On Tuesday, the American Enterprise Institute (AEI) hosted a briefing entitled: “Trillion-dollar problem: How oil dependency drives US debt.” AEI’s Benjamin Zycher moderated the event and Kenneth Blackwell, a professor at Liberty University, introduced the topic. The briefing’s main focus was a report of the same name commissioned by Securing America’s Future Energy. The papers co-authors, Phillip Swagel, a visiting scholar at AEI, and Robert Wescott, president of Keybridge Research LLC, explained the report’s findings.
Blackwell started the event by explaining four basic features of oil in America, saying: that, (1) oil price increases are a threat to US national security, given the country’s dependency on oil; (2) oil prices are determined by the global market, which is why oil prices continue to rise, despite rising American oil production; (3) complete energy independence is a myth, energy prices are set by the global market; (4) the solution to America’s oil dependency lies in both supply and demand.
The report examined oil price’s impact on the deficit over the past ten years, and its likely impact over the next thirty years. In the past ten years, rising oil prices have significantly increased the Department of Defense’s expenditures, but have also increased spending on social programs. By tying rising oil prices to higher inflation, the authors argued that rising oil prices lead to increased Cost of Living Adjustments for many of America’s social programs, like Social Security, thus increasing America’s debt. The report finds that rising oil prices caused an increase of 1 trillion dollars to the national debt.
The authors expect the trend of the past decade to continue into the near future, and recommend that the US quit its oil addiction. While they acknowledge that America’s use of oil is more economically efficient for the US in the short-term, transitioning to alternative sources of energy has far more long-term benefits.