U.S. Military Expenditures to Protect the Use of Persian-Gulf Oil For Motor Vehicles

In this Report, we seek to answer the question: “If the U.S. highway transportation sector did not use oil, how much would the U.S. Federal government reduce its military commitment in the Persian Gulf?” The analysis goes in four parts. First, we explain that the U.S. protects its “oil interests” in the Persian Gulf primarily to prevent supply disruptions and sudden price rises and the attendant macroeconomic problems. We cite evidence (including statements by the Joint Chiefs of Staff) that the U.S. Congress and the military do indeed plan and budget military operations for the Persian Gulf on account of U.S. oil interests there. We review and rebut arguments that the U.S. has other interests in the region substantially more important than those related to oil. Second, we review the best available estimates of the amount of that the U.S. military spends to protect U .S. interests in the Persian Gulf. As part of the review we address the difficult questions of how to allocate joint costs to particular programs. Third, we consider whether any of the economic assistance granted to countries of the Middle East is related to U.S. oil interests in the region. We show that most of this assistance goes to Israel and Egypt, and probably is not motivated by a desire to protect U.S. oil interests in nearby Arab countries. Finally, we work from our estimate of the cost of defending all U.S. interests in the Persian Gulf towards an estimate of the military cost of using oil in highway transportation. This proceeds in several steps: i) estimate how much military expenditure would be foregone if there were no oil in the Persian Gulf region; ii) estimate how much would be foregone if the U.S. did not produce or consume oil from the Persian Gulf, but other countries still did; iii) estimate how much would be foregone if U.S. producers had investments in the Gulf, but the U.S. did not consume Persian Gulf oil; iv) and lastly, estimate how much would be foregone if motor vehicles in the U.S. did not use oil, but other sectors still did and the U.S. (and other countries) still produced and consumed oil from the Gulf. This last is the bottom line of our analysis. Our analysis of these steps generally is illustrative, not rigorously quantitative. In the end, we estimate that if U.S. motor vehicles did not use petroleum, the U.S. would reduce its defense expenditures in the long run by roughly $1 to 10 billion dollars per year.