Energy: The Albatross of National Security
By Senator Richard Lugar
As submitted to Conservative Environmental Policy - Quarterly
Spring 2006

This article is excerpted with permission from Senator Lugar’s March 13, 2006 Leadership Forum address at the Brookings Institution.

In a remarkable moment during the 2006 State of the Union Address, President Bush caught the attention of the nation with five words: “America is addicted to oil.”

I had an opportunity soon after the speech to talk to the president about energy, and he admitted that he had not anticipated the impact of that statement or that some commentators would find it incongruous. I believe he is genuine in wanting to devote more focus to pursuing alternative energy sources.

Though not hostile to alternative energy sources, the Bush administration clearly downplayed their significance during the early part of his presidency.

Vice President Cheney, who oversaw Bush administration energy policy, stated on April 30, 2001: “Years down the road, alternative fuels may become a great deal more plentiful than they are today. But we are not yet in any position to stake our economy and our way of life on that possibility... The reality is that fossil fuels provide virtually 100 percent of our transportation needs and an overwhelming share of our electricity requirements. For years down the road, this will continue to be true.”

For decades, in fact, the energy debate in this country has pitted so-called pro-oil realists against idealistic advocates of alternative energy. The pro-oil commentators have attempted to discredit alternatives by saying they make up a tiny share of energy consumed and that dependence on oil is a choice of the marketplace. They assert that our government can and should do little to change this.

Now, indeed, advocates of alternative energy must resist the rhetorical temptations to suggest that energy problems are easily solved. They are not. Relieving our dependence on oil in any meaningful way is going to take much greater investment of time, money and political will. There is no “silver bullet solution.” But the difficulty of solving the problem does not make it any less necessary.

Now, whether or not one classifies America’s oil dependence as an addiction, the bottom line is that with less than 5 percent of the world’s population, the United States consumes 25 percent of its oil.

Most of the world’s oil is concentrated in places that are either hostile to American interests or vulnerable to political upheaval and terrorism. Demand for oil will increase far more rapidly than we expected just a few years ago. Within 25 years, the world will need 50 percent more energy than it does now. With these basics in mind, my message is that the balance of realism has passed from those who argue on behalf of oil and a laissez faire energy policy that relies on market evolution, to those who recognize that in the absence of a major reorientation in the way we get our energy, life in America is going to be much more difficult in the coming decades.

We have entered a different energy era that requires a much different response than in past decades. What is needed is an urgent national campaign, led by a succession of presidents and Congresses, who will ensure that American ingenuity and resources are fully committed to this problem.

In the absence of revolutionary changes in energy policy, we are risking multiple disasters for our country that will constrain living standards, undermine our foreign policy goals, and leave us highly vulnerable to the machinations of rogue states.

Our energy dependence creates at least six different threats that could directly or indirectly undermine American security and prosperity.

First, oil supplies are vulnerable to natural disasters, wars, and terrorist attacks that can disrupt the lifeblood of the international community.

The entire nation felt the spike in prices caused by Hurricanes Katrina and Rita last year. But these shocks, which helped send the price of oil to $70 a barrel, were minor compared to what would occur if major oil processing facilities in Saudi Arabia were sabotaged.

In late February, terrorists attempted such an attack. They penetrated the outer defenses of Saudi Arabia’s largest oil processing facility with car bombs before being repulsed. A successful terrorist attack would be devastating to the world economy. Al Qaeda and other terrorist organizations have openly declared their intent to attack oil facilities and to inflict pain on Western economies.

The vulnerability of oil supplies is not a new concern, but the lack of spare oil production capacity is new. As recently as four years ago, spare production capacity exceeded world oil consumption by about 10 percent. As world demand for oil has rapidly increased in the last few years, spare capacity has declined to less than 2 percent. Thus, any major disruption of oil creates scarcity that will drive prices up.

Second, over time, even if oil and natural gas supplies are not disrupted in dramatic ways that produce local or global economic shocks, worldwide reserves are nevertheless diminishing. This is occurring within the context of explosive economic growth in China, India, Brazil, and many other countries. The demand for energy from these industrializing giants is creating unprecedented competition for oil and natural gas.

As we approach the point where the world's oil-hungry economies are competing for insufficient supplies of energy, oil will become an even stronger magnet for conflict and threats of military action, than it already is.

Third, the use of energy as an overt weapon by producing nations is not a theoretical threat of the future. It is happening now.

Fourth, even when energy is not used overtly as a weapon, energy imbalances are allowing regimes in countries that are rich in oil and natural gas to avoid democratic reforms, and to insulate themselves from international pressure and the aspirations of their own people. We should recognize that we are transferring hundreds of billions of dollars each year to some of the least-accountable regimes in the world.

Fifth, the threat of climate change has been made worse by inefficient and unclean use of nonrenewable energy. In the long run, this could bring drought, famine, disease and mass migration, all of which could lead to conflict and instability.

There are no unilateral solutions to climate change. I have urged the Bush administration and my colleagues in Congress to return to a leadership role on the issue of climate change. I have advocated that the United States must be open to multilateral forums that attempt to achieve global solutions to the problem of greenhouse gases.

Our scientific understanding of climate change has advanced significantly. We have better computer models, more measurements, and more evidence, from the shrinking polar caps to expanding tropical disease zones for plants and humans, that the problem is real, caused by manmade emissions of greenhouse gases, including carbon dioxide from fossil fuels.

Sixth, our efforts to stem terrorist recruitment and to prevent terrorist cells and training grounds in the developing world are being undercut by the high costs of energy.

Now, each of these six threats from energy dependence is becoming more acute as time passes. Any of them could be the source of a catastrophe. Any realistic American foreign policy must redeploy diplomatic, military, scientific and economic resources toward solving the energy problem.

The basic dilemma for U.S. energy policy is: how can our government speed up the transition to alternative renewable energy sources, so that we can prevent irreparable harm to our nation or the world associated with these threats?

American energy policy, to date, has suffered from two fundamental flaws.

First, we have let two decades of relatively cheap oil and natural gas deepen our dependency on imports. An approach that focuses on research while ignoring deployment of new fuels will not meet our national security challenge.

The second flaw is that we have lacked a truly comprehensive energy policy with energy security as a strategic goal. American energy policy has been focused on a narrow definition of energy security that strived to ensure sufficient supplies at affordable prices.

This has translated into policies promoting diversification in supplies of oil and natural gas, but with little emphasis on energy alternatives. A policy that relies on a finite resource concentrated in a few countries is doomed to failure. Our long-term security and prosperity require sufficient, affordable, clean, reliable and sustainable energy.

Now, a first component of energy security is to ensure sufficient supplies. Our energy intensity per unit of GDP has steadily decreased, but our energy consumption is still projected to increase by more than a third over the next 25 years.

This demand scenario is not inevitable. Public policy can do much more to promote efficiency while still growing the economy. Expanded programs to enhance energy efficiency in appliances, building construction, and industry, are all necessary to keep our energy intensity declining.

One-third of our projected energy growth is in oil, a majority of which we have to import. I have co-sponsored a bipartisan bill that would require federal agencies to implement a plan to reduce U.S. oil consumption by 10 million barrels a day by 2031.

Automakers have a central role to play in improving our oil efficiency. We are working to close the SUV CAFE standards loophole and to get more hybrids and flex-fuel vehicles on the road. A fleet of hybrids, and future plug-in hybrids that run on E85, could reduce our oil use by 10 million barrels a day.

In partnership with the American auto industry, we should provide a set of incentives that gives them the opportunity to regain their strength and save jobs through innovation. This bill offers a 35 percent tax credit for automakers to retool their factories, so that they can make fuel-efficient, advanced technology vehicles.

Long-term energy security also requires the use of clean energy, a third component of energy security. As long as we continue to consume fuels that do not burn cleanly, or cannot have their damaging gases sequestered, we will continue to pay environmental costs and will remain vulnerable to a climate change-induced disaster.

The Congress must pass legislation establishing a cap-and-trade mechanism. A cap-and trade system would provide regulatory certainty, reward innovation to improve energy efficiency, and provide strong market incentives for clean, renewable fuels. Any such system should give credit for carbon sequestration in coal-fired plants and allow farmers and foresters to sell credits for the carbon they sequester.

I have introduced a resolution that calls for America to lead other nations to new agreements under the United Nations Framework Convention on Climate Change. Thanks to new technology, we can control many greenhouse gases with proactive, pro-growth solutions, not just draconian limitations on economic activity.

Industry and government alike recognize that progress on climate change can go hand in hand with progress on energy security, air pollution, and technology development.

We must also ensure that we are not wasting fossil fuel resources in end-use that could be fueled by other means. I am encouraged by DuPont’s commitment to replacing petrochemicals with bio alternatives. This wise business choice leaves DuPont less vulnerable to price spikes than competitors who still rely exclusively on oil and gas.

Now, as we make policy to influence the composition of our future energy portfolio, we should strive to consume fewer hydrocarbons than we can produce domestically.

Our policies should be targeted to replace hydrocarbons with carbohydrates. Obviously this is not a short-term proposition, but we can offset a significant portion of demand for oil by giving American consumers a real choice of automotive fuel. We must end oil's near monopoly on the transportation sector, which accounts for 60 percent of American oil consumption.

I believe that biofuels, combined with hybrid and other technologies, can begin to move us away from our extreme dependence on oil in the next decade. Corn-based ethanol is already providing many Midwesterners with a lower cost fuel option.

Cellulosic ethanol, which is made of more abundant and less expensive biomass, is poised for commercial take-off. I am pleased the president now supports the ethanol research that began under legislation I offered in the Agriculture Committee in 2000.

We have to make sure that consumers have access to E85 ethanol. Already there are millions of E85-capable vehicles on the road. I have introduced legislation that would require manufacturers to install flex-fuel technology in all new cars in the next ten years. This is an easy and cheap modification, which allows vehicles to run on a mixture of 85 percent ethanol and 15 percent gasoline, and will make their products more attractive to consumers.

The next challenge is to get E85 distributed through the big gas station chains. I have asked the oil majors about this and they have said that sufficient demand for E85 does not exist. But demand will not develop for something consumers do not have an option to buy, and it is time for the oil companies to make E85 available to their consumers. If these companies do not take advantage of the incentives Congress has provided, I would be in favor of legislation mandating that they install E85 pumps in appropriate markets.

Now to close, I would like to express optimism for the future. Our current energy balance is the result of industrial and consumption choices of the past. Despite our import dependence today, the U.S. is in a strong position to choose a different path, a path toward real energy security.

Success would free future generations of Americans from the energy dilemma that threatens to compromise our security and our prosperity. It could also lead to opportunities in many new industries that could reinvigorate our economy. These are problems that can be solved. We must act now, and we must act together.