Evaluating U.S. oil security and import reliance

We examine the literature that considers the consequences of U.S. reliance on imported oil. We take an approach that covers many ideas about the costs arising from U.S. reliance on imported oil, and we identify which of those ideas have broad support in the economics literature and which ideas have only limited support. We also quantify the costs of U.S. reliance on imported oil using two approaches. One is fairly narrow, conforms to the economics view of externalities, and yields small cost estimates. The other is relatively expansive, is favored by some policy analysts, and yields much larger cost estimates. We estimate these costs as expected U.S. economic losses over a time horizon from 2010 through 2035, while taking into account world oil market conditions, market power, probable oil supply disruptions, and the oil-market response to those supply disruptions.