About the Events

Why We Need to Get Off Oil—and How*

Hurricanes Katrina and Rita sent gas prices soaring and opened our eyes to America's dangerous dependence on oil. Not since the oil crisis in the 1970s has there been so much public attention on this issue. And yet today we have a problem of a very different, more dangerous nature: thirty years ago, OPEC chose to limit the oil supply. Today, oil producers are pumping as fast as they can, but cannot keep pace with rising demand.

It is no wonder that President George Bush has raised the alarm by stating: "America is addicted to oil."

What is most striking about the issue of American oil dependency is that virtually everyone agrees it is bad for America. It is hard to find anyone who will tell you that oil dependency is a good thing. Nevertheless, America's dependency continues to grow. This is due in part to the fact that there is little agreement on the best solutions, and that many solutions have proven politically difficult to implement.

Until now. The high price of oil-in terms of dollars, national security, and the environment-has reached a crisis point. We now have a historic opportunity to shift to new fuels to power our economy. We must not waste it.

This shift will take time. Solutions to our thirst for oil will require real change. There is no silver bullet, no simple answer. But we must understand that the solutions are out there, and that the cost of doing nothing is very high.

The Costs of Business As Usual

If America does not seize this historic opportunity to reduce our dependence on oil, we may bear the following serious consequences:

1. More conflicts in the Middle East

America imports almost 60% of its oil today and this figure will increase over time as demand goes up and domestic production remains flat. Where will that oil come from? Two-thirds of the world's oil is in the Middle East, primarily in Saudi Arabia, Iran and Iraq. The United States has less than 3% of global oil. The Department of Energy predicts that North American oil imports from the Persian Gulf will double from 2001 to 2025. Other oil suppliers, such as Venezuela, Russia, and West Africa, are also politically unstable and hold no significant long-term oil reserves compared to those in the Middle East.

Bottom line: America's economy and security are increasingly dependent on one of the most unstable regions on earth. Unless we change our ways, America will find itself even more at the mercy of Middle East oil and thus more likely to get involved in future conflicts.

America has tried to address its oil vulnerability by using the military to protect supply routes and to prop up or install friendly regimes. But as Iraq shows the price is astronomical-$300 billion and counting. Moreover, it doesn't work-Iraq is now producing less oil than it did before the invasion.

2. More terrorist attacks

The more dependent America is on foreign oil, the more troops will be deployed abroad to protect that oil. This creates resentment and invites terrorist attacks on our troops-and on oil supply routes. The U.S. troop presence in Saudi Arabia during the first Gulf War was a major contributor to the rise of Islamic terrorist groups like Al Qaeda, and U.S. troops in Iraq are now a main justification for the insurgency there. We must break our oil habit so we can reduce our military footprint abroad.

Moreover, much of the money Americans pay for imported oil goes to countries or groups that support terrorism. It is no accident that 15 of the 19 September 11 hijackers came from Saudi Arabia, as does Osama Bin Laden. It is time Americans stop funneling money to our own enemies.

3. Collision course with China

With over one billion people, China is second only to the U.S. in oil consumption-and gaining fast. China has one of the fastest growing economies in the world and an energy demand that is projected to grow by 150% by 2020. China's oil demand is increasing seven times faster than America's.

China currently imports half of its oil, and like the United States, China will become increasingly dependent on oil from the Middle East.

As a result, access to oil will over time become a key issue in relations between the two nations. The more U.S. actions in the Middle East are perceived as an effort to dominate oil resources there, the more China will consider the United States a threat to its interests, and visa-versa. In the current context of stagnating supply, this kind of demand competition is very destabilizing. Avoiding a potential U.S.-Chinese rivalry over global oil supplies is a key driver for reducing U.S. oil dependency.

4. Nuclear Weapons in Iran

The current Iranian regime appears determined to get nuclear weapons. This would be a disaster for global security, as the current regime is openly calling for the destruction of Israel, has significant ties to terrorist groups, and sits next to the Strait of Hormuz-through which 20% of the world's oil passes every day. Iran also has the second largest oil reserves (after Saudi Arabia), holding 10% of global oil. This gives Iran significant leverage over the West. Economic sanctions against Iran could lead it to cut off oil exports, which would send global oil prices soaring. A senior Iranian official reportedly threatened that Tehran may forcibly prevent oil exports via the Straits if the UN imposes economic sanctions.

As a result, oil-dependent, UN-veto-wielding China is opposed to economic sanctions. And all oil-importing nations would feel the crunch, since reduced supply on the global market would mean higher prices for all. This is true for the United States even though it does not buy oil directly from Iran. Thus all nations will have to consider the serious implications for their national economies if they support economic sanctions against Tehran. And to the extent that sanctions become a less likely response to Iran, military action may become more likely. But it does not have to be this way.

5. Continued global warming and more dangerous storms

Recent studies show that global warming is increasing the intensity of storms like Hurricane Katrina. An MIT study has shown for the first time that major storms in both the Atlantic and Pacific oceans since the 1970s have increased in duration and intensity by 50%. This increase in storm intensity is closely linked to increases in the average water temperature, which is linked to increases in global atmospheric temperature. Simply put, warmer air means warmer water and storms that are more severe.

Global warming is caused by the buildup of carbon dioxide in the atmosphere, and burning oil produces carbon dioxide. So, cutting our oil use can help reduce the intensity of severe storms like Hurricane Katrina-both here and abroad. According to MIT climatologist Kerry Emanuel: "The damage and casualties produced by more intense storms could increase considerably in the future."

This is a global problem. Hurricanes Katrina and Rita displaced tens of thousands and will cost the Federal Government $200 Billion or more for reconstruction. Refugee migrations and costs on this scale could easily overwhelm smaller nations and lead to international conflict.

6. Weaker economy

High oil prices get passed on to the consumer through higher costs at the pump, more expensive goods and services, a weaker job market, and lower stock prices. At much lower oil prices, the total economic cost of U.S. oil dependence had been estimated to be about $300 billion per year. At today's prices of $60 per barrel, the economic costs of exporting dollars for oil is much greater. As the price of oil continues to climb due to supply disruptions, this cost to the American economy and jobs will rise.

The U.S. trade deficit widened to a record $726 billion in 2005, its fourth consecutive annual record, and has almost doubled since 2001. The trade deficit was driven up by high energy prices and the nation's bill for imported oil. Oil imports accounted for 29% of the deficit, or $251 billion, up from 25% in 2004. And with oil prices on the rise, we can expect worse numbers to come.

The 2005 gasoline crisis was set off by the closure of refineries on the Gulf Coast, revealing America's long-standing vulnerability to supply disruptions. In this case, the disruption was domestic. But America's oil supply chain is global, and disruption can happen anywhere from when the crude oil is pumped from the ground to when it is pumped as refined gas into your car.

The Oil Shockwave crisis simulation run by the National Commission on Energy Policy and Securing America's Future Energy found that if, for example, there was ethnic unrest in oil-rich Nigeria and terrorist attacks in Alaska and Saudi Arabia, the reduced oil supply would drive U.S. gas prices to $5.74 a gallon and the economy into recession. And now we can add major hurricanes to the list of supply disruption possibilities.

The point is, as U.S. dependence on foreign oil grows, so does the vulnerability to supply shocks. According to Robert M. Gates, former CIA director, "The real lesson here [is that] it only requires a relatively small amount of oil to be taken out of the system to have huge economic and security implications."

We Have Alternatives

Oil prices are rising, global warming is accelerating, and our dependence on unstable suppliers in the Middle East is growing. Reducing America's oil use will save jobs, save the environment, and free us from the shackles of Middle East oil. So, how do we do it?

First, we must realize that domestic drilling and nuclear power cannot be the whole answer. Some would like to drill the Alaskan National Wildlife Refuge (ANWR) and other untapped American sources. But with only 3% of global reserves we would soon be back begging at the Saudi's spigot.

Nor can we depend on nuclear power alone. Nuclear plants produce electricity-but today only 3% of US oil demand goes to electricity production. The transportation sector is the major consumer of oil in America. Thus to reduce demand, we must focus on our cars.

Here are some of the most promising, realistic steps America can take to reduce its thirst for oil:

1. Congress should establish a national goal of saving 2.5 million barrels of oil per day over the next decade

Without national agreement on a goal, we will not get there. America must commit to investing the money we would otherwise send oversees to modernize and harness the technology potential of our factories and farms here at home.

Recently introduced legislation would establish such a goal. The bipartisan Vehicle and Fuel Choices for American Security Act of 2005 calls for saving 2.5 million barrels of oil per day within 10 years and increased savings by 2025 through new vehicle technologies and home-grown biofuels.

2. Raise gas mileage in new passenger vehicles through tax credits and standards

Passenger cars, minivans, SUVs and light trucks account for almost 50% of U.S. oil demand. This is why we must boost efficient use of oil by increasing the fuel economy performance of our vehicles. Consumers understand this and have responded to the recent price increases by buying more fuel-efficient cars, such as hybrids, and demanding a greater variety of gas-sipping choices. U.S. automakers are starting to respond by producing hybrids, but are far behind their Japanese competition and putting American jobs at risk.

The U.S. economy must become less vulnerable to high oil prices by reducing oil dependency. This is a national priority that merits public investment and commitment. Financial incentives to build more fuel-efficient vehicles would help save oil and increase U.S. automaker competitiveness. The states most vulnerable to factory closings and job loss-Michigan, Ohio and Indiana-must lead efforts to retool the U.S. auto industry.

Automakers and suppliers will need to retool their factories to produce advanced technology vehicles. Consumers will need to buy these more fuel-efficient cars, which will cost more that conventional vehicles. Both groups would benefits from tax credits. The bipartisan National Commission on Energy Policy (NCEP) recommends spending $3 billion over the next five to ten years on consumer and manufacturer tax credits. These tax credits will help reduce U.S. oil dependence and pay for themselves through increased tax revenue, including new jobs in the production of advanced vehicles.

To make sure that tax credits translate into oil savings, NCEP also recommends that federal fuel economy standards be raised, as they were in the 1970s and 1980s. The fuel economy standards enacted in 1975 were a key factor in the rise in gas mileage between 1978 and 1988.

3. Encourage growth of biofuels industry

Increasing auto fuel efficiency is just the first step to reducing oil use. The next crucial step is to develop alternative fuels that do not use petroleum. These new fuels can be grown by American farmers. Cellulosic biomass-made from agricultural leftovers (leaves, stems, stalks), crops grown for energy use (such as switchgrass), and garbage-can be made into ethanol as fuel for our cars.

In his 2006 State of the Union speech, President Bush declared: "We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips, stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years."

Today's cars can run on 10% ethanol fuel. But to really make a dent on oil demand, we need cars-called flexible fuel vehicles (FFVs)-that can run on fuel that is 15% gasoline and 85% ethanol. High ethanol fuels not only displace oil but also decrease harmful particulate air pollution.

Congress needs to require all new cars and trucks to be capable of running on biofuels. There is great potential for biofuels to replace oil in our cars and trucks. By 2050, biofuels coupled with efficiency and smart growth could reduce our oil demand by almost 8 million barrels of oil per day.

If hybrids are made to use ethanol and can be plugged in at night, such vehicles can be powered by blends of ethanol, gasoline, and electricity and could achieve over 100 miles per gallon of gasoline. According to Set America Free, if, by 2025, all cars on the road are plug-in, flexible fuel hybrids, U.S. oil demand would drop by as much as 12 million barrels per day.

4. Invest in smart growth and better public transportation

In addition to providing consumers with more fuel-efficient cars and alternative fuels, we also need to give them more alternatives to driving and to design our communities so we can drive less. The potential oil savings from better land use, transit oriented development, telecommuting and improved public transportation are huge. Over ten years, smart growth developments could save about 50 billion gallons of gasoline, over 1 billion barrels of oil, and 595 million metric tons of CO2 emissions.

A Vision for the Future

Imagine America with new automobile production plants producing advanced high-efficiency vehicles, creating jobs for American workers.

Imagine American farmers growing ethanol fuel to run our cars, and American citizens living in communities designed around modern transit systems.

Imagine Americans driving cars that get over 100 miles per gallon of gasoline.

Now imagine America free from the burden of protecting our stake in Middle East oil, allowing us to reduce our military footprint in the region and our exposure to terrorism. We could then base our foreign policy on the ideals that make this a great nation, like global peace and security, freedom and democracy.

According to Amory Lovins, CEO of the Rocky Mountain Institute: "As our nation stops needing oil, think of the possibilities of being able to treat oil-rich countries the same as nations that don't own a drop. Imagine too our moral clarity if other countries no longer assume everything the United States does is about oil."

Katrina and Rita have opened our eyes to the oil crisis. Let's not blink.

* NOTE: The views expressed here are those of 20/20 Vision, and not necessarily shared by all conference cosponsors. [Back to Top]