gulf states alone supplied nearly 15 percent of U.S. petroleum imports in 2010.(1)

Egypt's President Sadat persuaded the late Saudi King Faisal to threaten to withhold oil from the West to exploit for political advantage the growing dependence of the industrialized West on Arab oil. The tactic was effective: Soon the major American oil companies backed the Arab cause in public, and privately worked to weaken U.S. support for Israel.(2)

According to a 1974 report of the Senate Foreign Relations subcommittee on Multinational Corporations, the ARAMCO consortium-Exxon, Mobil, Texaco and SOCAL-attempted to block America's emergency airlift to Israel. During the war, the companies cooperated closely with Saudi Arabia to deny oil and fuel to the U.S. Navy.(3)

On other occasions, the major oil firms have advocated the positions of the Arab countries, particularly Saudi Arabia. The major oil companies vigorously lobbied Congress on behalf of the sale of F-15s in 1978 and AWACS aircraft in 1981. Together with Saudi foreign agents, these corporations enlisted many other American firms to lobby on the Saudis' behalf.(4) Saudi Arabia has a powerful lobby in the United States because hundreds of America's largest corporations do billions of dollars worth of business with the Kingdom. “And each of these corporations,” Hoag Levins noted, “had hundreds of subcontractors and vendors equally dependent on maintaining the good graces of Muslim leaders whose countries now collectively represent the single richest market in the world.”(5)

The Saudis often attack what they claim is the excessive influence of Israel's supporters in the United States, but investigative journalist Steve Emerson turned that claim upside down. After detailing many of the ties between Saudi Arabia and U.S. businesses, universities, lobbyists and former high-ranking government officials, he concluded:

The breadth and scope of the petrodollar impact is beyond any legal remedy. With so many corporations, institutions, and individuals thirsting after-and receiving-oil money, petrodollar influence is ubiquitous in American society. The result is the appearance of widespread, spontaneous support for the policies of Saudi Arabia and other Arab oil producers by American institutions ranging from universities to the Congress. The proliferation of vested ties has allowed special interests to be confused with national interests.

Never before in American history has any foreign economic power been as successful as Saudi Arabia in reaching and cultivating powerful supporters all across the country. The Saudis have discovered that one quintessential American weakness, the love of money, and the petrodollar connection has become diffused throughout the United States.(6)

The growing reliance on imported oil has also made the U.S. economy even more vulnerable to price jumps, as occurred in 1979, 1981, 1982, 1990, 2000, and 2005. Oil price increases have also allowed Arab oil-producers to generate tremendous revenues at the expense of American consumers. These profits have subsidized large weapons purchases and nonconventional weapons programs such as Iran's.

America's past dependence on Arab oil often raised the specter of a renewed attempt to blackmail the United States to abandon its support for Israel. The good news for Americans is that the principal foreign suppliers of U.S. oil today are more reliable and better allies than the Persian Gulf nations. Even more important, American reserves have increased significantly, oil prices plunged from more than $100/barrel in June 2014 to less than $45/barrel the following winter, and the cost of U.S. oil production has fallen. Today, the United States is close to replacing Saudi Arabia as the swing producer in determining the price of oil.(7)

Sources: 1."US Imports by Country of Origin - Petroleum and Other Liquids," US Energy Information Administration, (July 2010).
2. See Steven Emerson, “The ARAMCO Connection,” The New Republic (May 19, 1982), pp. 11-16; Russell Howe and Sarah Trott, The Power Peddlers, (NY: Doubleday, 1977), pp. 342-343; Anti-Defamation League, The U.S.-Saudi Relationship, (NY: ADL, 1980), p. 6.
3. Steven Emerson, The American House of Saud, (NY: Franklin Watts, 1985), pp. 36-37; Steven Spiegel, The Other Arab-Israeli Conflict, (IL: University of Chicago Press, 1985), pp. 258-59; Anthony Sampson, The Seven Sisters, (NY: Viking Press, 1975), pp. 248-50; Hoag Levins, Arab Reach: The Secret War Against Israel, (NY: Doubleday, 1983), p. 51.
4. Steven Emerson, “The Petrodollar Connection,” The New Republic, (February 17, 1982), pp. 18-25; also Emerson, (85), pp. 177-213.
5. Levins, p. 19.
6. Emerson (85), p. 413.
7. Clifford Krauss, “New Balance of Power,” New York Times, (April 22, 2015).