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Contact: Anya Schmemann, CFR Communications, 202-518-3419, [email protected]
America’s dependence on imported energy increases its strategic vulnerability and constrains its ability to pursue foreign policy and national security objectives, finds a Council-sponsored Independent Task Force. “The lack of sustained attention to energy issues is undercutting U.S. foreign policy and U.S. national security,” says the report.
At the same time, energy suppliers—from Russia to Iran to Venezuela—are able and willing to use their energy resources as leverage to pursue their strategic and political objectives.
“Because of their oil wealth, these and other producer countries are free to ignore U.S. policies and to pursue interests inimical to our national security,” says the report. Dependence also puts the United States into competition with other importing countries, notably China and India.
“The challenge over the next several decades is to manage the consequences of unavoidable dependence on oil and gas that is traded in world markets and to begin the transition to an economy that relies less on petroleum,” says Task Force Chair James R. Schlesinger, a former secretary of defense and secretary of energy. The report warns, “The longer the delay, the greater will be the subsequent trauma.”
The United States has 4.6 percent of the world’s population using 25 percent of the world’s oil.
The Task Force notes that “voices that espouse ‘energy independence’ are doing the nation a disservice by focusing on a goal that is unachievable over the foreseeable future and that encourages the adoption of inefficient and counterproductive policies....Leaders of both parties, especially when seeking public office, seem unable to resist announcing unrealistic goals that are transparent efforts to gain popularity rather than inform the public of the challenges the United States must overcome,” says the report, National Security Consequences of U.S. Oil Dependency.
Higher energy prices are unleashing remarkable forces for innovation in this country. Entrepreneurs are seeking new ideas for products and services such as batteries, advanced oil and gas exploration and production techniques, and biofuels. However, “no strategy will be effective without higher prices for transportation fuels, or regulatory incentives for more efficient vehicles, to stimulate new technologies that ultimately are vital to reducing the dependence on oil and gas, and to making a transition away from petroleum fuels,” said Task Force Chair John Deutch, former director of Central Intelligence and undersecretary of Energy.
“While the United States has limited leverage to achieve its energy security objectives through foreign policy actions, the United States has considerable ability to manage its energy future through the adoption of domestic policies that complement both a short- and long-term international strategy,” says Task Force Director David Victor, an adjunct senior fellow at the Council and Professor at Stanford Law School.
“The Task Force is unanimous in recommending the adoption of incentives to slow and eventually reverse the growth in consumption of petroleum products, especially transportation fuels such as motor gasoline,” and offers three options: a tax on gasoline; stricter and broader mandated Corporate Average Fuel Economy (CAFE) standards; and the use of tradable gasoline permits that would cap the total level of gasoline consumed in the economy.
Other recommendations include:
- Encourage supply of oil from all sources.
> The Persian Gulf, which will be an important source of supply for the foreseeable future.
> Sources outside the Persian Gulf “can reduce dependence on this politically fragile region.”
> Some additional domestic production from Alaska, offshore southern California, the east coast of Florida, the Gulf of Mexico, and publicly controlled areas in the Rocky Mountains.
The report makes clear, however, that the world cannot “drill its way out of this problem.”
- Promote better management of oil revenues and better governance because this encourages reliable production, which is in the country’s interest. The United States should take a more active role in international arrangements to manage the revenues from oil in a more transparent way in oil-producing nations (such as the Extractive Industries Transparency Initiative).
- Remove the protectionist tariff on imported ethanol. “Take advantage of efficient ethanol producers outside our borders, such as in Brazil.”
- Increase efficiency of oil and gas use in the United States and elsewhere. “Encourage consumers and businesses to use less oil and other forms of energy while still obtaining the energy services they need.”
- Switch from oil-derived products to alternatives. Biofuels have significant potential. The Task Force favors greater use of nuclear power today and notes that over time electricity can replace liquid fuels for transportation.
- Make the oil and gas infrastructure more efficient and secure. “Reexamine the management of the United States’s strategic stockpiles” and “reduce infrastructure vulnerability, whether to terrorist attacks or natural disasters.”
- Increase investment in new energy technologies. The “benefits of improved technology will come in the future only if investments are made today in research, development, and demonstration.”
- Promote the proper functioning and efficiency of energy markets. National oil companies, such as in Venezuela and Russia, control some three-quarters of the world’s oil reserves and are often inefficient. The United States should help “improve efficiency by assisting those that welcome reforms in management and operations.”
- Revitalize international institutions such as the International Energy Agency (IEA). A global approach is needed for coordinating with large consuming countries to manage oil shocks and supply disruptions. This system is currently run through the IEA but needs to be expanded to reflect the new demand-side reality by including major new oil consumers, especially China and India.
The Task Force warns, however, that the U.S. government is not well organized to address the threats to national security created by energy dependence. “The United States needs not merely to coordinate, but to integrate energy issues with its foreign policy,” says the report.
Recommendations to integrate energy issues into the foreign policy process include:
- Establish an energy security directorate within the National Security staff to coordinate inter-agency policymaking on energy security issues.
- Engage the Secretary of Energy in any foreign policy deliberations that involve energy issues.
- Include energy security considerations in the terms of reference of all planning studies at the National Security Council, Defense and State departments, and the intelligence community.
The Task Force restricted its inquiry to the challenges of managing U.S. and global dependence on imported oil and gas. It did not address other important energy security subjects such as nuclear proliferation and global warming.
Independent Task Force on Energy and U.S. Foreign Policy
Graham T. Allison, Belfer Center for Science and International Affairs
Norman R. Augustine,Lockheed Martin Corporation
Robert A. Belfer, Belfer Management
Steven W. Bosworth, The Fletcher School
Helima L. Croft, Lehman Brothers
Charles J. DiBona,Sentient Council
Jessica P. Einhorn, Paul H. Nitze School of Advanced International Studies
Martin S. Feldstein, National Bureau of Economic Research
David L. Goldwyn, Goldwyn International Strategies
Michael D. Granoff, Pomona Capital
Bennett Johnston, Johnston & Associates, LLP
Arnold Kanter, The Scowcroft Group
Karin M. Lissakers, Soros Fund Management LLC
Walter E. Massey, Morehouse College
Ernest J. Moniz, Massachusetts Institute of Technology
William K. Reilly, Aqua International Partners
Peter Schwartz, Global Business Network
Philip R. Sharp, Resources for the Future
James B. Steinberg,LBJ School of Public Affairs
Linda G. Stuntz, Stuntz, Davis & Staffier, P.C.
James L. Sweeney,Stanford University
Frank Verrastro, Center for Strategic & International Studies