Friday morning, the New York Stock Exchange took a moment of silence to remember the nearly 3,000 Americans who lost their lives in the 9/11 terrorist attacks. The constant vigilance of the Bush and Obama administrations against al-Qaeda over the past decade has thwarted no fewer than a dozen major terrorist plots, killed the top two al-Qaeda leaders, and in general weakened terrorist cells around the world. “After a decade of intelligence-gathering, counter-attacks and defensive measures, America does seem a good deal less vulnerable than it was on September 10th ten years ago (“September 11th 2001: Ten Years On,” The Economist).

Just prior to this moment of silence, a Bloomberg TV anchor stated: “The terrorist attacks on 9/11 saddened our country and strengthened our resolve to maintain the American way of life.” Read past the break for the full story and join the Green Light Distrikt Facebook group for updates on new events, blog posts and more.

Most people would interpret this as referring to the Declaration of Independence’s statement of the “unalienable rights” of Americans to “the pursuit of life, liberty and the pursuit of happiness.” I interpret this as referring in part to foreign oil as a centerpiece of the American way of life. Consider the following:

• Less than a year and a half after the 9/11 attacks, the U.S. launched the Iraq War with the stated intent of disarming Saddam Hussein’s regime of weapons of mass destruction. No WMD’s were ever found, but while Iraq holds the fourth largest proved oil reserves it ranks twelfth in production due to years of wars and sanctions, offering oil companies significant revenue opportunities and offering consumers, of which the Pentagon is the world’s largest, reduced prices due increased supply (International Energy Statistics, U.S. Energy Information Agency). Even before the end of the Iraq war, the Iraqi Ministry of Oil administered oil contracts to international oil companies (“Oil firms awarded Iraq contracts,” Al Jazeera).
• In the 1980’s, Reagan and the CIA supplied Afghani militant groups with arms and training to fight the Soviet Union. The administration, following the lead of the Carter Administration, said that the U.S.S.R. had depleted most of its oil reserves and was passing through Afghanistan to seize the Middle East’s oil fields (Taliban: Militant Islam, Oil and Fundamentalism and Central Asia, Rashid). As later evidence made clear, the world was not running out of oil, the lone exception being the United States (“The Oily Americans,” Time Magazine).
• “Economic research has long documented a relationship between oil price shocks and U.S. economic activity, with the consequence being slower GDP growth and possible recession, higher unemployment rates, and a higher price level” (“Globalization, Oil Price Shocks, and U.S. Economic Activity,” Balke, Brown and Yucel). In spring of this year, as crude oil prices climbed towards $100/barrel (for WTI), the International Energy Agency decided to release 60 million barrels of oil, 30 million of which were to come from the U.S. Strategic Petroleum Reserve, the largest release since the reserve was founded in 1975, to offset the loss of oil production from Libya and elsewhere in the Middle East (U.S. Department of Energy).
• In 1912, Churchill decided to convert the British naval fleet to oil, just two years prior to the onset of World War I; this transition to oil provided the winning edge. “On November 11, 1918, Germany, faced with an acute oil shortage for the coming winter, surrendered…The Allied Cause had floated to victory on a wave of oil.” Ever since, Western powers have tied their military strength and national security to Middle East Oil (The Prize: The Epic Quest for Oil, Money and Power, Yergin). The U.S. military has over the past few years made significant investments into alternative energy due to increasing attacks by insurgents on fuel convoys (“U.S. Military Orders Less Dependence on Foreign Fuels,” New York Times).

The relationship between U.S. foreign intervention and oil is due to the facts that reduced supply increases price, increased supply boosts corporate profits, and increased volatility negatively impacts growth, all of which significantly impact U.S. economic growth. What troubles me about this relation is that, a decade after the 9/11 attacks, the U.S. government has spent $4 Trillion on the wars in Afghanistan, Iraq and Pakistan – “equivalent to the country’s cumulative deficit for the six years from 2005 to 2010” – without comprehensively addressing the fact that U.S. foreign intervention over Middle East oil breeds terrorist activity (Time Magazine; “Does the U.S. Intervention Overseas Breed Terrorism? The Historical Record,” The Cato Institute).

Several entities understood this relationship after 9/11 and failed to act. The bipartisan 9/11 Commission and Congress were the most egregious offenders. The 9/11 Commission was “chartered to provide recommendations designed to guard against future attacks” (9/11 Commission Report). The report includes a recommendation that the United States and Saudi Arabia build a relationship about more than oil, such as jointly fighting terrorism. While this recommendation has been effectively implemented and is critical to prevent terrorist attacks, the report doesn’t recommend that the U.S. address its energy security. Congressional leaders are also at fault, many of which support increasingly disproportionate spending on national security while arguing for energy independence and against alternative energy and energy efficiency due to the high cost.

If the United States really wants to prevent terrorism, what’s needed is an energy policy that addresses our dependence on foreign oil. “The 2007 Energy Act originally sought to cut subsidies to the petroleum industry in order to promote petroleum independence and different forms of alternative energy. These tax changes were ultimately dropped after opposition in the Senate” (“U.S. Energy Independence and Security Act of 2007,” Wikipedia). There are several examples of items that an energy policy can reevaluate, of which the Obama administration’s increased fuel economy standards was a significant step:

• Oil subsidies and tax credits for government R&D, enhanced oil recovery, marginal well production, percentage depletion allowance, and exemption from passive loss limitation increase the federal deficit and incentivize foreign oil dependence (“What’s an Oil Subsidy?,” The Heritage Foundation).
• Solutions such as liquefied natural gas (LNG) vehicles, natural gas/solar hybrid power plants, stop-start idle elimination are currently available and can all reduce transportation oil consumption, which accounts for 70% of U.S. oil consumption (Energy Information Agency, 2010 Energy Review).
• The White House needs to follow in the footsteps of Congress and repeal ethanol subsidies, which consume the largest amount of federal subsidies as a percent of total spending at 26.5% (“Senate vote marks start of end to ethanol subsidies,”Reuters; “Government Financial Subsidies,” Windows on State Government).
• The U.S. needs to hold itself accountable by setting binding energy targets that diversify its energy supply over time, guided by the example of China’s Five Year Plan (“Key goals of China’s five year plan,” The Telegraph).

The Economist argues that the key in the next decade of fighting terrorism will be to regain the trust of Muslim countries and to use force more sparingly. This can’t happen without addressing our love-hate affair with oil. It’s time to end the moment of silence about the relationship between energy and national security and develop a rational, cost-effective, secure American energy policy.

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About Aaron Desatnik

Aaron is a research analyst at Iridian Asset Management, an equity management firm in the New York City area. Part of his work is to investigate mid- and large-cap energy efficiency and renewable energy companies to evaluate their investment potential. Previously Aaron was the Director of Marketing at the Sustainable Performance Institute in Boston, MA. He is also active in the community and has organized campaigns to increase awareness about the benefits of purchasing local food in the Greater Boston Jewish community as well as to develop a growth strategy for the transportation advocacy group LivableStreets Alliance. Ping Aaron if you want to talk about strategy, investing, energy or cycling. hello@aarondesatnik.com @aarondesatnik www.aarondesatnik.com

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