In which Tom Friedman agrees with Me

Tom Friedman’s column in the NY Times this weekendis about the recently announced agreement struck by the Administration and the Automakers to double auto fuel economy by 2025. I, and the rest of my colleagues at the American Security Project, agree that “This is a big deal” as Friedman writes.

In fact, I agree completely, in exactly the same words. I originally wrote, on July 28 “This is a big deal.” as part of a blog post on ASP’s Flashpoint blog when the deal was signed. This sentence, along with more analysis on how important this deal will be for national security was included in an article written by Mark Clayton in the Christian Science Monitor.

I’m pleased that Mr. Friedman agrees with our analysis: the agreement struck by the Administration and the Automakers to double auto fuel economy by 2025 is a big deal.  It is very important for American national security and foreign policy that we use less oil.

Here’s Tom Freidman:

This is a big deal — a legacy deal for Obama that will make a significant, long-term contribution to America’s energy, environmental, health and national security agendas.

Here’s my blog post:

This is a big deal.

It is very important for American national security and foreign policy that we use less oil. Last year, ASP released a report“Ending Our Dependence on Oil,” which showed how America’s addiction to oil threatens our national security.

It is important that the United States as a whole uses less oil because the sheer volume of oil imports harms American competitiveness and drives down the value of the dollar. The United States sends hundreds of billions of dollars overseas to pay for oil. The United States consumed over $1.45 trillion worth of oil in 2010, of which $680 billion was spent on imports.

Here’s the Christian Science Monitor quoting me:

Energy-security experts praised the new agreement as key to reducing America's reliance on foreign oil.

"This is a big deal," Andrew Holland, senior fellow with the American Security Project, a bipartisan public-policy and research organization, wrote on his blog. "It is important that the United States as a whole uses less oil because the sheer volume of oil imports harms American competitiveness and drives down the value of the dollar."

The US spent at least $680 billion on oil imports in 2010, he writes. Without those imports, the US trade deficit of $497 billion in 2010 "would not have existed.” He continues, “That capital could be used for investment at home, and the export of that capital had the effect of driving down the value of the dollar."

The problem is not dependence on imported oil - its ALL oil

I see, via Real Clear Energy, that Jim Powell of the Cato Institute has an article over at Forbes, saying "Why 'Dependence' On Foreign Oil Is A Bogus Worry".

He's right that dependence on imported oil is not a problem. But, he doesn't complete his thought. It is dependence on ALL OIL that is the problem. Politicians like to blame foreign oil, but the truth is that its our dependence on oil at all that is harming both the American economy and America's national security.

So long as American businesses and consumers are completely dependent upon oil for 94% of their transportation, fluctuations in price will disproportionately affect those who need oil. This is not a commodity with easy and available substitutes.  

We're seeing it now with prices back up over $100 per barrel. This acts exactly as a tax increase: we don't have any other option. That harms our economy. Note that it is not whether the oil is imported or produced here at home: consumers are still bearing the burden.

There is a better way - we should reduce overall dependence on oil by increasing fleet fuel economy and by promoting alternatives that can break the monopoly that oil holds.

Asian Companies want technology - not Canadian Exports

I'm almost done with the tar sands, but there is one other argument I've heard a lot about: Asian national oil companies are buying up shares in Canadian oil companies to secure access to their oil.

However, I understand that the investments from Asian oil companies in Canada is not really for supply, contrary to many assumptions. Instead, Asian (particularly Chinese, but also Malaysian and Indian) companies are looking for access to technology. If they can master the technology for fracking, horizontal drilling, and in-situ drilling, they will open up many new areas of domestic production. That's really what they're after - not Canadian oil.

Even More on the Tar Sands

Prompted by a very interesting post on Grist, "Everything you’ve heard about the tar sands and energy security is wrong", which said that we should keep Canadian oil in reserve to ensure longer-term energy security - a point I also made in my recent (and long-winded) post on the Tar Sands and the Keystone pipeline.

That has prompted an interesting discussion on the nature of energy security, and our relationship to Canada.

It clearly would be in Canadian producer companies interests to open up their Pacific coast to oil exports. There has, indeed, been a push to build a pipeline to the coast, at the port of Kitamat. However, there is significant opposition, from both environmentalists and Native Americans, to building it. They will probably be enough to block it, at least for a time. So - we can't simply assume that the export routes will open. Here's a source on that.

What will actually happen on the Oil Sands

I just finished a post on why I think that permitting the Keystone XL pipeline would not benefit American energy security, economic stability, or environmental sustainablity (see also here on ASP's blog).

However, that does not mean I think that anyone will listen to me.

Before they left for their August recess, the House passed legislation that would require the State Department to issue a ruling on whether or not to allow the pipeline to move forward. Although the legislation is unlikely to move through the Senate, it does put pressure on the Administration to move forward with its decision.

As much as the Administration has done on climate and environmental policy, I think they realize they're vulnerable to charges of not creating enough jobs. That will be question #1 in next fall's election, and I think they're willing to sacrifice environmentalists (who have never proved able to deliver any votes) for jobs. If Bill McKibben and 350.org can use their direct action to convince policymakers otherwise, more power to them. But, I'm not sure that will actually happen.

On the Canadian Oil (or Tar) Sands

I've been trying to figure out one which side I come down on regarding the Keystone XL pipeline. For those unfamiliar with it, the Keystone XL pipeline is a proposed expansion of a pipeline operated by TransCanada to bring oil from the Northern Alberta refined from the oil sands (or tar sands) into the United States and down to the main American refineries in Texas and Louisiana.

Be prepared - this is a long post, because this is a complicated and difficult issue. I am writing about this now because there has been a series of protests against the oil sands by Greenpeace and Bill McKibben's 350.org group. I see that a number of protesters have been arrested this week at the White House.

This is a difficult topic to write about because, as I have been writing, most recently in my paper "America's Energy Choices" and the Op-Ed published along with it, we have to consider three aspects when making choices about energy: (1) energy security, (2) economic stability, and (3) environmental sustainability. The problem with the Canadian oil sands is that these three concerns come into conflict, thus proving that determining America's energy future will require us to make difficult choices.

Number of the Week: 41,235,700

Today's number of the week is how much gasoline the United States uses.

In May, 2011 refiners in the US delivered 41,235,700 gallons of gasoline per day. If expanded out to a year, that totals out to 15,051,030,500 (15 billion) gallons per year (These numbers are all from the Energy Information Agency).

What is most interesting here is that the United States is on track to use the least gasoline since the EIA began keeping track of these numbers in 1983. If you see the chart, you can see that gasoline use started to fall after 2003, then fell off a cliff with the oil price spike in 2008 and the ensuing recession. It has not come back.

Politico has an article today "Expiring gas tax may be next battle on the Hill" saying that the Tea Party may pick a fight over the extension of the 18.4 cent/gallon gas tax, slated to need re-authorization by September 30. The chart above, combined with the knowledge that the gas tax hasn't been increased since 1993 shows in graphic detail why our roads, rails, and bridges (funded with gas tax money) are crumbling.

Fuel Economy Increase Will Help National Security

While all of Washington is focused on the debt reduction talks, it does seem that there is some work actually happening. On Friday, the President is expected to announce a compromise between automakers and environmentalists.

According to the Wall Street Journal, who first reported this on Tuesday night, the President will announce that corporate average fuel economy (CAFE) standards will see a 5% average annual increase in fuel economy for cars and a 3.5% increase for light trucks, staring in 2016 and lasting through 2021. From 2021 until 2025 both would face a 5% annual increase. This builds upon the announcement of a new rule implemented last year that raised fuel economy standards from 2012 through 2016.

The result of this is that by 2025 - not that long when we're talking about the long lead-time necessary for designing and building cars - the average fuel economy will jump to 54.5 miles per gallon. That is approximately double what it was in 2010, the model year previous to the current one, of 27.5.

This is a big deal.

It is very important for American national security and foreign policy that we use less oil. First, it is important that the United States as a whole uses less oil because the sheer volume of oil imports harms American competitiveness and drives down the value of the dollar. The United States sends hundreds of billions of dollars overseas to pay for oil. The United States consumed over $1.45 trillion worth of oil in 2010, of which $680 billion was spent on imports.

Without these imports, the U.S. trade deficit, which was $497 billion in 2010, would not have existed. That capital could be used for investment at home, and the export of that capital had the effect of driving down the value of the dollar.

Second, it is important for each American consumer that they are less vulnerable to oil price fluctuations. Oil is a volatile commodity. Over the last four years alone, the global price of oil has fluctuated from an average price per barrel of $69 in 2007 to a peak of $147 in July 2008, back down below $35 in January 2009, then back up above $120 per barrel in April 2011. This constant fluctuation harms consumers because it impairs their ability to plan for the long-term by acting as an unplanned tax.

These problems directly impact the security of the United States because every person working on foreign policy knows how vulnerable the American economy and the American consumer are to the rising price of oil. That vulnerability constrains these decision-makers when dealing with oil-producing regimes. There is a good argument to be made (for another blog post) that the United States has acted very differently to Arab countries throughout the Arab Spring, depending on how much oil they produce.

The increases in CAFE standards that the President will announce tomorrow will put the United States on track to reducing its vulnerability to oil-producing regimes. This is an important step that should be applauded.

Number of the Week: 60,000,000

30 days ago, on June 23, the IEA announced a release of oil from its member states' strategic petroleum reserves totaling sixty million barrels of crude. Most of it has been released - but some is still waiting to go to market.

The IEA's stated rationale for the release was to replace the loss of 1.5 mbd of production lost from the ongoing war in Libya.

With this week's 30 day review, the IEA has announced that it will not to release additional oil from reserves.

On June 23, prior to the release, the spot price of a barrel of WTI Crude was $95. The day after the announcement, it fell to $90. Today, WTI is trading above $99.