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FRONT PAGE CONTRIBUTOR

False Sense of (Energy) Security

Superficially, it would seem that the nation is successfully pursuing the Obama Administration’s stated energy goals of “increasing domestic oil production” and “reducing our dependence on foreign oil.” Domestic oil production has increased, but in spite of and not because of Administration policies. And while our overall oil import demand has declined, our imports from the Persian Gulf states, and Saudi Arabia in particular, have actually grown dramatically to make up for shortfalls from Mexico and elsewhere.

There are two separate issues with regard to the supply of petroleum and refined products: Price, and Security of Supply. When the President said, “We can’t just drill our way to lower gas prices”, the political pressure of $4.00 per gallon for gasoline was his primary concern. But in an international emergency (say, a protracted shutdown of the Straits of Hormuz), our Strategic Petroleum Reserve might be quickly exhausted. Gasoline at $4.00 per gallon might seem cheap. Security of supply should be our nation’s #1 strategic concern with respect to energy.

A recent article in the New York Times considers our current supply situation and its causes:

U.S. Reliance on Oil From Saudi Arabia Is Growing Again

The increase in Saudi oil exports to the United States began slowly last summer and has picked up pace this year. Until then, the United States had decreased its dependence on foreign oil and from the [Persian] Gulf in particular.

This reversal is driven in part by the battle over Iran’s nuclear program. The United States tightened sanctions that hampered Iran’s ability to sell crude, the lifeline of its troubled economy, and Saudi Arabia agreed to increase production to help guarantee that the price did not skyrocket. While prices have remained relatively stable, and Tehran’s treasury has been squeezed, the United States is left increasingly vulnerable to a region in turmoil. …

“At a time when there is a rising chance of either a nuclear Iran or an Israeli strike on Iran’s nuclear facilities, we should be trying to reduce our reliance on oil going through the Strait of Hormuz and not increasing it,” said Michael Makovsky, a former Defense Department official who worked on Middle East issues in the George W. Bush administration.

The accompanying graphic helps make sense of the figures:

U.S. oil consumption is flat to declining for two reasons: 1) the economic recession, and 2) a long-term trend of decreased energy intensity in our economy.

The production declines in Mexico are alarming. Mexico has been a reliable partner, and as a North American source, a boon to U.S. energy security. If current trends continue, Mexico will become a net importer of oil by 2020. This is taken seriously in the country, which is seriously considering allowing access to international firms to explore and develop Mexican fields for the first time in nearly a century.

By citing “increasing domestic oil production” as a policy goal, the Administration calls attention to the fact that it has done little or nothing to enable it. In fact, early in the Obama Administration, increased oil production was actually seen as a negative, in that it worked counter to the Administration’s ambitious Green Energy plans. Credit the private sector with 100% of the supply growth we’ve experienced since 2009.

Two other decisions by this Administration have worked counter to Security of Supply. Because of the drilling moratorium and general regulatory overreaction to the BP Spill in the Gulf of Mexico,

… production is about 700,000 barrels a day lower than forecast. Much of that oil is heavy and is being replaced by Saudi imports, experts said.

Then there’s the Keystone XL pipeline, which was designed to enhance access and availability to Canadian heavy oil to those same Gulf Coast refineries that are running short of Mexican and Venezuelan heavy oil supply that they are designed to process. Again, Saudi oil can make up the shortfall.

Some issues transcend November’s election and voters angry over $4.00 per gallon gasoline. Our interests are heavily dependent on having a secure source of North American oil. If we continue to be oblivious to supply security concerns, we might wake up one day to find that the Chinese have shut us out of the game while we were asleep.

How do we achieve North American energy security? Mexico and Canada can be only part of the picture. The rest depends on a commitment to do as much as possible to help ourselves, and we can drill our way to that, Mr. President. You start by recognizing that our domestic oil and gas companies are part of the solution, not part of the problem. You honor the commitment of American explorers and risk takers who have “built that”, in the Bakken and in the Eagle Ford and in the Deepwater Gulf of Mexico, and elsewhere. And you take a rational, apolitical look at cutting red tape and opening access to areas that for whatever reason we currently deem off-limits to drilling.

Cross-posted at Maley’s Energy Blog.


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