Oct
17

Collaborative Solutions: Energy Security in North America

 
Earlier today, Admiral Dennis C. Blair (ret.) former Director of National Intelligence and Commander in Chief of U.S. Pacific Command, spoke before a packed lunchtime crowd at this year’s Chicago Council on Global Affairs U.S.-Canada Energy Summit. His remarks, “Shared Challenges, Collaborate Solutions: Energy Security in North America,” spoke to the long tradition of U.S.-Canadian cooperation, especially on energy issues, and the importance of developing, together, a cohesive, comprehensive energy security strategy for decoupling North America from its dependence on oil.

Consistent, secure and affordable energy has been a priority of global importance for more than a century. Today’s headlines echo that importance: focused on the question of supply security. Access to Russian gas in Europe, Libya’s struggle to ramp up oil production, or the Islamic State’s threatening Iraqi oil production, all of these concerns center on the importance of making sure the oil keeps flowing. In this context, the ideas of “energy independence” or “ending our dependence on foreign oil” are naturally attractive. The U.S. production boom has altered the landscape of the global oil market, and indeed has helped smooth over supply disruptions that could have otherwise caused severe price spikes. For example, in 2011, civil unrest in Libya led to a supply disruption that drove up the price of oil $20, essentially plateauing the U.S. economic recovery. Today, in the face of 3.5 million barrels per day (mbd) of supply disruptions, we have fared better, able to fill some of the gaps, reducing volatility in the global oil market. For forty years, this understanding of energy security, that we can produce our way out, has heavily influenced policy in the United States. Today, we are closer than ever to the idea of energy self-sufficiency: America’s net imports of liquid fuels will fall to just 20 percent of total oil consumption next year—an astonishing drop from 2005’s level of more than 60 percent. While idea of energy independence may seem appealing, it neglects to take into account the power of the global oil market—far from a “free” market—and its influence on our economy and national security. Total petroleum spending by U.S. households, businesses, and public agencies averaged nearly $880 billion annually over the past three years—equal to more than 5.5 percent of U.S. GDP over the same period. In 1974, in the midst of the OPEC oil embargo, that figure was only slightly higher at 6.1 percent. Households continue to be among the most adversely affected, with annual gasoline spending more than doubling between 2002 and 2013, a period during which we know wage growth was underwhelming at best. Furthermore, in its most recent forecasts, the U.S. Department of Energy suggests OPEC will be called on to meet more than half of the needed increase in global liquid fuels production between today and 2040. Meeting growing demand in the global oil market will require OPEC supply—and the cartel influence that comes with it. What most observers concerned with energy security fail to realize is that as long as oil is the dominant fuel in transportation, our economy will be vulnerable to high oil prices and potential volatility from events around the globe. Foreign policy discussions must account for potential price spikes and economic ripple effects when dealing with countries like Russia, and our foreign and military policy apparatus will remain heavily focused on the Middle East. There appears to be no escape from this seemingly intractable scenario, one where the U.S. military spends up to $83 billion annually to secure global oil supply, and we negotiate with states like Iran, not willingly, but out of need to maintain regional stability and keep markets running smoothly. We are kept hostage to a resource with side effects that prove to be exceptionally costly. Dependence on one energy source limits our options by default. When discussing the provision of oil to the Royal Navy prior to the First World War, Winston Churchill once noted, rather poignantly, that, “Safety and certainty in oil lie in variety and variety alone.” When we extend this image to the transportation sector, “variety” takes on a greater meaning. Energy security lies in fuel diversity. Breaking our dependence on oil means taking advantage of our domestic resources, such as natural gas and electricity, both readily and cheaply available today. By decoupling ourselves from oil, we insulate our economies from the impacts of the global oil market and the risks contained therein. The United States is not alone in this challenge. Energy security is a shared security problem. The U.S., Canada, and most other major oil-consuming countries are dangerously dependent on oil to power mobility and our economies. Oil accounts for 37 percent of U.S. energy demand and 31 percent of Canadian energy demand. In the United States, no other energy source comes close. This dependence is most acute in transportation, where oil accounts for more than 90 percent energy consumption—in the United States, Canada, and globally. Oil-consuming countries must work to encourage the fuel diversity necessary to break oil’s monopoly on transportation. Enhancing North America’s existing natural gas network will play a critical role in getting more natural gas cars and trucks on the road, which is especially important for the continent’s heavy-duty truck fleet. Electric cars have made significant strides toward wider adoption, though infrastructure has historically lagged behind consumer needs. But along the West Coast, the Pacific Coast Collaborative’s Green Highways program has jumped ahead of the curve, and participating states are deploying EV charging equipment every 40 to 60 miles along a 585-mile stretch of Interstate 5, and onto BC-99. By drawing from multiple different fuels from a variety of sources, we will simultaneously enhance our advantage on the international stage, increase our economic resilience, and offer more choices to consumers.  The United States and Canada have already shown their ability into integrate economically across a vast array of industries, goods, and services. We should continue to encourage this synergy by promoting diversified transportation and working to craft policies that maximize its efficiency—within and across borders.
Oct
15

Are We More Energy Secure? Then and Now (Part 2 of 2)

 

In part of one of this piece, we looked at ways in which the United States is more energy secure than ten years ago. Now, it’s worth looking at ways in which our energy security has failed to improve, or in some cases, worsened. 1) Oil’s Share of Transportation Fuel One of the most glaring vulnerabilities in our energy security is the fact ...

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Oct
10

Tesla Pushes Forward on Autonomous Vehicles

 

  Last night, Tesla Motors CEO Elon Musk debuted the automaker’s newest product, an update to the Model S with new features that include all wheel drive (AWD), 0-60 acceleration in just over 3 seconds, and some highly anticipated autonomous driving features. The new AWD edition is recognizable from the addition of a “D” to the standard model names (60D, 85D, ...

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Oct
10

How do Consumers Respond to Falling Gasoline Prices?

 

Last month, as gas prices dropped by nearly 15 cents nationwide, consumers responded by purchasing less fuel-efficient vehicles. This trend became evident with the help of two measures. First, sales-weighted new vehicle fuel economy dropped noticeably after several months of impressive gains. According to data collected by Michal Svitak and Brendan Scoette at the University of Michigan’s Transportation Research Institute, the ...

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Oct
9

Oil Security Index: October 2014 Update

 

This morning, SAFE released its latest quarterly update to the Oil Security Index, a tool measuring the relative oil security of more than a dozen countries around the world based on a set of key indicators. These indicators include structural dependence on oil, economic exposure to the global oil market, and capacity to respond to oil supply disruptions. This most recent ...

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