U.S. Markets open in 59 mins
  • S&P Futures

    +5.00 (+0.12%)
  • Dow Futures

    -24.00 (-0.07%)
  • Nasdaq Futures

    +23.50 (+0.17%)
  • Russell 2000 Futures

    +14.80 (+0.66%)
  • Crude Oil

    +0.11 (+0.18%)
  • Gold

    +12.10 (+0.68%)
  • Silver

    +0.17 (+0.67%)

    +0.0057 (+0.4709%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    +0.90 (+5.14%)

    +0.0036 (+0.2581%)

    -0.3780 (-0.3501%)

    -5,317.84 (-9.67%)
  • CMC Crypto 200

    -105.50 (-8.49%)
  • FTSE 100

    -36.84 (-0.53%)
  • Nikkei 225

    -167.57 (-0.57%)

How T. Boone Pickens would get America out of the Middle East

Rick Newman
·Senior Columnist

Oil isn’t the only reason American boots keep leaving imprints in the Arabian dust. But it’s certainly the biggest one.

The United States has fought two wars in Iraq during the last 30 years, and it’s now embroiled in a low-visibility war with Islamic State terrorists in northern Iraq and Syria. The day may be coming, however, when the United States can meet its own oil needs with no reliance on the despots and faux-democrats of the Middle East.

“Put Canada, Mexico and the United States together and you have solved our energy security issues,” famed oilman T. Boone Pickens tells Yahoo Finance in the video above. “You don’t need a damn barrel from the Middle East.”

Pickens’ idea is to form a sort of North American cartel in which the United States and its northern and southern neighbors provide all the petroleum products anybody on the continent needs. The numbers roughly line up: The three nations combined produce about 22 million barrels of gasoline, heating oil and other petroleum products per day, while consuming about 24 million barrels. American assistance and technology could probably help Mexico significantly ramp up its oil output, and bring total North American production in line with consumption.

The problem is that all three nations trade petroleum products worldwide instead of limiting oil trading to North America. The United States, for instance, imports about 9.5 million barrels of oil per day, from more than 80 countries. And it exports nearly 5 million barrels of petroleum products per day to many of the same countries. The United States exports very little raw crude, which was only recently allowed. Most oil exports from the United States are refined products such as fuels and lubricants.

Creating a North American oil-trading block would require some kind of three-nation pact, similar, say, to the North American Free Trade Agreement. It would also have to be phased in slowly, to allow a smooth transition from the multilateral oil trade that prevails today to one focused on North America. The whole scheme may seem implausible, given that the U.S. Congress can barely approve treats for dogs, and Republican presidential candidate Donald Trump is more interested in building walls to keep Mexicans out of the U.S. than in mutually beneficial agreements.

On the other hand, the whole oil economy is in a state of upheaval because of the surge in U.S. oil production caused by new fracking techniques and a worldwide oversupply of petroleum. Oil giant Saudi Arabia recently dismissed its long-serving oil minister and announced a plan to diversify its economy, to become less dependent on oil. Russia, another huge producer, is in a severe recession due to the plunge in oil prices and a huge decline in trade. Venezuela, with the world’s largest oil reserves, ought to be rich but instead is enduring an economic collapse.

There have been oil busts, before, and the petrostates have largely bounced back. But Pickens thinks the United States should exploit its new power as an oil producer to develop muscular new energy policies, downsize the U.S. military presence in the Middle East, and deploy the resources someplace else. “We ought to get out of there, because we don’t need their oil,” he says. There are certainly other reasons to stay involved in the Middle East, but U.S. policy toward the region would be a lot simpler if oil weren’t part of the equation.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.