In accepting the nomination as the Republican
candidate for U.S. president, Sen. John McCain proclaimed
that if elected, "We are going to stop sending $700 billion a year to
countries that don't like us very much." One can't help but wonder what
$700 billion the good senator is talking about. (He certainly couldn't have
been talking about U.S. foreign aid. According to U.S. Agency for International
Development [USAID] report U.S.
Overseas Loans and Grants, Obligations, and Loan Authorizations [commonly
known as "The Greenbook"], in 2006 the United States provided almost
$27 billion in economic aid to foreign countries and another $12 billion in
military assistance for a grand total of $39 billion, the bulk of which was
spent in the Middle East and North Africa [$15 billion].)
Apparently, the $700 billion is money we're spending for energy, presumably
foreign oil. According to McCain, "We will produce more energy at home.
We will drill new wells offshore, and we'll drill them now. We will build more
nuclear power plants. We will develop clean coal technology. We will increase
the use of wind, tide, solar, and natural gas. We will encourage the development
and use of flex fuel, hybrid, and electric automobiles."
to the Energy Information Administration (EIA), the United States imports
about 58 percent of the petroleum products (which includes crude oil and other
refined petroleum products such as gasoline, diesel fuel, heating oil, jet
fuel, chemical feedstocks, and asphalt) it consumes. In 2007, the United
States imported 4.9 billion barrels of oil at an average price of $72
per barrel, or roughly $352 billion – about half of the $700 billion claimed
by McCain. Using 2007 consumption levels (although oil consumption is currently
declining as Americans adjust to the increased price of gas at the pump) and
the current price of oil ($105 per barrel as this is written), the cost of
foreign oil would be $515 billion. Even at the EIA's 2009 projected price of
$123 per barrel, foreign oil would cost $603 billion – still less than McCain's
So where did McCain come up with $700 billion? Apparently he's been talking
to Texas billionaire oilman turned wind farmer T. Boone Pickens.
In July Pickens rolled out a $50 million media campaign to tout his
energy plan. According to Pickens, America is addicted to foreign oil,
and "As imports grow and world prices rise, the amount of money we send
to foreign nations every year is soaring. At current oil prices, we will send
$700 billion dollars out of the country this year alone." In the first
half of this year, the United States imported 2.4 billion barrels of oil. If
we assume that 4.8 billion barrels is a good estimate for the entire year,
the price of oil would have to average $145 per barrel for the cost foreign
oil to equal $700 billion in 2008 – but the record high for a barrel of oil
was $147 per
barrel for only one day in July, and according to EIA the projected average
price for this year is $119 per barrel, which would equal a total of $571 billion.
(Pickens also claims we import 70 percent of our oil, which is significantly
more than the 58 percent figure from the EIA.)
Pickens is also apparently the source of McCain's claim of sending $700 billion
"to countries that don't like us very much." In a September 2006
stated that "others [countries we buy oil from] are not friendly."
And in July of this year he told the Senate Homeland Security and Governmental
Affairs Committee that many of the countries supplying oil to the United States
Clearly, "not friendly" is a euphemism for the Middle East. But
in 2007, only 16 percent of imported oil (a little less than 800 million barrels)
came from the Persian Gulf (Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and
United Arab Emirates). The reality is that nearly half of imported oil comes
from Western Hemisphere sources, which account for three of the top five suppliers
of foreign oil:
- Canada: 18.2 percent (which accounts for more barrels of oil – not quite
900 million – than all of the Persian Gulf countries)
- Mexico: 11.4 percent
- Saudi Arabia: 11.0 percent
- Venezuela: 10.1 percent
- Nigeria: 8.4 percent
The last time I checked, both Canada and Mexico were considered friendly neighbors.
Ultimately, John McCain's pledge "to stop sending $700 billion a year
to countries that don't like us very much" amounts to the same kind of
exaggeration and fear-mongering the Bush administration engaged in to demonize
Saddam Hussein as a dire threat to America – which he clearly wasn't. Similarly,
imported oil is not a threat to the United States, simply an economic reality.
(One thing McCain is right about is that "[t]he
issue of economics is not something I've understood as well as I should.")
More importantly, the foreign countries that sell oil are not enemies. The
last thing we need to do is chase another phantom menace.