The Military Cost of Defending Global Oil Supplies

According to the calculations of the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), the cost to the United States of defending the global oil supply is zero. This zero-cost estimate comes from the methodology used by the U.S. government budgets for national defense. Since it is difficult to assign a cost to the oil protection mission—and since the Department of Defense (DoD) would realize no savings if this mission were not pursued—EPA and NHTSA conclude that it is pointless to assign any value above zero for this activity. This approach fails to account for the large opportunity costs of protecting the global oil supply.

To more accurately assess the military cost to the U.S. of protecting global oil supplies—and therefore understanding the military cost/benefit of the Fuel Economy Standards (FES) program—SAFE conducted an extensive review of the existing literature that analyzes the military cost of U.S. oil dependence. In addition, SAFE carried out a series of interviews with military members of its Energy Security Leadership Council (ESLC) as well as other leading experts in this field.

SAFE’s analysis found:

  • At minimum, approximately $81 billion per year is spent by the U.S. military protecting global oil supplies. This is approximately 16 percent of recent DoD base budgets. Spread out over the 19.8 million barrels of oil consumed daily in the U.S. in 2017, the implicit subsidy for all petroleum consumers is approximately $11.25 per barrel of crude oil, or $0.28 per gallon. A more extensive estimate by two highly-regarded economists suggests the costs could be greater than $30 per barrel, or over $0.70 per gallon.
  • America’s dependence on oil as the primary transportation fuel has costs beyond those directly shown at the gas pump. SAFE and its ESLC strongly believe based on first hand experience that the military cost of oil dependence is substantially greater than zero, and argue that a cost of at least $0.28 per gallon should be used by EPA and NHTSA in their military cost/benefit analysis for the FES program.
  • Reducing oil use in the transportation sector allows for the possibility of shifting U.S. military priorities toward more critical strategic threats. “If we reduced our oil consumption by half, [the U.S. military] would act differently,” says ESLC member Admiral Dennis C. Blair, the former Director of National Intelligence and Commander in Chief of the U.S. Pacific Command. General Duncan McNabb, the former commander of the U.S. Transportation Command and also a member of SAFE’s ESLC stated: “If we can reduce our dependence on oil, we could reduce our presence in the Gulf and use the funds for other critical military priorities, like cybersecurity or hypersonic weapons. The same funds could support different security priorities. We would make different choices, that would make us safer and more secure.”

The full report can be found here.