Why We Should Take Draconian Energy Conservation Measures Now

A recent Council on Foreign Relations Independent Task Force Report, "National Security Consequences of U.S. Oil Dependency", makes a concise case for policy changes from the current U.S. Administration’s weak public acknowledgement that  the U.S. is "addicted to oil".

The report debunks several oil myths (some selected myths below):

(1) Who really controls oil supplies and prices? It’s the state run National Oil Companies, such as Russia, Mexico, Venezuela, Saudi Arabia, and Brazil– not ExxonMobil, BP, Shell, and Chevron;

(2) Cutting oil imports will NOT lower fuel prices.

(3) There’s plenty of low cost oil ready to be tapped– NO, there isn’t.

It also makes a series of recommendations for domestic and foreign policy initiatives designed to cure that oil addiction and to positively impact U.S. foreign policy in the process (eg. repeal the imported ethanol tax of $0.54 per gallon; use more nuclear power; spend more on research and development on battery technology).

The report is useful and informative, but it does not go far enough.  The task force that produced this report was co-chaired by John Deutch of MIT and James Schlesinger of Lehman Brothers. Twenty four other prominent experts in this field participated in this important project.  Two members of the task force, David Goldwyn of Goldwyn International Strategies and Michael Granoff of Pomona Capital, share my view and wrote an addendum that is included in the report making the following assertion:

"We subscribe to the report’s analyis and recommendations, but the report understates the gravity of the threat that energy dependence poses to U.S. national security. . . . Global dependence on oil is rapidly eroding U.S. power and influence because oil is a strategic commodity largely controlled by regressive governments and a cartel that raises prices and multiplies the rents that flow to oil producers. . . . Most gravely, oil consumers are in effect financing both sides of the war on terrorism. . . ."

What they recommend:

(1) The integration of U.S. energy and foreign policy– for example, by engaging China and India at a presidential level on the impact of their investment practices on regional stability and on the shared interest between the U.S., China, and india in a free market for energy;

(2) Expand and deepen the U.S. collective energy security system through the inclusion of China and India in the International Energy Agency.

(3) The U.S. should actively use its economic power as a component of its energy strategy.

They conclude, and I agree, that "an incremental approach to the challenge . . . will not be adequate."

In my own reading of the report, I was struck by the following statistics:

68% of the oil used in the United States is for transportation, and oil fuels 96% of transportation needs.

If the United States were to lower its oil consumption by 10% (2.5% of world demand), the effect in current tight oil markets could be a temporary decline in global prices (about 12% to 25%) and a lowering of the anticipated rate of future increases.

OK.  We can cut consumption by 10%– we can cut anything by 10% if we put our minds to it!

Why can’t our President deliver a speech next week challenging oil consumers to reduce transportation consumption by 10% before December 2008?  Why can’t we all carpool to work for a year and change our behavior on the roads by driving less, leaving the gas guzzler in the garage, and making sacrifices?  Why doesn’t our government provide aggressive tax incentives now to induce consumers to change behavior?  We can do it, we only lack the collective national will to do so because we don’t have bold leaders ready to carry the torch.

Happy New Year! 

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