US to find 'more oil at home,' while cutting consumption: Obama

Washington (Platts)--30Mar2011/357 pm EDT/1957 GMT

US President Barack Obama on Wednesday called for the country to reduce oil imports by one-third within the next decade, warning that the US cannot "afford to bet our long-term prosperity and security on a resource that will eventually run out."

In a speech at Georgetown University in Washington, the president presented a "Blueprint for a Secure Energy Future" that would reduce US oil imports by increasing the use of domestic natural gas, promoting advanced biofuels, boosting vehicle fuel efficiency and increasing US oil output.

The president said that while gasoline price increases have historically been temporary, the long-term trend suggests "there will be more ups than downs. That's because countries like India and China are growing at a rapid clip. And as 2 billion more people start consuming more goods, driving more cars and using more energy, it's certain that demand will go up a lot faster than supply."

But Obama warned that "there are no quick fixes, and we will keep being a victim to shifts in the oil market until we get serious about a long-term policy for secure, affordable energy."

"Meeting this new goal of cutting our oil dependence depends largely on two things -- finding and producing more oil at home and reducing our dependence on oil with cleaner alternative fuels and greater efficiency," he said.

The US currently relies heavily on imported oil. In 2010, it imported 9.163 million b/d of crude and nearly 2.6 million b/d of refined products, according to data from the Energy Information Administration, the statistical arm of the Department of Energy. US crude production last year averaged 5.512 million b/d.

Neighboring Canada and Mexico were top crude suppliers with 1.972 million b/d and 1.14 million b/d, respectively.

International crude prices climbed above $100/barrel early this year as unrest spread across North Africa and the Middle East, with North Sea Brent trading close to $120/b in the latter part of February as the unrest spread to Libya and reduced oil production there.

To spur an increase in US production, Obama said the White House is developing "incentives" for oil companies to speed up development in areas already open to drilling. Although Obama did not provide details, a White House fact sheet issued Wednesday said the US Department of Interior is already shortening some lease terms and requiring drilling to begin before granting lease extensions. DOI is also studying a graduated royalty rate structure to reward faster development.

Obama set a goal of building four commercial-scale biofuels refineries in the next two years and pledged that the US government would buy only low-emissions vehicles by 2015.

"The fleet of cars and trucks we use in the federal government is one of the largest in the country," Obama said. "That's why we've already doubled the number of alternative vehicles in the federal fleet, and that's why, today, I am directing agencies to purchase 100% alternative fuel, hybrid or electric vehicles by 2015."

"We've known about the dangers of our oil dependence for decades," the president said. "Presidents and politicians of every stripe have promised energy independence, but that promise has so far gone unmet.

"I've pledged to reduce America's dependence on oil too, and I'm proud of the historic progress we've made over the last two years towards that goal. But we've also run into the same political gridlock and inertia that's held us back for decades.

"That has to change. We cannot keep going from shock, when gas prices go up, to trance on the issue of energy security, rushing to propose action when gas prices rise, then hitting the snooze button when they fall again."

Reaction to Obama's speech was mixed, with oil producers saying the president's criticism was misguided and some green groups taking issue with his proposed solutions.

The president of the Independent Petroleum Producers of America, Barry Russell, said slow permitting by the federal government is partially to blame for the slow development that Obama cited.

"Leases can't be developed if companies don't have the permits necessary to proceed with exploration and production activities, which take several years and billions of dollars to develop," Russell said. "There is also no guarantee that oil and natural gas will be found on all of the land that is leased."

Democrats and environmental groups had a largely positive reaction, to the speech, although Friends of the Earth criticized Obama for relying too heavily on nuclear and natural gas power.

Frances Beinecke, president of environmental group the Natural Resources Defense Council, said Obama's goal of cutting oil imports is achievable.

"We can get there by driving higher-gas-mileage vehicles, expanding mass transit systems, using more wind and solar, and building more efficiency into the products we use and the buildings we live and work in," Beinecke said.

--Keith Chu, keith_chu@platts.com

To subscribe or visit go to:  http://www.platts.com