Energy/National Security
National Security Demands More Diverse Energy Supplies
By Charli Coon
As the nation braces to deal with the national security threat of terrorism, Washington must ensure an adequate supply of oil from reliable sources at reasonably stable prices. Disruptions in oil supply, such as occurred after the 1973 Arab-Israeli war, the 1979 Iranian revolution, and the 1990 invasion of Kuwait by Iraq, reinforce the need to reduce America's dependence on Middle Eastern oil.
The United States first experienced oil disruptions in the 1970s when two sudden and sharp oil price hikes rocked the economy. These disruptions damaged industries that depend on oil and forced Americans to realize how vulnerable the nation was to instability in the Middle East. Sufficient and reliable supplies of energy are vital to U.S. energy and economic security.
At the time of the 1973 Arab oil embargo, the United States imported about 35 percent of its oil. Since then, oil imports have increased to about 53 percent of American consumption. The Energy Information Administration at the U.S. Department of Energy estimates that the United States will increase its dependence on foreign oil to about 66 percent by 2030, much of it from the Persian Gulf region.
The recent terrorist attacks on the United States should remind policymakers that concentrating oil imports from any one region of the world, such as the Middle East, places America's energy and economic security at risk. Promoting diversity in supplies, enhancing the transportation and delivery of supplies, developing other fuel sources, and increasing energy efficiency to reduce America's dependence on oil from the Gulf region are sound policies.
Reducing America's Dependence on Middle East Oil.
Reliance on imported oil has increased steadily over the past 25 years.
According to Energy Department data, the United States increased its oil
imports between 1973 and 1996 by about 40 percent. In 1996, net imports
of oil were about 46 percent of total oil consumption, with approximately
17 percent coming from the Persian Gulf.
In 2000, the United States imported about 24 percent of its oil from the Middle East. Nearly 55 percent of America's gross oil imports that year came from four countries: Canada (15 percent), Saudi Arabia and Venezuela (14 percent each), and Mexico (12 percent). Currently, slightly over 50 percent of the oil that the United States imports every day comes from the Western Hemisphere.
The Middle East holds over two-thirds of the world's oil reserves, followed by 14 percent in the Western Hemisphere and 7 percent in Africa. Clearly, Middle East oil producers will remain vital to the global economy. Prolonged unrest and disruptions of supplies from this region, however, will wreak economic havoc throughout the world.
While it is unlikely that the United States will ever be self-sufficient in meeting its oil needs, greater diversity of oil imports would reduce market instability and prices paid by consumers. President George W. Bush, in his national energy plan, recognizes the global nature and importance of the energy marketplace. His plan emphasizes the importance of strengthening U.S. trade alliances with major oil producers and greater oil production in the Western Hemisphere, Africa, the Caspian Sea region, and other regions with abundant oil resources. Increased U.S., Canadian, and Mexican energy production, pipeline linkages, and cooperation, for example, would enhance America's energy security and advance the economies of each of these countries.
In addition to increasing domestic production and upgrading the nation's infrastructure, to reduce U.S. dependence on foreign oil, Congress should take steps to strengthen trade relations with other oil-producing regions or countries, such as Canada, Mexico, Latin America, and Africa, and ensure that America has a diversity of fuels available beyond oil to meets its needs.
Importance of Oil to the Military.
Sufficient and reliable supplies of energy are essential for the nation's
military in times of peace, but they are especially so when it engages
in military action. For example, Greenwire reported on September 17 that
the 582,000 soldiers in the Persian Gulf War consumed 450,000 barrels
of petroleum products each day. It takes eight times more oil to meet
the needs of each soldier today than it did during World War II. Further,
the Department of Defense accounts for about 80 percent of the U.S. government's
energy use, of which nearly 75 percent is for jet fuel. It is essential
that Washington pursue a diverse supply of oil to meet its security needs.
Terrorism and Oil. Clearly, the more dependent the United States becomes on oil from the Middle East, the more influence instability in that region could have on the economy. The Department of Energy estimates that Middle Eastern nations could nearly triple their oil revenues by 2010, to $250 billion per year. Such wealth gives nations--including those that are strongly anti-Western--tremendous purchasing power for weapons and international influence. Countries hosting or harboring terrorists could disrupt America's vital supplies of oil.
The oil-rich Middle East is infested with a wide variety of the world's most dangerous terrorist groups, including Osama bin Laden's terrorist network. Bin Laden remains the prime suspect in the ongoing investigation to determine who was behind the September 11 terrorist attacks. Al-Qaeda cells are believed to exist in at least 35 countries or regions throughout the world, including Canada and Africa, two of America's significant suppliers of imported oil. Eradicating terrorism from wherever it is located would help to ensure the stability of oil supplies for much of the world.
Conclusion.
Energy is a global commodity that is essential for economic stability
and national security. The Bush plan sets forth a process for enhancing
domestic supplies of energy, upgrading the nation's aging infrastructure,
increasing energy efficiency, advancing renewable and alternative fuels,
and increasing the diversity of supply. The recent terrorist attacks highlight
the need to begin this process now.
--Charli E. Coon, J.D., is Senior Policy Analyst for Energy and the Environment in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
Opinion Editorial
Monday, September 17, 2001by H. Sterling Burnett, Ph.D.
We have many new lessons to learn in the years to come
from the horrific terrorist attacks in New York and Washington, D.C. One
lesson, however, is an old one: "those who do not learn from history,
are doomed to repeat it." Our nation's prosperity depends in large part
on our oil supply and our energy use. Oil is more than a fuel source.
It is a feedstock for plastics, pharmaceuticals, fertilizers, lubricants
and construction materials. Robert Ebel, of the Center for Strategic and
International Studies, has even argued that oil is a national security
priority, saying: "Oil fuels military power, national treasuries, and
international politics. It has been transformed into a determinant of
well-being, of national security, and of international power for those
who possess this vital resource, and the converse for those who do not."
Yet from the Arab oil embargo in the 1970s, through the Gulf War to today,
the U.S. remains dependent upon foreign nations for a majority of our
oil needs. Even though a majority of these countries are in regions of
the world that are politically unstable and/or have governments that are
hostile to U.S. interests.
The results could be seen less than six hours after the terrorist's attack,
when many parts of the country began to see an exorbitant rise in gasoline
prices. While price "gouging" undoubtedly played some role in the price
spikes, rising prices were also a result of gas station owners fearful
that a shooting war was about to break out between the U.S. and one or
more oil exporting nations, which would reduce the supplies of oil for
gasoline and raise their cost.
Now, while our nation's memory is clear and our will is focused, is the
time to begin changing our state of dependence. America's leaders could
take steps to reduce our dependence on oil from distant lands, but each
step requires political courage. Leaders must put aside regional concerns
and the demands of special interests for the good of the nation.
By all accounts, America's remaining large deposits of oil lie either
under public lands, or offshore. Unfortunately, these areas have been
placed off-limits to oil production due to environmental concerns. It
is time to choose: our national security, or marginally protecting sea
birds and otters.
Take the Arctic National Wildlife Refuge (ANWR) for example. The Energy
Information Agency estimates that ANWR contains between six and 16 billion
barrels of oil under its frozen expanse. By comparison, the United States
imports approximately 7 million barrels of oil per day. Even if only six
billion barrels of oil were recovered in ANWR, during a time of emergency
the U.S. could cut all imports of foreign oil - including imports from
friendly nations like Canada - for two years with little or no effect
on our economy.
Critics of opening ANWR to exploration have argued that it would take
ten years to recover any oil found there. These same arguments were made
11 years ago during the Gulf War. But if we had made the decision to drill
then, we would have less to fear from taking needed military action in
the region today. The question is, will our national security be held
hostage to OPEC in the future.
In addition, politicians must stop interfering in energy markets. Every
time politicians ham-handedly intervene in the market to keep energy prices
artificially low, they further ensure our continued dependence on foreign
oil. High energy prices are a sign of scarcity and serve as a signal to
small independent oil companies and large corporations alike that there
is profit to be made if they can bring new supplies of fuel to the market.
As the past demonstrates, once new fields are in production and supplies
increase, competition will drive prices down. Price controls on energy
do nothing more than guarantee further scarcity, since it tells potential
oil entrepreneurs that the expensive and highly risky exploration they
undertake in the quest for new oil fields will not be rewarded.
America will never have complete energy independence, nor should we attempt
it. Relying only on domestic supplies of oil when less expensive foreign
alternatives are available would be as foolish as our current policy of
dependence. Instead, our energy policy should allow us access to cheap,
abundant foreign energy when political winds are favorable, while removing
political obstacles to domestic production so that in times of crisis,
America's prosperity is not held hostage to hostile foreign powers.
Oral Testimony on Compromising Our National Security By Restricting Domestic Exploration & Development Of Our Oil and Gas Resources
Before the United States Senate
Committee on Resources
by Robert E. Ebel
Director, Energy and National Security
Center for Strategic and International Studies
Washington, D. C.
April 12, 2000
Thank you, Mr. Chairman, for the opportunity to express my views on the political and financial implications of our rising dependence on oil imports. I fear that these implications are lost on the American public generally but particularly on many of the policy makers in this country.
The general public's view of developments in the world oil market is very limited; it is limited to that little window on a gasoline pump at their favorite filling station. If the price per gallon is essentially unchanged since the last visit, then, what is the problem? But if the price happens to be higher on each succeeding visit, then, what are the oil companies doing to us now?
The question of where the oil comes from is rarely, if ever, raised. Oil is oil, isn't it? What matters is the price at the pump. The consumer finds it easy to ignore any linkage between the price at the pump and where the crude oil refined to make that gasoline might have been produced.
Policy makers do understand that our increasing reliance on imported oil threatens our national security. Three findings to that effect have been made in the past 12 years. But, what to do about that increasing reliance? The answer from our government has been, "present policies suffice," or words to that effect. That is, yes, there is a problem but don't expect any actions on part of your government which might help alleviate the situation. I can take little comfort from that.
Just what are these present policies? It seems that our energy policy continues to be guided by two considerations: First, let the market place make the decisions. Second, U.S. companies are encouraged to search for oil outside the United States, but away from the Persian Gulf.
Do we let the market place make the decisions? Of course not. Governments everywhere, but especially the United States, are reluctant to pass up any opportunity to take actions to influence oil and energy supply and demand, which in turn define price levels. With all good intentions, of course. But we have learned that this interference tends to prolong imbalances, rather than resolving them.
It has always seemed to me a bit incongruous that our government encourages the search for oil outside the United States. To take that posture means we have consigned ourselves to greater and greater dependence on foreign oil. It means that oil exploration budgets will be spent, but not in the United States. It means we have given up on ourselves, we have agreed to place our future well-being in the hands of nation-states whose national interests may not always coincide with ours.
There is always the hope, I suggest, that this search for oil will provide the world with an alternative to the Persian Gulf, viewed as an area of continuing instability but also where the bulk of the world oil reserves are to be found. Some thought, erroneously as it turned out, that such an alternative had at last been found, in the Caspian Sea of the former Soviet Union. But, reality has overcome hope. Yes, the region's potential is substantial but not at all comparable to the Gulf. At the same time, one might judge that the political risk encountered in the Caspian is at least the equal of that in the Gulf. Security of supply is no less assured.
Should we give up on ourselves? I think not. We all know of individuals who are described by their acquaintances as having a "great potential." Some live up to their potential, some do not, for whatever the reason.
Nations are much the same way. Having a recognized potential is not necessarily a guarantee of success. Nations-and individuals-must work to realize their potential. Perhaps the most disappointing are those who turn away from what might have been. How can it be that the world's sole super-power finds it so easy to turn its back on its inheritance? But, it has.
What might happen if our government would reverse its energy policy and encourage the search for oil and gas in the United States? With our potential fully available for exploitation rather than locked away.
What will it take? Another oil embargo, like the one we endured in 1973-74? When our our dependence on foreign oil to satisfy our thirst was just 35 percent, compared to the more than 50 percent today. Another embargo would be far more disruptive, far more debilitating, but it just might bring us to our senses.
Our energy policy is one-sided, and inward-looking. Should the world's sole super-power be put in a position where it literally has to travel, hat-in-hand, to exporting countries to ask for increases in supply to bring prices down? Where were we when prices had fallen to $10 or less per barrel? We were rejoicing, because cheap oil helped fuel our economic growth. Did we care about the exporters, facing financial difficulties, because of the low prices? We did not, that was their problem, not ours.
When the exporters took collective action for the purpose of raising prices, success probably surprised them as much as it did us, for many in the West thought that once prices began to rise, cheating would set in and price increases would be constrained. Yes, there was cheating, although that word was not used. Instead, we monitored compliance to the agreed quotas. At the time of the March 2000 OPEC meeting, compliance was averaging around 75 percent, meaning that an additional 1.1 million barrels per day or so were being placed into the market outside the agreed quotas.
Nonetheless, oil prices roughly had tripled.
Now, these higher prices became a problem not just for consumers but for the exporters as well. How high is too high? Have these high prices stimulated production outside the exporters, have these high prices given renewed life to alternative forms of energy, have these high prices dampened demand for oil? How to bring about a "soft landing" for these prices?
The success of the oil exporting countries in cooperating to achieve higher oil prices is a lesson which is not being lost on the exporters, and I hope it is a lesson not lost on consumers as well. Success breeds imitation, so it is said. If so, what next might await us?
The United States is considered vulnerable because of our high and steadily rising dependence on foreign oil. At the same time, the oil exporters have a vulnerability of their own, and that is a dominating dependence on oil-derived revenues to fund their way of life. Few have diversified economies which might protect themselves during those times of low oil prices. Few have even tried to diversify. The scent of oil money is intoxicating, and for many their oil riches have proven both a curse and a blessing.
Oil is their strength and their weakness, and we should not be surprised when oil is used to express that strength or to overcome that weakness.
Mr. Chairman, whenever an oil crisis appears, we reach for the shelf entitled "Project Independence" and dust off the remedies of opening up prospective lands, now denied, for exploration. We take a second look at alternative forms of energy, and we once again discuss the need to become more efficient in our use of oil. But then the crisis passes, as this one will, and these remedies are returned to the shelf, to once again gather dust, to be revisited upon the occasion of the next crisis, which will surely appear, although in what form I cannot say.
Mr. Chairman, when will we ever learn to act, instead of reacting?
Mr. Chairman, that concludes my oral statement and I look forward to
any questions you may have. With your permission, I ask that this oral
statement be submitted for the record.
