The Foreign Service Journal, December 2003

and their allies by creating an opportunity for governments to press for political or military con- cessions as a precondition for moderate oil prices or in the case of subnational groups, raising the stakes of a major terrorist attack on oil installations. Consumer Country Strategies Consuming countries have a clear interest in undertaking poli- cies that will limit the growth in oil use and insulate their economies from the vagaries of the oil markets, in effect undermining OPEC’s market strength. Policies taken in conjunction with other consuming nations are likely to be more effective than policies taken individually, but the United States must also find the resolve to get its own energy act together, instead of counting on the “good will” of friends within OPEC to assure that oil prices remain “moderate.” A serious effort to lessen dependence on the Middle East would involve simultaneously nurturing sources of “new” oil such as Russia, the Caspian and Canadian tar sands, while at the same time allocating more sub- stantial resources to alternative sources of energy. In addition to fostering these “new” sources of supply, the U.S. should look seriously at ways to bring the rules of oil sector trade and investment into harmony with the rules govern- ing trade in manufactures and services. This might require actively discriminating against the exports of those countries that do not permit foreign investment and that undertake limitations on exports to manipu- late prices. The fact that Norway and Mexico are among these countries makes such diplomatic trade F O C U S D E C E M B E R 2 0 0 3 / F O R E I G N S E R V I C E J O U R N A L 29 OPEC’s ability to raise prices in the short run to levels that may be damaging to the economies of major consuming countries poses a major policy challenge. Residential 22% Transportation 27% Industrial 33% U.S. Energy Consumption by Economic Sector 2002 Commercial 18% Petroleum 41% Other 2% Natural Gas 24% Coal 22% U.S. Energy Consumption by Economic Sector 2002 Hydro 3% Nuclear 8% Source: Energy Information Administration