UPDATE 1-RAND says cost of oil supply disruption worst threat

(Adds details about recommendations, additional risks)

By Erwin Seba

HOUSTON, May 11 (Reuters) - The greatest threat to the United States from crude oil imports is a long-term disruption of world supply and the higher costs associated with that loss of imports, according to a RAND Corp study issued Monday.

"The fact that the United States imports nearly three-fifths of its oil does not pose a national security threat," said Keith Crane, the study's lead author and senior economist at RAND, a nonprofit research organization.

"There is an integrated world oil market, and embargoes do not work. But a large, extended drop in the global supply of oil would trigger a sharp rise in oil prices and significantly affect the United States, no matter how much or how little oil the United States imports," Crane said in a statement.

The study, commissioned by the U.S. Institute for 21st Century Energy, an affiliate of the U.S. Chamber of Commerce, recommended steps be taken to reduce the vulnerability of the U.S. economy to sudden drops in world oil supplies.

"By reducing demand or increasing competitive alternative energy supplies, the United States would place downward pressure on world oil prices and ease risks to U.S. national security," according to the study.

Among the steps recommended in the study:

- Maintenance of well-functioning oil markets;