Posted by: bmeverett | April 1, 2011

Obama’s New Year’s Resolution


Every January 1, Americans resolve to lose 20 or more pounds of weight. We decide we would rather be slim and trim, looking great with six-pac abs and sculptures muscles. We then implement this resolution with two predictable steps: we buy a diet book and sign up for a gym. That’s usually the end of it. For a few days, it makes us feel good and convinces our spouses and friends that we have really set ourselves on the right path at last. The fact that we have made this resolution every New Year’s Day for the past 30 years or so makes no difference. This time, WE REALLY MEAN IT!

US energy policy follows precisely the same pattern. Since the first oil crisis in 1973-1974, a total of eight Presidents (5 Republican and 3 Democrat) have promised the American people a real reduction in oil imports. President Obama’s New Year’s resolution came at his March 30 in a speech at Georgetown University. A little late in the year, but OK. The President promised, “When I was elected to this office, America imported 11 million barrels of oil a day. By a little more than a decade from now, we will have cut that by one-third.” How is he going to achieve this goal? By producing more oil and developing alternative energy sources, including safe nuclear power. These policies are the diet book and gym membership of the energy world. Every one of the last eight Presidents has made taken the same approach.

In 1974, President Nixon offered the American people Project Independence – a plan to reduce US dependence on imported oil to zero by 1980 through (you guessed it) additional oil production and the development of new sources of energy, including safe nuclear power. In his famous “Crisis of Confidence Speech” on July 15, 1979, President Jimmy Carter promised “I am tonight setting a clear goal for the energy policy of the United States. Beginning this moment, this Nation will never use more foreign oil than we did in 1977—never.” How? Produce more oil and develop alternatives, including safe nuclear power. How’d we do? Well, US crude and petroleum product imports in 1979 were just under 8 million barrels per day (MBD). In January of 2011, we imported 12 MBD.

How can this keep happening decade after decade? There are two explanations – one cynical and one analytical. The cynical explanation is that politicians always make promises they have no intention of keeping. I was working as a mid-level manager in the International Affairs Division of the Department of Energy when Jimmy Carter was preparing his “Crisis of Confidence” speech in 1979. A senior White House staffer called over requesting the Deputy Assistant Secretary, who was unavailable at the time. Ultimately, the call came over to me to go immediately to the White House for a meeting on the President’s speech. The White House staffer who had called the meeting explained to the group that President Carter was considering announcing a hard ceiling on oil imports and wanted our reactions. Several people wanted to know what mechanisms would be established to limit imports, how the ceiling would be enforced, and how the President wanted to deal with the increased oil prices that would inevitably result when the US economy hit the limit. The staffer responded that had no interest in the policy issues surrounding this proposal. He wanted to know whether we thought oil imports would hit the ceiling before the November, 1980 election. Beyond that, he said, he didn’t care. He referred to the questioners as “a bunch of bureaucrats”.

It should come as no surprise that elected officials and their advisors act this way. President Obama carefully set the due date for his promised reduction out ten years. In other words, he made no promise that can be broken while he is still in office. Between now and November of 2012, nothing can happen that will prevent the President from assuring voters that his promise will be kept.

On the other hand, given the importance that all Presidents attach to reducing oil imports, why don’t they actually do something? The first reason is that energy independence would not be good for the US. It’s easy to believe that our foreign policy is driven by our need for oil and that we could tell Middle Eastern dictators (particularly the Saudis) to take a hike if we didn’t need their oil. Unfortunately, no matter what we do, the rest of the world relies heavily on global oil trade and Middle East supplies. Europe relies on imports for about two-thirds of its oil, China for more than half and Japan for virtually all its petroleum needs. The US economy is deeply and irrevocably integrated with the global economy. Would we really tell our closest allies and competitors that the US no longer has an interest in the fate of the Middle East? Would we allow China to meddle politically or even militarily in this critical region? How would the Europeans act if the US no longer protected the critical strategic areas of the world? In fact, if the US imported no oil at all, we would still have a critical interest in a healthy and secure world oil market.

The second reason is that energy independence would be prohibitively expensive. Oil is a transportation fuel, and our economy and indeed our society are based on accessible low-cost transportation. There are at present no alternative fuels or vehicles that come even close to the performance or low cost of oil. Forcible replacement of petroleum with ethanol, natural gas or electricity or replacement of private vehicles with public transportation would simply make transportation more expensive. The economic and social costs would be unacceptable.

It’s easy for politicians and pundits to talk about “moon shots.” The problem is that we do not need a technical solution to our energy problem, we need a commercial solution. We succeeded in putting 12 men on the moon, but we have not made moon travel accessible to the average person. It’s easy to promise that government programs will produce new economically viable technologies sometime in the future, but the US has spent over $125 billion (in today’s dollars) on energy research over the last 40 years and has produced nothing of any commercial significance. Why in the world should anyone believe that more money will produce these promised technological breakthroughs?

Energy independence is the standard New Year’s resolution of American Presidents. It deserves about as much attention as our other resolutions.

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