Power  /  Argument

How Private Oil Companies Took Over U.S. Energy Security

And why it’s time to take it back.

In the wake of Russia’s invasion of Ukraine, concerns over energy security have surged. The price of crude oil soared past $120 per barrel, while the average price of a gallon of gasoline in the United States exceeded $4. Despite the looming threat of climate change and the need to decarbonize the economy, Sen. Joe Manchin and other congressional lawmakers argue that the best way for Washington to address the current crisis is to increase domestic oil and gas production.

On the surface, that appears to make sense. Fossil fuel production is intimately linked to energy security—that is, a nation’s ability to meet its energy needs with steady supplies at manageable prices. The more oil a nation produces, the less vulnerable it is to outside supply shocks.

But unlike other major oil-producing nations such as Saudi Arabia or large consumers such as China, the United States depends on private companies—rather than state-owned entities—to execute the exploration, production, refining, transportation, and marketing of its energy products. And unlike those state-owned entities, which pursue commercial opportunities in service of national priorities, private oil companies are motivated only by profit.

Though the partnership of public interest and private capital has worked to meet U.S. energy needs in the past, Washington’s traditional approach may not be enough for its current dilemma. The United States faces a triple problem: how to supply the country with energy, meet the energy needs of its allies in Europe, and take action to mitigate global climate change, all without causing negative economic repercussions. History suggests that expecting corporate actors to meet public needs will not be sufficient for tackling these problems—and could even endanger U.S. national security by subordinating it to the narrow commercial interests of a single industry.

Throughout the 20th century, concerns over impending oil shortages frequently compelled U.S. policymakers to push U.S. oil companies to increase production at home and abroad.

In the wake of World War I, as U.S. oil production experienced a brief decline after years of high wartime demand, U.S. officials encouraged private companies to expand their activities internationally while searching for more oil at home, facilitating a major increase in domestic oil production.

During World War II, U.S. companies received backing from the State Department to develop their holdings in the Middle East. Cheap oil from the Persian Gulf was a critical component of the Marshall Plan, which reconstructed war-torn Western Europe. To support their operations, the U.S. Treasury allowed the companies to deduct taxes paid to Middle Eastern governments.

As a result of this public-private partnership, cheap oil flowed to the industrial West, fueling a dramatic postwar economic boom. The State Department saw the companies as effective tools for furthering the national interest and strengthening energy security.

But differing commercial priorities among the companies frequently produced conflict that threatened national security or warped policy to serve commercial interests.