How Clean Energy Is Reducing Dependence On Foriegn Oil

Strengthening National Energy Security past Reducing Dependence on Imported Oil

Strengthening National Free energy Security by Reducing Dependence on Imported Oil

April 24, 2002 22 min read

Two unrelated political crises--the increasing tensions in the Heart Due east and the political instability in Venezuela--have additional earth oil prices and sent a wake-upwards phone call to U.S. policymakers about the urgent need to address America'south energy security. The U.Due south. Senate will soon vote on an energy neb that will do trivial to increase domestic product and reduce America's dependence on vulnerable foreign imports. Unless the Senate follows the lead of the Business firm and takes this opportunity to enact primal provisions of the Assistants's balanced energy plan, the nation'due south energy security will remain at loftier hazard.

National Security Requires Energy Security.
On April 8, Saddam Hussein alleged that Republic of iraq would halt oil exports for 30 days or until Israeli war machine forces ceased their counterterrorist operations in Palestinian territory. This cutback threatened to deprive the world market of approximately i.7 million barrels of crude oil per day, or well-nigh iv pct of international supplies. The announcement sparked a $1.00 per barrel hike in the cost of rough oil in New York trading to $27.23 per barrel.¹ Iran and Libya stated they would follow arrange if other Muslim oil-exporting states joined the effort to use oil as a political weapon against Israel.

Merely when Saudi arabia, the earth'south largest oil exporter, indicated it would aid make up any shortfall, oil prices fell.² Then the world market was roiled past political unrest in Venezuela, the quaternary largest oil exporting nation. Popular discontent with leftist President Hugo Chavez'due south policies led to a massive labor strike against the national oil company that exports up to 2.v 1000000 barrels of crude oil and refined products per twenty-four hours.

These crises, which imposed considerable economic costs on all oil-importing countries, drove habitation the danger in allowing America'south dependence on strange oil supplies to go along, let alone to abound. In 2000, the United States imported 53 percent of its total oil consumption, which the U.S. Department of Energy projects will ascent to 62 percentage by 2022.³ Of those 2000 imports, Venezuela provided 14 percent while Republic of iraq furnished about 9 percent. Disturbingly, despite its difficult-line policy on Iraq, the United States is the biggest consumer of Iraqi crude oil, buying more than one-half of Republic of iraq's oil exports and providing Baghdad with a rich source of funding.

The Department of Energy's Energy Information Administration (EIA) predicts that the Usa volition become increasingly dependent on oil imports from the volatile Middle East, with imports from this region increasing from most 24 percent of total oil imports in 2000 to nearly 50 percent by 2022.⁴ This level compares with the 15 percent and 23 percentage of oil information technology imported from that region during the 1973-1974 and 1979-1980 Center Eastern oil crises, respectively.⁵ Simply as evidenced by the 1973 Arab oil embargo and the 1979 Iranian revolution, an abrupt and prolonged loss of Middle Eastern oil wreaks havoc on the U.S. economic system, increasing unemployment and boosting aggrandizement. Oil peaked at $39 a barrel in 1981, contributing to double-digit interest rates, inflation at ix percent, and unemployment close to 8 percent.^vi Authorities actions made things fifty-fifty worse as gas rationing, price controls, and the heavy hand of regulation interfered with energy markets.⁷

The recessions of the 1970s, the early 1980s, and the early 1990s all were preceded by a ascent in oil prices. In 1979, President Jimmy Carter chosen the free energy crisis "a clear and present danger to our national security."⁸ Twenty years afterward, in a response to a bipartisan request from 11 U.S. Senators, the U.S. Section of Commerce conducted an investigation into the nation's increasing oil imports. That report, released in November 1999, concluded "that petroleum imports threaten to impair the national security."⁹ Nevertheless the nation is fifty-fifty more dependent on foreign oil today than it was in the 1970s, when Congress and the White House began to discuss free energy security and national security in a serious manner.

Achieving energy security will require more than than rhetoric--it requires action. The United states needs a coherent energy policy for both energy security and national security. It has been almost a full year since President George W. Bush first proposed a balanced long-term plan to enhance U.South. free energy security and solve the nation's free energy needs responsibly.¹⁰ The Firm of Representatives then passed H.R. four, the Securing America'due south Futurity Energy Act (Rubber) of 2001--a comprehensive beak incorporating many of the President's proposals.

Since then, however, spiking rough-oil prices accept pumped up gasoline and natural gas prices and energy costs for businesses and consumers even equally the economic system turned the corner on the recession.^xi Although the Senate leadership has recently immune floor consideration of an energy beak (Southward. 517), in its current class, that bill would fail to reduce the nation's vulnerability to oil supply interruptions.

Implementing a Comprehensive Energy Programme.
There is still fourth dimension for Washington to implement a coherent energy policy to enhance the nation'southward energy security. To do then, however, the Assistants must button forward with its free energy initiative. Now that procedural moves have kept the Senate from seizing an opportunity to open up a small portion of the Arctic National Wildlife Refuge (ANWR) to exploration, the Administration should fight to revive ANWR oil production in the House-Senate conference committee. If this approach fails, the Assistants as well should consider developing ANWR as an adjunct to the Strategic Petroleum Reserve (SPR), which would be held in reserve and brought onstream only in an oil crisis.

At a time of increasing uncertainty in the Eye E and Venezuela about oil production levels, the U.s.a. cannot beget to squander an opportunity to increment domestic oil production. If the Senate continues to block efforts to bring ANWR oil onstream, it will be responsible for increasing, not decreasing, America's vulnerability to energy disruptions and crises in oil-producing regions around the world.

Expanding Non-OPEC Oil Supplies

The Bush Administration and Congress mostly agree that oil imports should be reduced. Measures of oil import dependence, while important, tin can provide limited guidance to free energy security if viewed in isolation. Heavy reliance on oil imports does non necessarily mean that the United States is vulnerable to an oil disruption.¹² For example, if the earth oil supply came from many producers and one suddenly stopped exporting oil, information technology would have little upshot on U.South. or world supplies and prices, fifty-fifty at a high rate of dependence past the U.s.a..¹³ Concentration, therefore, is a key cistron in determining the nation'south energy security.^xiv

In 2000, U.Due south. cyberspace imports of petroleum deemed for 53 percent of domestic petroleum consumption.¹⁵ Over 50 per centum of these imports came from countries located in the Western Hemisphere, compared with nearly 24 percent from the Middle East.¹⁶ The U.S. Department of Free energy projects that U.Southward. imports will increase to about 62 pct of domestic petroleum consumption in 2022.¹⁷ Oil imports are projected to rise from 10.4 million barrels per twenty-four hours in 2000 to 16.half dozen million barrels per day in 2022.^xviii Oil imports from the Persian Gulf will almost double over the same period, ascent from 2.ii million barrels per twenty-four hour period in 2000 to 4.2 million barrels per twenty-four hours in 2022.^nineteen

At the same time, more than 50 percentage of the full North American imports in 2022 are expected from the Atlantic Basin, with significant increases in rough oil imports anticipated from Canada and from Latin American producers that include Brazil, Republic of colombia, Mexico, and Venezuela.²⁰ Production volumes in Mexico, for instance, are expected to exceed 4.1 one thousand thousand barrels per solar day by the terminate of the decade and remain near that level through 2022.²¹ Canada's output is also expected to increase over the side by side two years to add together an additional 700,000 barrels a day from a combination of offshore projects and oil from tar sands.²²

Likewise, West African producers, including Nigeria and Angola, are expected to increase their export volumes to Due north America.²³ The Caspian Basin region output is expected to rise to well-nigh iii million barrels per twenty-four hour period by 2005 and to increase steadily thereafter.²⁴ Oil production from the former Soviet Union (FSU) is expected to attain 10 million barrels per mean solar day by 2005 and exceed 14.viii meg barrels per twenty-four hour period by 2022, implying export volumes greater than 6.9 one thousand thousand barrels per solar day.

After 2 decades of steady growth (at 1.one percent annually), not-OPEC²⁵ supply from proven reserves is expected to continue that trend, increasing steadily from 46 million barrels per day in 2000 to 61.1 million barrels per solar day in 2022, posing significant competition for the OPEC producers.²⁶ Two factors are backside the dependable growth in not-OPEC supply: (1) reduced costs for exploration and recovery, and (2) advanced technologies.²⁷ Additionally, over the past 25 years, not-OPEC supplies from Alaska'south N Gradient, Mexico, the North Ocean, and the Caspian Basin all have exceeded oil production expectations.²⁸ Expanding supplies of oil from these regions would further enable the United States to reduce its import vulnerability from the Middle East and improve the nation'due south energy security.

Augmenting Domestic Oil Supplies

The most practicable way to limit U.Southward. vulnerability to disruptions in strange oil supply is to augment domestic oil production. A potential supply of reliable domestic oil is located in Section 1002 of the Arctic National Wildlife Refuge located in the upper northeast quadrant of Alaska. This area has been described as "the largest unexplored, potentially productive onshore bowl in the Usa"²⁹ and could produce oil equivalent to half of all U.Due south. imports from Persian Gulf countries for thirty years.³⁰ Simply a small sliver of those 2,000 acres would be needed to tap into this source--leaving a full 99.99 percent of the xix million acres of ANWR untouched by exploration.³¹

Congress approved exploration of Section 1002 in 1995, but President Nib Clinton vetoed that legislation. If he had signed it, the United States would be well on its style to enhancing the nation's energy security. Concluding August, the Business firm of Representatives corrected this politically motivated but unwise step by authorizing oil and gas exploration in Department 1002. Given the growing instability in the Middle Eastward and U.S. dependence on foreign oil, information technology is past fourth dimension for the Senate to open up Section 1002 to that exploration--both for energy security and for national security reasons.

Promising areas of oil and natural gas discoveries are also located offshore in the Gulf of Mexico, in the Eastern Gulf of Mexico, and on the Atlantic and Pacific Outer Continental Shelves (OCS). However, federal constabulary prohibits exploration on the OCS and in the Eastern Gulf of Mexico. A recent comprehensive assessment past the Department of Interior's Minerals Direction Service (MMS) estimates that the total amount of undiscovered, conventionally recoverable resource in the U.South. OCS is 75 billion barrels of oil.³²

Avant-garde technologies allow industry to pinpoint resources more accurately, excerpt them more efficiently and with less surface disturbance, minimize associated wastes, and restore sites to their original or fifty-fifty amend condition.³³ Congress and the White Firm need to lift the leasing restrictions and allow responsible exploration in these areas to enhance U.S. energy security.

Building Upward the U.Due south. Strategic Petroleum Reserve

A ready stockpile of oil that can be drawn from to supercede any interrupted imports is essential to sound free energy policy, and a potent measure for dealing with foreign supply interruptions.³⁴ It could besides reduce skyrocketing price increases that accompany those supply interruptions.³⁵ To exist effective, all the same, the stockpile must be managed correctly and used solely for its intended purpose--to compensate for supply shortfalls--not to dampen toll hikes.

To alleviate the economic disruptions caused by the 1973-1974 Arab oil embargo, Congress in 1975 authorized the establishment of the Strategic Petroleum Reserve in the Energy Policy and Conservation Act (EPCA).³⁶ The legislation authorizes a drawdown of the SPR upon a finding by the President that there is a "severe energy supply interruption."

In 1990, Congress liberalized that drawdown authority to let for the SPR'southward utilise to prevent small or regional shortages from escalating into larger ones, and it has further broadened information technology to include instances in which a reduction in supply appears sufficiently severe to bring about an increase in the cost of petroleum. Information technology must be severe enough to "likely...cause a major adverse impact on the national economy."³⁷ The policy governing SPR use generally has been that SPR oil is to exist used to ameliorate oil supply shortages and their consequences (including higher prices), merely not to regulate prices explicitly.³⁸

The Clinton Administration established a risky precedent for the use of SPR oil in 2000. Due to high gasoline prices and concerns nearly the supply of and prices for home heating oil in an election year, President Clinton directed a release of 30 one thousand thousand barrels of oil from the SPR in September 2000.³⁹ Nether a so-chosen swap, bidders would render 31.5 million barrels to the SPR in 2001. This "repayment" schedule was extended, however, in March 2001, postponing the render of nearly 24 million barrels of the "swapped" oil until Jan 2003.^xl President Clinton in consequence used the SPR, which was established to protect Americans from cut-offs of oil imports, to dispense prices.

In response to renewed concerns about domestic energy security, the Firm in October 2001 passed a resolution expressing its support for filling the SPR to its authorized capacity of ane billion barrels. As of March 28, 2002, the SPR contained nigh 561 one thousand thousand barrels of oil. Information technology has a maximum drawdown adequacy of 4.eighteen million barrels per day for 90 days, with oil offset to arrive in the marketplace 15 days later on a presidential conclusion to initiate a drawdown.⁴¹ On November 13, 2001, President Bush ordered the filling of the SPR to its current concrete capacity of 700 million barrels. Oil shipments take begun and are expected to be completed by 2005.⁴²

Strengthening Energy Security

U.S. dependence on foreign oil has increased steadily since the 1973 Arab oil embargo. Projections show the nation'due south dependence increasing to over 60 percent past 2022 if Congress fails to have necessary actions to enhance free energy security.⁴³ Both the White House and the House of Representatives have acted responsibly to reduce the nation's vulnerability to supply disruptions by proposing measures that would increase domestic production by opening up 2,000 acres in Section 1002 of ANWR to oil and gas exploration and filling the Strategic Petroleum Reserve to its maximum capacity.

Regrettably, the Senate leadership until recently has repeatedly stalled passage of a comprehensive free energy plan. Moreover, the plan it has allowed the members to debate is seriously flawed.

The Bush Administration and Congress should take steps at present to increase energy security and strengthen national security. Specifically, the Administration should:

Push forrard with filling the Strategic Petroleum Reserve. The likelihood that a producer land will use oil in an attempt to influence U.S. policy is direct related to its chances of success.⁴⁴ The greatest do good of having a stockpile, similar that of the nation's nuclear arsenal, may be its mere being, which would reduce the prospects for successful oil bribery and deter hostile states from attempting to cut back oil production or to disrupt U.S. oil imports.
Persuade the conference committee on energy legislation to open ANWR for exploration and examine the choice of developing it as an adjunct to the SPR. ANWR could be explored and developed, and the pipeline infrastructure built, but oil wells capped until they are needed to exist tapped during an oil crisis. The oil companies that develop ANWR could be compensated for their investment by being allowed to draw oil from SPR supplies elsewhere. Because ANWR oil would not come on-line for at least five years, SPR oil released before then would be exchanged for greater amounts of ANWR oil, which would provide a net increase in long-term free energy security.
Encourage the Senate to act quickly to implement the measures of the balanced Bush-league free energy plan by affirming the provisions already passed by the House. If the Senate fails to exercise so, it will have missed a sensible opportunity to make the nation more secure and less susceptible to crises in oil-producing regions around the globe.

Conclusion

The Iraqi oil cutback and Venezuelan oil-worker strikes have over again driven dwelling house to Americans their potential vulnerability to oil supply disruptions and oil cost hikes. Congress must bear in mind the dubiety of long-term dependence on oil imports from volatile regions such as the Centre East every bit it weighs the costs and benefits of developing additional oil supplies inside the boundaries of the United States.

President Bush has proposed a balanced energy programme that will enhance the land's national and energy security. Last August, the House of Representatives passed legislation that would implement many of those measures. It is time for the Senate to human activity responsibly and pass an energy package that enables the nation to increase energy security and improve national security for the future.

Charli E. Coon, J.D., is Senior Policy Analyst for Free energy and the Environs in the Thomas A. Roe Institute for Economical Policy Studies, and James Phillips is Research Young man in Heart Eastern Affairs in the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.