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An Oil Habit America Cannot Break

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By Robert J. Samuelson
Wednesday, October 18, 2006

"Americans can always be counted on to do the right thing . . . after they have exhausted all other possibilities."

-- widely attributed to

Winston Churchill

On energy, we're disproving even this cynical axiom. Our main energy problem is our huge dependence on imported oil.

For years, some remedies have been obvious: Tax oil heavily to spur Americans to buy more fuel-efficient vehicles and to drive a bit less, raise sharply the government's fuel economy standards so those vehicles are available, and allow more oil and gas drilling. In recent years, we've done none of these things. It's doubtful we will anytime soon. "Other possibilities" seem inexhaustible.

Under present policies, U.S. oil demand will expand 34 percent by 2030, the Energy Department projects. There will be more people, cars, planes and travel. Imports would satisfy all of the increase. We should try to prevent or minimize that. With China and India's oil demand increasing, American restraint would relax pressure on prices and reduce oil's usefulness as a political weapon. Consuming 25 percent of world oil, we're hardly powerless. But instead of doing what we might, we're awash in delusions.

Item: As gasoline prices have receded from $3 a gallon, many Americans attribute the decline to politics. In one Gallup poll, 42 percent of respondents said the Bush administration had manipulated prices to improve Republican prospects in congressional elections. Gee, if the White House could fix prices so easily, why let them rise in the first place? (The drop reflects small shifts in supply and demand: an end to summer driving, high oil inventories and fading fears that Iran will cut supplies.) Item: We're still enthralled by energy "independence" even though -- as a new report from the Council on Foreign Relations makes clear -- it's impossible for "at least several decades." In 1973, President Richard Nixon announced Project Independence, which was to eliminate oil imports by 1980. In 1973, the United States had net oil imports of 6 million barrels a day, 35 percent of our consumption. In 2006, net imports average 12.4 million barrels a day, or 60 percent of use. Nixon's advisers warned him that his goal was unattainable. In the foreseeable future, it still is. Anyone suggesting otherwise is misinformed or dishonest.

No plausible combination of alternative fuels or "conservation" can soon substitute for all that imported oil. Even if that weren't true, many other countries -- most of the world economy to which we are tightly tied -- would remain dependent on oil imports. So we'd be hostage indirectly.

The problem is not that the world will soon run out of oil. Global oil use now totals 31 billion barrels annually. Proven oil reserves are about 1.3 trillion barrels, reports Oil & Gas Journal. That's 42 years of supply at present consumption rates. Yes, consumption is rising -- but more oil will be found. Even when it's all gone, other hydrocarbon deposits can be, at higher prices, converted into oil. John Hofmeister, president of Shell Oil, claims that the oil shale in Colorado amounts to another 1 trillion barrels and that Canada's oil sands total 1.3 trillion barrels. Indeed, the oil sands are already producing.

The problem is not even imports. It is that most imports come from countries that are potentially insecure, unstable or hostile. More than 700 billion barrels of reserves, slightly more than half, lie in the Persian Gulf; 80 billion are in Venezuela, 76 billion in the former Soviet Union, 39 billion in Libya. New exploration in these countries is difficult; supply interruptions are an ever-present threat.

Unfortunately, the steps we should take involve immediate political costs -- they'd be unpopular -- while the benefits would emerge slowly and seem modest. Suppose, for example, we opened coastal areas and parts of Alaska, including the Arctic National Wildlife Refuge, to drilling. U.S. oil and natural gas production would rise. But the increases would occur only after five or 10 years, and they might merely offset declines in existing U.S. fields. To a casual observer, the benefit would be barely visible.

Or imagine we raised the government's fuel economy standards for new vehicles -- say, from 27.5 miles per gallon for cars to 40 mpg. Because factories can't be converted instantly, the shift would be spread over 10 to 20 years. Replacing today's more than 225 million cars and light trucks would also be gradual and hardly perceptible. We'd also need a tax on fuel of at least $1 to $2 a gallon. Without mandated higher fuel prices, many Americans wouldn't buy more efficient vehicles. They'd recondition bigger sport-utility vehicles and sedans to keep them running. Or more driving would offset potential fuel savings. With low fuel prices in the 1990s, average annual driving per car rose about 1,500 miles, to almost 12,000.

So we probably won't do much about our oil habit. Any realistic proposal would ignite a firestorm of protest. Environmentalists would denounce more drilling. Auto companies would protest new fuel economy standards. Most important, the public would denounce a steep energy tax, even if it were introduced gradually with most proceeds rebated by lowering other taxes (as is desirable). And these unpleasant steps would merely reduce our dependence from what it would otherwise be. It's a hard case to make.

Because Americans want painless salvation, our politicians proffer visions that promise just that: a shift to hydrogen fuel or a surge in ethanol. The first may be futuristic wishful thinking; the second is mainly a costly giveaway to farmers. Both are deceptions, new excuses not to do the "right thing."


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