Saudi Arabia Should Pay A Tax To America For Every Barrel Of Oil It Sells To China

Saudi Arabia should pay America a fee for the service of securing the flow of its oil through the Persian Gulf to China, and affording it the ability to compete effectively against China’s other major supplier, Russia.

Long before the fracking revolution, relations between Saudi Arabia and America were based on a myth: America’s dependence on Saudi oil.

Why was that a myth?

Because up to 1973, America was the world’s largest oil producer, so it didn’t need Saudi Arabia’s oil. And when it needed it, Saudi Arabia wouldn’t hesitate to impose an embargo against its ally.

If the myth of America’s dependence on Saudi made little sense in the pre-fracking period, it makes less sense now, when America is back in the position as the world’s largest oil producer.

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What ties the two countries together then? Geopolitics. America’s determination to keep Saudi oil flowing through the Gulf.

“Critics also point to the rise in US oil production as evidence that the US-Saudi alliance has outlived its purpose,” writes F. Gregory Gause III in Foreign Affairs. “But the ties between the two countries have never been about American access to Saudi hydrocarbons. In fact, when the relationship began in the early decades of the Cold War, the United States did not import a drop of oil from the Arabian Peninsula. What has always undergirded the relationship is the importance of Saudi (and the rest of the region’s) oil to the global market. The Persian Gulf still produces 30 percent of the world’s oil, with Saudi Arabia accounting for over a third of that output. Disruptions in the Gulf thus continue to reverberate worldwide. ”

Simply put, America is standing by to make sure that Saudi oil flows through the Gulf to its Asia allies. That was true back in the old days, that is, when Saudi oil was flowing mostly to Japan, an American ally, ready to shoulder the bill of America’s protection when needed (e.g., during the Gulf War).

But it hasn’t been true in the last two decades, with a big chunk of Saudi oil is flowing to China, a non-America ally; and an antagonist in South China Sea where China is trying to write its own navigation rules.

That’s why Saudi Arabia should pay America a fee for every barrel it exports to China.

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