The American fantasy of energy independence

by John Gault

03-05-06

President George W. Bush's recent admission that "America is addicted to oil" and his vow to use new technologies "to replace more than 75 % of our oil imports from the Middle East by 2025" attracted considerable attention in the United States and abroad.
While the President avoided the term "energy independence" in his 2006 State of the Union speech, his aspiration to disconnect America from its dependence on Middle Eastern oil echoes the stated desires of leaders from both major US political parties over the past thirty years.

While a reduction in American reliance on imported oil has been promoted domestically as being good for the United States, oil and energy consumers worldwide would also benefit, because any decline in global oil demand (or in its rate of growth) will help to relieve pressure on limited crude oil production capacity. Moreover, a reduction in US oil imports should improve America's image abroad.
Viewed from the outside, America is seen as an energyglutton, consuming a quarter of the world's oil production. Americans should, in the eyes of the rest of the world, be able to reduce their oil consumption without reducing their standard of living.

So, if the President is proposing a reduction in America's dependence on imported oil, shouldn't the rest of the world applaud this latest US energy security ambition? Instead, the new emphasis has elicited only lukewarm response, for two main reasons:
-- First, the new emphasis appears to be a retreat following the demise of previous US energy security policies. The President's new emphasis is seen as arising not from choice but from desperation.
-- Second, the new emphasis lacks the essential elements for real, long-run energy security: creating idle capacity at critical nodes in the energy supply chain, allowing the market to determine which new technologies are most promising, and removing the causes of Arab and Islamic hostility toward America.

The new emphasis is an admission that other strategies have failed
The Bush "addiction to oil" statement raised eyebrows both inside and outside America because his explicit emphasis on reducing imports from the Middle East implicitly recognizes that Gulf oil supplies cannot be militarily secured. Such an admission, while hardly revolutionary, seems to contradict what many assumed was the real motivation for invading Iraq: to secure Gulf oil supplies for the indefinite future.
The Bush administration, for obvious reasons, never touted energy security as a central justification for the invasion, even as other pretexts -- from weapons of mass destruction to the linkage between Saddam Hussein and 9/11 -- were discredited.

Nevertheless, oil long hovered in the background. When White House Economic Adviser Laurence Lindsey told the Wall Street Journal in September 2002 that the cost of the Iraq invasion could be as high as $ 100 to $ 200 bn (an estimate the White House quickly disavowed as too high), he indicated that one could expect an additional 3 to 5 mm bpd of Iraqi oil production following the ouster of Saddam.
To date, the United States government has spent over $ 250 billon on the Iraq invasion and occupation. Linda Bilmes of Harvard University and Joseph Stiglitz of Columbia University estimate the eventual budgetary and non-budgetary cost of the Iraq intervention will be between $ 1 and $ 2 tn.

This expensive adventure, far from improving US energy security, has actually rendered security more precarious. So far, the Iraqi invasion has contributed to the demise of the old US energy security quid-pro-quo in the Middle East. This arrangement had two parts: friendship with traditional regimes ruling the oil producing states, and willingness to use military might to protect their power and their oilfields.
In return, the US received assurances of ample oil supplies at moderate prices. For decades this quid-pro-quo endured, although at increasing cost to the United States, which had to rescue Kuwait and thenceforth to maintaina stronger military presence in the region.

The ongoing incursion in Iraq forever changed this equation. It revealed that even a US military occupation could not adequately protect oil installations from sabotage. It revealed that the US, tied down in Afghanistan and Iraq, might not be able to come to the rescue of another regime at the same time.
It revealed that the Bush Administration would now promote democratization in the Greater Middle East, tacitly criticizing some of America's oldest allies. And it continues to reveal and augment the strength of anti-American feelings throughout the region, putting governments friendly to the US in an awkward position.

Even an increase in Iraq's oil production capacity has not been achieved. Iraqi experts, soon after the invasion, spoke of capacity rising to 6 mm bpd by 2010 given sufficient investment. In fact, Iraq's oil output is today well below pre-invasion levels. Major oil companies, eager to invest in Iraq's petroleum industry, wait in the wings pending the emergence of a stable government and an improvement in physical security.
So, to date, a military intervention which eventually will cost $ 1-$ 2 tn (and tens of thousands of Iraqi, American and other dead and wounded) has hardly paid off in terms of US energy security.

Sceptics therefore wonder whether Mr Bush's new emphasis on disconnecting his country from Middle East oil is just a belated recognition that his efforts to project US power in the region have proven too costly and ineffective, and that the pre-invasion security structure in the Gulf cannot be reinstated.
From this perspective, the new emphasis can be interpreted as a fall-back strategy after nothing else has worked, and sceptics wonder whether this second-term President has either the will or the political leverage to implement it.

A credible American energy security strategy must include three fundamental elements
Recent events suggest that any meaningful US energy security policy would include three important elements:
-- maintaining idle capacity in critical energy facilities,
-- helping the market identify the most promising new technologies, and
-- re-establishing a positive public perception of America in the Middle East. None of these featured in the 2006 State of the Union address.

Maintaining idle capacity
For more than two decades global oil production capacity remained well ahead of consumption. Most of the idle production capacity was in the Middle East Gulf. Gulf producers used this capacity to moderate upward oil price pressures, for example during the early 1980s (the Iran-Iraq war), the autumn of 1990 (the Iraqi invasion of Kuwait), in January 2003 (when an oil workers' strike cut Venezuela's oil production), and in the months following the US-led invasion of Iraq in March 2003.
To promote energy security, American policies should encourage a margin of idle production capacity in major producing countries. This means US sanctions restricting investment in such countries should not be imposed quite so easily or so often. This means the US should listen carefully to reasonable pleas from producer governments seeking recognition of and reciprocity for their maintenance of idle capacity.

Helping the market identify the most promising new technologies
Energy technologies undoubtedly will continue to contribute to energy security by increasing the efficiency of production and delivery of existing energies, by making old energy sources more environmentally friendly, by bringing new energy sources to market at competitive prices, and by making all energy network components more reliable.
To improve energy security, the US government can and should encourage the private development of energy technologies because there are significant externalities (such as a cleaner environment and greater energy security) for which the social benefits cannot be captured by private investors.

To realize the greatest technological contribution to energy security at the least cost to society, government support should be as technology-neutral as possible. Taxes and/or subsidies should reflect externalities rather than being targeted to promote individual technologies or specific new energy sources.
It is extremely unlikely that the most promising new technologies will be those selected in Congressional committees or those most promoted by lobbyists. Democracy has many advantages but popularity is not the best guide to scientific achievement.

Reducing hostility toward America
Under any plausible scenario, world energy markets will continue to rely on oil from the Middle East and, increasingly, on natural gas from the same region. Our global economic interdependence guarantees that an oil shortage anywhere will affect the United States immediately.
While such global interdependence is expanding, the United States seems to have forgotten the fragility of its important relationships in the Middle East. American energy security now requires a break with the past and a new approach to all the peoples of the Middle East. Propaganda will not achieve this; what is needed is substance, not spin.

An America primarily concerned with energy security today would:
-- set an irreproachable example at home by strengthening American secular democracy, enhancing racial and ethnic equality, and improving the lot of the impoverished so clearly revealed to the world by Hurricane Katrina.
-- set an irreproachable example internationally by reasserting America's commitment to the Geneva Conventions and their universal applicability, and by joining the International Criminal Court.
-- withdraw American troops from Iraq as quickly as feasible. Whatever the reasons for their original mission, their continued presence now provokes resistance and provides justification for terrorist attacks.
-- avoid policies in the region that open the United States to accusations of hypocrisy.

The US must no longer assert it is enforcing United Nations Security Council resolutions in some countries (Kuwait, Iraq) while blocking implementation of UN resolutions elsewhere (Israeli-occupied Palestine). Nuclear weapons cannot be quietly tolerated in Israel, Pakistan and India while being fought tooth-and-nail in Iran.
The Bush call for independence from Middle East oil is a fantasy. Instead, a strategy including the fundamental elements recommended here would better enhance American energy security. Unfortunately, these elements did not feature in the Bush 2006 State of the Union address.

Dr Gault is an independent energy consultant based in Geneva.
 

 

Source: Al-Hayat