US must do more to mesh its energy and foreign policies: report

US must do more to mesh its energy and foreign policies: report

Washington (Platts)--12Oct2006

Closer coordination of US foreign and energy policies is essential to
effectively promote alternatives to oil and energy security throughout the
world, the Council on Foreign Relations said in a report released Thursday.

Prepared by a task force headed by former CIA Director John Deutch and
former Energy Secretary James Schlesinger, the report argued that US energy
policy has been inadequate for the last 30 years and has largely responded to
the whims of politicians and consumers.

"The lack of sustained attention to energy issues is undercutting US
foreign policy and US national security," the report said.

"Major energy suppliers--from Russia to Iran to Venezuela--have been
increasingly able and willing to use their energy resources to pursue their
strategic and political objectives," according to the report. "Major energy
consumers--notably the United States, but other countries, as well--are
finding that their growing dependence on imported energy decreases their
strategic vulnerability and constrains their ability to pursue a broad range
of foreign policy and national security objectives."

That dependence also increases competition between the US and emerging
economies, including China and India, for energy supplies, the report said,
adding that "[a]t best, these trends will challenge US foreign policy; at
worst, they will seriously strain relations between the United States and
these countries."

The report recommended Washington adopt more effective plans for reducing
demand for oil than have been attempted by Republican and Democratic
administrations since the Arab oil embargo of the 1970s, and coordinate them
with the government's foreign policy.

"Leaders of both political parties, especially when seeking public
office, seem unable to resist announcing unrealistic goals that are
transparent efforts to gain popularity rather than inform the public of the
challenges the United States must overcome," the report said.

The task force, including officials of former administrations, former
lawmakers and retired CEOs, was "unanimous in recommending the adoption of
incentives to slow and eventually reverse the growth in consumption of
petroleum products," though its members could not agree on specific measures,
the report stated.

The group considered three measures for reducing oil use: a new tax on
gasoline, with proceeds recycled into the economy, possibly including funding
for energy technology research; stricter and broader Corporate Average Fuel
Economy standards; and implementation of a system of tradable gasoline
permits, which would place a cap on gasoline use in the country.

"Used singly or in combination, these measures would not only encourage
higher-efficiency vehicles (although these will take time to find their way
into the fleet), but also encourage the introduction of alternative fuels, as
well as promote changes in behavior, such as greater use of public
transportation," the report said.

At the same time as the US promotes measures to reduce oil demand, it
should also act to open some new areas to oil and natural gas development,
including areas in Alaska, along the East and West coasts and in the Gulf of
Mexico, the report said.

Among other steps, the report recommended that the government offer
"greatly expanded incentives and investments" in research in vehicles,
enhanced oil recovery, biofuels, energy efficiency and other technologies that
would lead to short- and long-term results.

To elevate energy issues in foreign policy decision-making, the report
called for the establishment of an energy directorate at the National Security
Council comparable to directorates that already exist for defense policy and
international economics.

The report also recommended that the energy secretary have "a seat at the
table in all foreign policy matters" with "an important energy aspect," saying
that while "all matters of foreign policy do not centrally involve energy, it
is striking how many now do."

Further, it said the US should take the lead in revising cooperative
agreements reached in the International Energy Agency in the 1970s. The
agreements require IEA-member countries to follow procedures for dealing with
shortages of energy supplies. The most important change would be to encourage
rapidly growing economies, such as China and India, to build large oil
reserves whose use they would coordinate with other oil importing nations.

--Bill Loveless, bill_loveless@platts.com

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