Media

July 31, 2006

News Release

Contact:
Mary Whitlow
703-525-0770
mwhitlow@potomacinstitute.org
/www.PotomacInstitute.org

Arlington, VA -- On July 28, 2006, a panel of experts discussed the current conflict in the Middle East and the potential effects on energy security at the Potomac Institute for Policy Studies. This is a vital issue given that a lack of energy security could destabilize the world. Potomac Institute’s Chairman and CEO, Michael Swetnam, and Prof. Yonah Alexander, Director of the International Center for Terrorism Studies, welcomed the audience and offered opening remarks.

Col. Edward Badolato, USMC (Ret.), President and CEO of Integrated Infrastructure Analytics, commented that the “Global War on Terror (GWOT) could more accurately be called the Global War against Islamic Radicals.” The impact that terrorists, as non-state actors, have had against the United States is unexpected and surprising. However, the "transfer of wealth" from western countries to Middle Eastern countries as a result of the oil trade has enabled terrorists to have a sweeping impact in the GWOT. The United States’ response to the continued terrorist threat in the Gulf should be missile defense, intelligence cooperation among the United States and Middle Eastern nations, and securing an infrastructure of pipelines to get the oil out of the region without having to pass through the Straits of Hormuz, which gives Iran the capability to stop oil from leaving the Gulf.

"Things are not always as they seem," stated Dr. Norman Bailey as he began his remarks. The Adjunct Professor of Economic Statecraft at the Institute of World Politics spoke about several misconceptions that often affect oil and energy policy. The first misconception is that the United States is dependent on Middle Eastern oil. While the United States does receive a large amount of oil from Saudi Arabia, its primary suppliers are Canada, Mexico, and Venezuela. Another common misconception is that oil from the Middle East is cheap. To arrive at an accurate price it is necessary to consider the vast amount of money spent on transporting oil, refining oil, protecting the oil trade, and providing security. These factors make the price of oil signifanctly higher than the actual cost of extracting oil from the ground and then refining it into fuel. Dr. Bailey also stated that the cost of oil is not a result of the current conflict, which is a common assumption, but rather a result of supply and demand. Dr. Bailey's closing remarks focused on current Iranian practices that are cause for concern. Iran is leasing super-tankers and filling them with oil then anchoring them in the Gulf. The official explanation is that the Iranians are storing the oil to profit from it later because they want to have collateral to offer the United States. However, the real answer is that the tankers will be used as a weapon. Iran's navy and air force would do little harm to the United States and its allies, and in the event that Iran is attacked, it will blow up the tankers to prevent passage through the Straits of Hormuz. Since 40 percent of oil goes through the Straits of Hormuz the countries in the Eastern hemisphere would not be able to import oil and the price could increase to $200 per barrel.

Dr. Ariel Cohen, Senior Research Fellow at the Heritage Foundation, eloquently stated that "we're missing the big picture. It's Jihad, stupid. It's nukes, stupid. It's energy, stupid." The current conflict between Israel and Hezbollah is not the most important world event, it is a diversion from Iran's nuclear weapons program, which deserves more attention. However, since Hezbollah is backed by Iran it is important to examine its tactics and efficiency. Hezbollah "has demonstrated great skill with missiles. What can Iran itself do with missiles?," asked Cohen. It could also be possible that there are Hezbollah cells throughout the Middle East that have the ability to attack oil pipelines.

The panel noted that until the United States and the West can prevent instability that causes oil prices to increase we must search for global and systemic solutions for energy. The most beneficial area to find a replacement for oil is in transportation fuels, especially jet fuels. Improving investment conditions in any and all global markets is also a necessary step to promote energy security.

The International Center for Terrorism Studies at the Potomac Institute for Policy Studies and the Inter-University Center for Terrorism Studies were
co-sponsors of this event.

The Potomac Institute for Policy Studies is an independent, 501(c)(3), not-for-profit public policy research institute. The Institute identifies and aggressively shepherds discussion on key science and technology issues facing our society. From these discussions and forums, we develop meaningful science and technology policy options and ensure their implementation at the intersection of business and government.

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