Key words :
alternative transportation fuels,
Oil Independence Possible for U.S. by 2030
26 Oct, 2007 11:49 am
Oil independence is possible for the U.S. if comprehensive and aggressive energy policies are implemented aimed at reducing demand for oil, increasing supply, and promoting alternative fuels.
The news is especially important when one considers that, between 1970 and 2000, economists estimate that the costs of American dependence on foreign supplies of oil have ranged between $5 and $13 trillion dollars. That’s more than the cost of all wars fought by the U.S. (adjusted for inflation) going all the way back to the Revolutionary War.
The trick is to start by thinking about oil independence a little differently. Oil independence should not be viewed as eliminating all imports of oil or reducing imports from hostile or unstable oil producing states. Instead, it should entail creating a world where the costs of the country’s dependence on oil would be so small that they would have little to no effect on our economic, military, or foreign policy. It means creating a world where the estimated total economic costs of oil dependence would be less than one percent of U.S. gross domestic product by 2030.
Conceived in this way (and contrary to much political commentary these days), researchers at the Oak Ridge National Laboratory (ORNL) have calculated that if the country as a whole reduced their demand for oil by 7.22 million barrels per day (MBD) and increased supply by 3 MBD, oil independence would be achieved by 2030 with a 95 percent chance of success. By reducing demand for oil, increasing its price elasticity, and increasing the supply of conventional and unconventional petroleum products, ORNL researchers noted that the country would be virtually immune from oil price shocks and market uncertainty. If large oil producing states were to respond to the U.S. by cutting back production, their initial gains from higher prices would also reduce their market share, in turn further limiting their ability to influence the oil market in the future.
So if decreasing American demand for oil by 7.22 MBD and increasing supply by 3 MBD would enable the U.S. to achieve oil independence in 2030, which combination of policies offers an optimal strategy? Policymakers, for instance, could lower demand for oil by making automobiles more efficient (by legislating more stringent fuel economy standards for light and heavy duty vehicles or lowering the interstate speed limit), promoting alternatives in mode choice (such as mass transit, light rail, and carpooling), or establishing telecommuting centers and incentives for commuters to work from home. They could also promote rigorous standards for tire inflation and reduce oil consumption in other sectors of the economy. Alternatively, they could increase alternative domestic supplies of oil, develop better technologies for the extraction of oil shale, mandate the use of advanced oil recovery and extraction techniques, and promote alternatives to oil such as ethanol, bio-diesel, and Fischer-Tropsch fuels.
Taken together, such policies could reduce demand for oil by 8.266 to 12.119 MBD and increase American oil supply by 8.939 and 12.119 MBD by 2030—well over the target set by the ORNL study. Thus, to insulate the American economy from the vagaries of the world oil market, policymakers need not focus only geopolitical power structures in oil producing states. Instead, attempts to change the behavior of the country’s automobile drivers, industrial leaders, and homeowners could greatly minimize reliance on foreign supplies of oil. To battle the “oil problem” policymakers need not talk only about sending more troops to Iraq or Saudi Arabia nor drafting new contracts with Nigeria and Russia. They could also focus on curbing American demand for oil and expanding domestic conventional and alternative supplies.
Such a synergistic approach would present immense obstacles. When President George W. Bush stated that “America is addicted to oil … The best way to break this addiction is through technology,” he was only partly right. Some of the tools required for oil independence have been around for decades, and instruments such as fuel economy standards and alternative fuels are well known. Getting them fully accepted is the challenge. Policymakers must move beyond the idea that technology will automatically solve the country’s energy problems and come to address the remaining social, economic, and political barriers.
Instead of continuing to support mostly research and development on refining existing technologies and discovering new ones, one option could be to shift government support to efforts aimed at increasing public understanding of energy and transportation policy. The U.S. has already invested billions of dollars in basic and applied science, procurement, tax incentives, tax credits, subsidies, standards, and financial assistance to promote many of the options needed for oil independence. It may now be time to target the remaining social barriers in the same way the government has committed resources to promoting technological options.
Even if these remaining social barriers were somehow overcome, achieving oil independence would not be without costs. It would necessitate massive government investment and intrusion into the practices of industrial managers, automobile manufacturers, and the public at large. Even then, options such as more domestic drilling and wider use of coal-to-liquids would contribute to climate change and environmental degradation. More research is definitely needed to further assess these costs and benefits.
In essence, the debate over whether oil independence can be achieved for the U.S. continues only because those making policy continue to believe it cannot be achieved. The key to implementing a strategy of oil independence is more a matter of managing the interdependence of technologies available to reduce oil demand and increase supply, rather than trying to establish the independence of the United States from foreign supplies of oil. Once such interdependence is recognized and synergistically pursued, the country can achieve oil independence. The only remaining questions are how, and whether the benefits outweigh the costs.
For more, see Benjamin K. Sovacool, “Solving the Oil Independence Problem: Is it Possible?” Energy Policy 35(11) (November, 2007), pp. 5505-5514.
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Is that an economic cost, or something else, such as the cost of military expenditure in the Middle East? If the latter, is it all expenditure, or only that which could be attributed to protecting oil supplies. (Some of the USA's involvement in the region is to protect allies like Israel, Turkey and Egypt.) If the USA became "oil independent", but the rest of the world did not, how much of that expenditure would disappear?
And, given that the USA's market for liquid petroleum and biofuels are tied to the global market, why would "the country would be virtually immune from oil price shocks"? Are you suggesting that if the world price for crude oil rose or dropped suddenly, prices in the United States wouldn't move in tandem?
[Response] Ron, thank you very much for your insightful questions. I am happy to provide the source for the oil dependence cost estimate, which is in constant dollars of 2000. It's from a D. Greene and D. Ahmad report to the DOE entitled "Costs of U.S. Oil Dependence: 2005 Update." You can download it from: http://www-cta.ornl.gov/cta/Publications/Reports/ORNL_TM2005_45.pdf I believe it should answer all of your questions about how those costs were measured. You make a good point about the connection between petroleum/crude oil prices being tied to biofuels (and to natural gas and other fuels as well). The "virtual immunity" from price shocks would only relate to the three types of direct costs discussed by Greene and Ahmad; they would not include related costs to the biofuels sector, which is definitely something researchers should look into ...