Burning the Mideast oil: it fuels your car, and is the raw material for everything from CDs and jet fuel to shower curtains and the nylon in your socks. American life depends on a resource that's out of our control.

The United States may be the world's largest economy and greatest military power, but it depends,on a ceaseless flow of oil from other countries--about 9 million barrels arriving every day, enough to fill a hole the size of a football field 1,000 feet deep.

Even a small reduction in that supply can spike prices higher, sending tipples through the economy in the form of increased costs for food, fuel, and consumer goods. A major drop in imports, which account for more than half of U.S. oil consumption, could just about bring the nation's economy grinding to a halt.

That basic equation--less oil equals higher costs, and damage to the economy--keeps Pentagon planners and world economists awake at night. President Bush has threatened war over suspicions that Iraq has or is working on weapons of mass destruction-biological, chemical, or nuclear arms. But with the Middle East providing about 25 percent of the oil used in the United States, a war with Iraq runs the risk of literally setting on fire a region whose resources are essential to the U.S. and the world.

"If we're bombing Afghanistan, it doesn't affect the world economy," says Youssef Ibrahim, a senior fellow at the Council on Foreign Relations, a think tank. "If we bomb Iraq, it will affect the world economy and the U.S. economy."

If it comes to war, the Pentagon hopes to quickly seize Iraqi oil fields, to prevent Saddam Hussein from destroying them in an act of revenge--a real possibility. During the 1991 Gulf War following Iraq's invasion of Kuwait, Saddam's troops set fire to Kuwait's oil fields, creating an economic and ecological disaster.

FEELING THE COST AT THE PUMP

Military planners also worry that Iraq could launch attacks on the oil fields and ports of Saudi Arabia, the top foreign supplier of oil to the U.S., or the shipping lanes of the Persian Gulf, used for transporting much of the Middle East's oil exports. At the gulf's southernmost point, the Strait of Hormuz, the waterway is just six miles wide. Sinking a few well-placed oil tankers there could effectively shut down shipments from the region.

U.S. military analysts believe that American forces can prevent those scenarios and keep the oil flowing. But already this year, U.S. consumers have had a foretaste of the effect that reduced oil imports can have on their pocketbooks.

The trouble began in December, when a strike at Venezuela's state-owned oil company led to a sudden drop in its oil shipments to the U.S., from 1.5 million barrels a day to 2 million barrels for the entire month of December. Venezuela is the fourth-largest source of foreign oil for the U.S., accounting for 14 percent of American imports.

The strike, coupled with fears about a war with Iraq, sent oil prices soaring 27 percent in little more than a month. Prices shot above $33 a barrel (normal prices range from $18 to $25), and the average price for regular unleaded gasoline hit $1.45 a gallon--up 34 cents from a year earlier. The U.S. Department of Energy forecasts gasoline prices will rise an average of 10 cents a gallon by mid-spring because of the strike.

"We were consuming 1.5 million barrels of Venezuelan oil each day that we're not getting now, which means we have to get it from someplace else," a senior State Department official said.

The cut in Venezuelan imports has been disruptive, but several other nations in the Organization of Petroleum Exporting Countries (OPEC), a coalition of Arab and some non-Arab oil states, said they would try to make up the shortfall. Saudi Arabia especially has the capacity to increase production quickly. But the help is not immediate: It takes 35 to 40 days for Saudi production to gear up and for the oil to reach the U.S.

The bigger fear, say many oil analysts, is that war in Iraq, on top of the Venezuelan cutbacks, could lead to shortages that other countries would be unable to make up. In 2001, the U.S. imported about 795,000 barrels of Iraqi oil daily, which is about 8.5 percent of total U.S. imports.

A SHORT-TERM PLAN B

The U.S. does have a backup supply: the Strategic Petroleum Reserve, a stockpile of oil in huge underground caverns along the Texas and Louisiana gulf coast. The stockpile now holds a record 599 million barrels of oil that could be released in case of a major slowdown in oil supplies. But America's increasing thirst for oil has reduced the number of days the stockpile will last--from a high of 118 days in 1985, to a current estimate of 51 days.

The U.S. now imports about 53 percent of its oil, compared with a low of 23 percent in 1983, and the current demand is all but certain to rise.

Much of the additional need will be supplied by the Middle East, due to a simple fact of geography: It's where the oil is. About two thirds of the world's known reserves, or 683.5 billion barrels, are in the Mideast, according to Oil and Gas Journal, which tracks the petroleum industry. In contrast, the U.S. has about 2 percent of known reserves, about 22 billion barrels. Studies suggest that another 3 billion to 16 billion may lie beneath Alaska's Arctic National Wildlife Refuge.

COMING UNDER OPEC CONTROL

By 2005, the federal Energy Information Administration forecasts that the majority of world oil production--51 percent--will come from OPEC, much of that from the Middle East.

To avoid putting the American economy at the mercy of OPEC, the U.S. is seeking to build up other sources. Recently, the Bush administration began negotiating with Nigeria, currently the U.S.'s fifth-largest foreign supplier, to help increase oil production in its rich fields. But other possible sources have been a disappointment. Though Russia has abundant oil, a variety of factors ranging from bad weather to transportation problems have kept Russian oil imports low--about 85,000 barrels a day in 2002.

Critics of U.S. policy say the Bush administration's plans to invade Iraq have less to do with weapons of mass destruction than with a U.S. desire to control a major source of oil for decades to come. Iraq's known oil reserves, 112 billion barrels, rank second in the world, behind only Saudi Arabia.

White House officials forcefully deny the allegation. "The only interest the United States has in the region is furthering the cause of peace and stability, not [Iraq's] ability to generate oil," says Ari Fleischer, the President's spokesman.

A QUESTION OF AMERICA POWER

But the behavior of both the U.S. and foreign governments suggests that the story-behind-the-story about U.S. interest in Iraq, at least partly, involves oil. Russia, for example, has muted its criticism of U.S. threats against Iraq because it stands to gain if the U.S. takes over Iraqi wells. Iraq owes Russia $7 billion to $10 billion for aid given during Iraq's war with Iran more than a decade ago. With American control over Iraq's oil, Baghdad is more likely to find the money to pay up.

Yet Russia, France, Saudi Arabia, and many other countries also fear that U.S. control of Iraqi oil production would give the U.S. control over world oil prices.

"The real issue is American power," says Toby T. Gaff, a former adviser to President Bill Clinton on Russia. "How do countries safeguard their interests in a unipolar world, where Washington's attitude is that what's good for America is good for the world?"

With so many different scenarios, most analysts agree on only one point: Oil prices are likely to be volatile this year.

"Every factor that could affect the oil market is with us this year," says Amy Myers Jaffe, senior energy adviser at the James A. Baker III Institute for Public Policy at Rice University in Houston, Texas. "This year could be the roller-coaster ride of roller-coaster rides."

TOTAL U.S. Sources of Oil

TOTAL U.S. IMPORTS:

OPEC:                  52%
Non-OPEC:              48%

Europe:                % of U.S.
                       imports

Norway                 3.0%
Netherlands            0.0%
United Kingdom         2.6%
Russia                 0.0%
Italy                  0.0%
Spain                  0.0%

REGIONAL TOTAL         5.6%

North America:         % of U.S.
                       imports

Canada                 14.5%
Mexico                 14.9%

REGIONAL TOTAL         29.5%

South America:         % of U.S.
                       imports

Venezuela              13.8%
Colombia               2.8%
Ecuador                1.2%
Brazil                 0.1%

REGIONAL TOTAL         18%

Carribbean:

REGIONAL TOTAL         0.6%

Africa:                % of U.S.
                       imports

Nigeria                9.0%
Angola                 3.4%
Gabon                  1.5%
Algeria                0.1%
Libya                  0.0%

REGIONAL TOTAL         14.1%

Middle East:           % of U.S.
                       imports

Saudi Arabia           17.3%
Iraq                   8.5%
Kuwait                 2.5%
United Arab Emirates   0.2%
Qatar                  0.01%
Iran                   0%
Bahrain                0%

REGIONAL TOTAL         28.6%

Asia-Pacific:          % of U.S.
                       imports

Indonesia              0.4%
Australia              0.4%
Malaysia               0.2%
China (PRC)            0.1%

REGIONAL TOTAL         1.1%

Why a Growing Dependence on Imported Oil Threatens the U.S. Economy

DISCUSSION QUESTIONS

* What did this article teach you about the impact of oil prices on life in America?

* Do you agree or disagree with those in the Bush administration who want to seize control of Iraq's oil fields?

TEACHING OBJECTIVES

To help students understand America's dependence on imported oil, how oil prices impact the U.S. economy, how access to oil influences U.S. relations with other countries, and what policies might reduce that dependence.

CLASSROOM STRATEGIES

THE OIL-ECONOMY LINK: Students should understand how seriously energy costs affect the economy. Remind them that oil prices affect not only the cost of gasoline but also the cost of food and other consumer goods. Note that oil is the raw material for items as diverse as CDs, nylon socks, and shower curtains.

Ask students what would happen to their families' lifestyles if war cut oil supplies, sending prices skyward. Would such a price rise mean cutting back spending in other areas--clothes, movies, CDs, and other goods? Tell students that the U.S. economy drifted into recession after the 1991 Persian Gulf war helped drive up gasoline prices. As industry spent more and more on oil and gasoline, it had less to spend on other things--like developing new products and hiring new employees. Many political analysts say that the resulting economic recession helped defeat President Bush's father's re-election bid.

DEBATE: Note that alternative fuels account for only about 5 percent of current U.S. energy and probably won't replace reliance on petroleum without government tax breaks or other subsidies. Many experts say the immediate goal should be to conserve energy. Toward that goal, one proposal is to restrict sales of SUVs and other low-mileage vehicles. Students can take sides on the question. Try using these two hot-button statements to launch debate: (1) Individual freedom includes the right to drive whatever kind of vehicle I wish. (2) Wasting gasoline is unpatriotic.

RESEARCH: Have students note the latest average price for gasoline (about $1.45), seen on the graph in TE p. 4. Assign them to research the price of regular gasoline in their community over the next few weeks. How do the prices compare? (Note: Prices tend to be higher in the upper Midwest and the Northeast and lower closer to the Gulf of Mexico. State taxes also influence prices.)

Upfront QUIZ 1

FILL IN THE BLANK DIRECTIONS: Write the correct answer on the line provided.

1. Middle Eastern countries currently supply the United States with about --percent of the oil used in this country.

2. During the 1991 Persian Gulf war, Saddam Hussein's military set oil fields on fire in the neighboring country of --, producing an economic and ecological disaster.

3. In December 2002 and January 2003, Americans learned just how much political turmoil can affect their gasoline prices, after a strike in --, a leading South American oil producer, sent prices up 27 percent in little more than a month.

4. The U.S. government has a backup oil supply, the Strategic Petroleum Reserve, a stockpile in underground caverns, where it stores millions of barrels of oil in the states of -- and --.

5. The Organization of Petroleum Exporting Countries, better known as --, is a coalition of Arab and some non-Arab oil-producing countries.

6. There may be 3 billion to 16 billion barrels of oil beneath Alaska's Arctic National -- Refuge.

7. Among the new energy alternatives are giant arrays of -- panels that generate power from the sun.

8. Energy runs everything from factories to toys, but the majority of energy is used in --.

9. Despite the lack of government support, power companies are developing -- power at a rate that makes it the fastest-growing new source of power.

10. One promising new idea in the world of alternative fuels are automobiles that will run on --.

ANSWER KEY

1. 25

2. Kuwait

3. Venezuela

4. Texas/Louisiana

5. OPEC

6. Wildlife

7. solar

8. transportation

9. wind

10. hydrogen