The Myth of an Oil Shock
Will a Middle Eastern oil disruption crush the economy? New research suggests the answer is no—and that a major tenet of American foreign policy may be fundamentally wrong.
Scholars examining the recent history of oil disruptions have found the worldwide oil market to be remarkably adaptable and surprisingly quick at compensating for shortfalls. Economists have found that much of the damage once attributed to oil shocks can more persuasively be laid at the feet of bad government policies. The U.S. economy, meanwhile, has become less dependent on Persian Gulf oil and less sensitive to changes in crude prices overall than it was in 1973. These findings have led a few bold political scientists and foreign policy experts to start asking an uncomfortable question: If the United States could withstand a disruption in Persian Gulf oil supplies, why does it need a permanent military presence in the region at all?
