The Hazards of Energy Dependence
"Let us set as our national goal…that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy source”.
George W. Bush, after saying we are “addicted to oil” in his 2006 State of the Union? Actually, it was Richard Nixon in 1973. The Organization of Arab Petroleum Exporting Countries had announced that, as a consequence of the Yom Kippur War, they would embargo oil shipments to all countries that supported Israel.
That was the first oil shock that sent prices skyward. Then came another in 1979 when Iranian revolutionaries shut down their oil fields and shortages sent the price of oil to its highest level in history (in current dollars) until surpassed at the end of 2007.
In 1973 the U.S. was consuming 12.5 million barrels per day, 26% of it imported. The 1979 shock jolted the U.S. to action – conservation and new auto mileage standards that actually reduced consumption into the early 80s. But a collective amnesia induced by low oil prices led to a long progression of increased consumption, even in the face of steadily declining U.S. output. We now find America burning over 21 million barrels every day, reliant on other countries for a frightening 60% of that amount, and now, suddenly, at prices that flirt with $100 a barrel even without embargoes or supply disruptions.
How did we manage to shrug off two major supply disruptions and drift into a far more precarious state?
The problem will only worsen if we fail to substitute alternatives. Oil consumption is otherwise projected to grow 44% by 2025, while at the same time domestic production declines to meet only 30% of our need.
“Energy independence” will someday come to the rescue. That comforting notion has become commonplace as we picture a future of more efficient autos, wind turbines, and solar collectors. What is not often spoken of is “energy dependence” – the dangerous vulnerability the United States faces right now, a catalog of harrowing threats for which the nation is woefully unprepared. We thought it useful to focus on the scope of our dependence in this series.
HOSTILE SUPPLIERS AND FRAGILE SUPPLY LINES
If you were to say that about three-quarters of the world’s oil is in the hands of “big oil” -- companies like ExxonMobil, BP, and Chevron – you probably would not get much of an argument. In fact, it is the reverse: 77% of world oil reserves are owned by national companies. Tina Rosenberg in The New York Times Magazine made the point that “there are 13 state-owned oil companies with more reserves than ExxonMobil, the largest multinational company…Nationalized oil is the trend”. A number of those countries are not our friends. One-fourth