Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker. Read more opinion SHARE THIS ARTICLE Share Tweet Post Email

As you probably know, the leader of the free world thinks most of it has been getting a free lunch:

One of the more consistent refrains from President Trump is that the U.S.-led world order, in place since the end of World War II, just might not be worth the money and effort. Americans, the president has said, "cannot be the policemen of the world".

Bluster? Maybe. But if it isn't, then it's a big deal for a vital market that grew up under the Pax Americana: oil.

Modern oil drilling began in the late 19th century, but Homo Hydrocarbon truly evolved after 1945. While it took roughly seven decades for global oil demand to reach around 10 million barrels a day by the end of World War II, the next seven decades saw demand surge to almost 100 million barrels a day.

Roughly half the world's barrels have to be shipped across the ocean. And this global supply chain owes a lot to a peculiar bargain struck by America with its allies amid the ruins of 1945. In return for joining a security system managed from Washington, D.C., countries could participate in free trade backed by the muscle of the U.S. Navy.

Historically speaking, that's very odd.

To understand why, look at these three charts showing the world’s top five navies by proportion of global naval strength in 1870, 1940 and 2010 :

Britannia Ruled the Waves The U.K. held the largest share of the world's naval strength in 1870... Source: “Power at Sea: A Naval Power Dataset, 1865-2011”, Brian Crisher and Mark Souva, Florida State University

The Handover ...By 1940, as World War II was getting underway, U.S. naval strength was just edging ahead of that of the U.K., with Japan not far behind... Source: “Power at Sea: A Naval Power Dataset, 1865-2011”, Brian Crisher and Mark Souva, Florida State University

Hegemony ...And as of 2010, the U.S. Navy accounted for half the world's naval capability Source: “Power at Sea: A Naval Power Dataset, 1865-2011”, Brian Crisher and Mark Souva, Florida State University

So much for the age of empires. The strategic decision by the U.S. to use its enormous power post-1945 to underpin a global, open trade system rather than an imperial, mercantilist system represented a decisive break from what came before.

It also made the global oil market as we know it possible.

Oil is, of course, intrinsically useful stuff. But that alone didn't ensure its ubiquity. For that, we had to be reasonably sure of a consistent supply.

When Winston Churchill decided in 1911 to switch the Royal Navy to running on oil, away from domestic coal, he did it because oil-fired ships were more efficient. Also critical, however, was the assurance that the Royal Navy could keep the sea lanes open to Persia's oilfields.

When such assurance is challenged, consumers respond. Take the oil shocks of the 1970s, which spurred efforts to boost supplies from outside of the Middle East and investments in everything from nuclear power to more efficient cars to limit consumption.

Now we face a potentially structural disruption.

Peter Zeihan, a geopolitics analyst, says Trump's vocal ambivalence about the U.S.-led international order represents less a sudden shift in policy and more an acceleration of a process underway since the end of the Cold War. And it dovetails with increased hostility to what's seen as "unfair" trade. The president may be its most prominent critic, but he certainly wasn't the only candidate trash-talking trade agreements last year.

As you might guess from the title of Zeihan's latest book, "The Absent Superpower", he foresees America backing away from the global order it created now that this arrangement has apparently outlived its usefulness. This isn't a decline-and-fall thesis. The U.S. will retain the capability to intervene pretty much wherever it wants on the planet and will of course enter alliances as needed. It just won't necessarily be guaranteeing safe passage for everyone as a matter of course.

The most obvious role the U.S. Navy plays in the oil market is ensuring choke-points such as the Strait of Hormuz in the Persian Gulf -- through which almost a fifth of the world's barrels pass -- stay open. But the navy's continual deployment and support capabilities are also important in deterring piracy, particularly in hotspots -- and important oil tanker routes -- such as the Horn of Africa and the Strait of Malacca in Asia.

While it seems alarmist to say the U.S. might back away from such responsibilities, remember the arrangement whereby its navy effectively functions as a public good isn't normal, historically speaking.

And questions about its cost-effectiveness haven't just emanated from the White House. Earlier this year, an essay published in Foreign Affairs asked the question:

Is Persian Gulf oil still worth defending with American military might?

Back in 2010, Roger Stern, an energy specialist at the University of Tulsa, took a stab at calculating the cost to the U.S. of policing the Persian Gulf to keep oil supplies flowing. His estimate for 1976 through 2007: $6.8 trillion (jn real terms; and that doesn't include the past decade, obviously).

Estimated U.S. Cost of Policing Persian Gulf, 1976-2007 $6.8 Trillion

Critically, the populist wave in the U.S. has coincided with the shale boom, as epitomized in Energy Secretary Rick Perry's "energy dominant" slogan. Falling dependence on oil imports provides further ammunition for anyone seeking to scale back America's commitments.

Such a shift would increase risks to oil supply at some point. Which actually presents a risk to demand.

The reason for this is the shift in global oil consumption from West to East:

East Side Story The IEA projects Asian oil demand will be roughly double that of the U.S. and Europe by 2040, even as Japanese consumption declines Source: International Energy Agency

The twist here is that Asia's two powerhouses, China and India, rely more on imports for their oil than the U.S. did even at the height of its dependency -- and it's only going to get worse:

State Of Dependence China and India are already more dependent on oil imports than the U.S. ever was -- and projected to become even more so Source: BP, International Energy Agency

Any planner in Beijing or New Delhi looking at that chart and watching Washington cannot be feeling comfortable. They don't have the luxury of just waiting around to see whether or not the president is serious. They have to take steps to deal simply with the possibility of it.

One obvious step is to expand their own navies, as both are doing. This is a multi-decade process, however, and carries other risks. Given the tension generated already by China's moves in the South China Sea, an Asian naval arms race along the lines of Europe's early 20th-century one is not an appealing prospect.

Besides the potential for conflict, building modern warships is also expensive. Aircraft carriers cost at least several billion dollars each -- and that's before you put planes and people on them, buy other ships to defend them, and pay running and maintenance costs.

This won't stop those navies getting built. But I suspect it will mean Asia's heavyweights also pursue other methods to mitigate their dependency on oil imports -- just as the U.S. and its allies did when they got a taste of disruption in the 1970s.

So the security dimension is likely to not merely provide work for Asia's naval yards, but provide more impetus to efforts to limit consumption of oil.

An aircraft carrier is powerful, for sure. But it's even more powerful in this context if it's backed by, say, tens of millions of hybrid and electric vehicles back home.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:

Liam Denning in New York at ldenning1@bloomberg.net

To contact the editor responsible for this story:

Mark Gongloff at mgongloff1@bloomberg.net