In this case, the Europeans don’t appear worried, and intend to rely in part on increased LNG imports to make up the difference.  That should stand as a reminder that linking the US to the global natural gas market through robust LNG exports could have energy security ramifications that will need to be taken into account.

On the oil side, today’s WSJ reports that the Nigerian militant group MEND (Movement for the Emancipation of the Niger Delta) claimed responsibility for an attack on an Eni SpA pipeline that caused the company to shut down the pipeline on Sunday.  That’s disturbing since MEND has been “largely dormant since a 2009 amnesty granted to militants” and of course Nigerian oil production leads all African production.  Apparently some younger “militants feel they haven’t benefited from the peace dividend as much as MEND’s ex-commanders.” “An oil-industry official said it was nearly certain the Eni incident was sabotage” and MEND “warned of more attacks in the Delta.”  And it’s not just MEND threatening Nigerian production:  ”Last month, to protest against government plans to remove fuel subsidies, unions threatened to shut down the country’s oil production” leading the Nigerian government to pull back on those plans.  That’s doubly bad since market-distorting subsidies like Nigeria’s help keep global oil prices high.

There’s no question that 2011 was a good year for US energy security on both the natural gas and oil fronts.  Yet we are reminded daily why greater energy self-sufficiency is a worthy goal.

The major news this week has been President Obama’s “all of the above” energy strategy, one which encompasses renewables and alternatives as well as expanded production of oil and gas. The most notable part of the President’s plan is a strong emphasis for natural gas as a transportation fuel, supported by tax credits to offset part of the cost of upgrading medium and heavy duty trucks to run on natural gas, federal help to spur creation of natural gas corridors on heavy duty trucking routes, and incentives for conversion of city bus and truck fleets. A 2009 report from the Massachusetts Institute of Technology indicated that an optimal application of natural gas in transportation could be to replace diesel as the primary fuel for heavy-duty vehicles.

In the Senate, Jeff Merkley (D-OR) announced on Thursday at the Washington Auto Show that he will be introducing a bill to encourage fleet purchases of electric vehicles. So far, it is understood that the bill will include incentives for public and private purchases, creating a larger market for EVs enabling automakers to produce the cars less expensively.  We will be staying tuned for news about this important legislation.

Additionally, both chambers are preparing for the renewal of the nation’s surface transportation bill, which expires in March. Senate Environment and Public Works Chairman Barbara Boxer (D-CA) and top Republican Jim Inhofe (R-OK) have developed a bipartisan, 2-year bill which was voted out of committee 18-0. Politico reports Transportation Secretary Ray LaHood has praised “extraordinary leadership” of the committee, and described the unanimous committee vote as “unheard of in the halls of congress.” The House Transportation and Infrastructure Committee is also working on a less bipartisan bill, partially paid for through opening the Arctic National Wildlife Refuge (ANWR) to oil exploration. This provision is a non-starter for Obama and most Democrats. Nonetheless, we are optimistic for longer-term, surface transportation legislation with the essential fuel savings provisions necessary to improve energy security and reduce fuel waste. Some ideas can be found in SAFE’s report, Congestion in America: A growing Challenge to U.S. Energy Security, released earlier this week.

The legislative and executive branches are off to a running start this year, but actions speak louder than words, and we are eager for some legislative achievements. As SAFE President and CEO Robbie Diamond was quoted in the Wall Street Journal earlier this week, “Now that President Obama and Republicans say they are on the same page with an all of the above energy strategy, let’s get something done.”

The Jobs Council Report should be praised for its scope in addressing the importance of both energy progress and pragmatism. An emphasis on green energy and renewable sources could have been anticipated, but the report also stresses the importance of increased fossil fuels development for the foreseeable future, stating,

“While we believe the United States, as well as the rest of the world, needs to move deliberately and cost-effectively towards greater proportions of renewable and low carbon forms of energy, we recognize that this will be a long term transition and that traditional forms of fossil energy will continue to be important to our economy as we transition.”

With regard to alternative fuel vehicles, the report discusses the importance of the government’s role in scaling up fully electric vehicles and hybrids, by increasing purchases from state and federal government agencies (including the military), as well as research to support advancements in battery technologies.  The tremendous upside: “widespread adoption of vehicles powered by electricity, natural gas, and alternative fuels could hasten and make permanent our return to being a net exporter of petroleum.”

This goal is urgent and essential, and the jobs report delivers in addressing a full spectrum of goals, many of which are advocated by SAFE. However, many more specific details about the various recommendations are needed to secure sustained energy-industry growth. Furthermore, since the release of the report, the Administration’s first major energy move has been to reject the Keystone XL Pipeline. Of course, those following the controversial pipeline’s lengthy approval process know Obama’s rejection only applies to TransCanada’s proposed route through the Nebraska Sandhills, and the company can re-apply upon development of an alternative route (industry officials are expecting TransCanada to submit a new version within two weeks). Still, as Keystone has emerged as such a powerful symbol of shovel-ready, energy producing jobs; it’s a bold move and arguably a direct contradiction to “all-in.”

First, in “Glut Hits Natural-Gas Prices,” the WSJ reports:

U.S. energy companies are pumping so much natural gas out of the ground that prices are plummeting, and the cheap gas isn’t likely to evaporate anytime soon.

Natural-gas prices fell 5.7% Wednesday to their lowest level in over two years—good news for people who use gas to heat homes and for companies that use it to power factories.

For U.S. energy companies, however, the domestic natural-gas market is looking increasingly out of whack. Despite a 32% drop in prices last year, onshore production rose 10%, and it is expected to rise another 4% this year, according to Barclays Capital. As a result, prices are expected to remain low for at least the next couple years.

Prices may even drop through — or at least near — the old $2 per mBtu floor that hadn’t been hit since 2002.

So what to do with all this gas?  The WSJ provides one answer in their story on utility emissions, “Power Plants Top List of Emissions.”  This is the first time EPA has made detailed emissions information publicly available, and not surprisingly:

Power plants accounted for more than half of the greenhouse-gas emissions by the major emitters on the list, with refineries and chemical facilities also contributing large shares.

So clearly one thing to do with all this gas is use it for power plants while we figure out how to burn coal more cleanly.

Another thing that can be done is referenced in Bloomberg today, who reports that: 

Chrysler Group LLC, the automaker controlled by Fiat SpA, plans to begin selling natural gas- powered pickups in the U.S. this year, said Sergio Marchionne, chief executive officer of both automakers.

Apparently deliveries will begin in the US in 2017 to, appropriately enough, fleet customers.  The reason to start with fleets is obvious and well reported by Bloomberg:

Infrastructure for refueling natural gas vehicles is limited. The International Association for Natural Gas Vehicles says on its website that there were 1,000 stations and 112,000 natural-gas vehicles in the U.S. as of December 2010. The worldwide totals were 12.7 million such vehicles and 18,202 refueling stations, according to the association’s data.

So you start with fleets that can make the investment in refueling infrastructure and can then recapture the investment in lower engine and fuel costs versus diesel and electric hybrid — estimated by Fiat as $3,000 in engine costs alone for natural gas versus $3,300 for diesel and $8,000 for an electric hybrid.

Natural gas for power and natural gas for fleet vehicles where it makes sense.  That’s a pretty sound use of this currently plentiful commodity and a likely recipe for sustainable pricing.

According to a new Intelligence Report published today by SAFE, Iran is likely to intensify its threats toward oil supplies moving thorough the Persian Gulf over the course of 2012 as part of an unconventional method of conflict that uses oil as a strategic weapon to keep the West from continuing its trend of hard-hitting sanctions.

Unfortunately, there is no elegant way for the U.S. and its allies in the short-term to put a stop to Iran’s behavior. The United States has lacked good policy options against the Iranian regime for decades because the U.S. transportation sector is heavily dependent on oil. In the short and medium-term, additional sanctions and better strategic oil stockpile management may help alleviate some of the risk posed by a cut-off in oil shipments by Iran. In the long-term, however, the key to any effective strategy that will reduce U.S. dependence will likely only be found by shifting America’s transportation sector toward non-petroleum fuels like electricity and natural gas.

Click here to read the full Intelligence Report.

The candidates’ energy policy consensus breaks down over tax breaks for oil and gas producers and whether to just restructure, or flat out eliminate the EPA. The Iowa Caucuses on Jan. 3 saw Mitt Romney defeat surprise second-place finisher Rick Santorum by a mere eight votes and follow up primaries in New Hampshire on Jan. 10, South Carolina on Jan. 21, and Florida on Jan. 31 will have a disproportionate influence on the outcome of the Republican nomination.

Regardless of who is the Republican nominee may be, the contrast between the Republican energy platform coming out of its Tampa, Florida convention in August and the energy/environmental policies of President Barack Obama as he runs for re-election could not be starker, making the November 6^th general election one for the ages in terms of the future direction for U.S. energy policy.

Click here to read the full report.

To update: In addition to a threat last week to close the Strait, yesterday (Tuesday, January 3^rd), Iranian armed forces commander General Ataollah Salehi delivered a series of provocative statements to the USS John C. Stennis aircraft carrier that recently left the Persian Gulf’s waters, saying “We warn this ship, which is considered a threat to us, not to come back, and we do not repeat our words twice.”  The Islamic Republic  is known for its exaggerated military rhetoric (Iranian Naval Commander Admiral Habibollah Sayari is quoted as saying that closing the Strait would be “as easy as drinking a glass of water”), yet oil prices still jumped 4% in response, and U.S. officials note that Iran’s increasingly bellicose tone is likely a result of economic desperation, the Washington Post reports.

The Wall Street Journal’s Editorial Staff has taken a rather hawkish approach to the situation in their piece, “Iranian Strait Talk: A Carrier response to Tehran’s threats.” They point out that Iran fits all potential categories for regime gone rogue, with violations ranging from taking hostages and repressing their own citizens to test-firing ballistic and cruise missiles during naval exercises. In their assessment, Iran can’t do much more than bluff, considering “The “American warship” that Tehran is now threatening, the USS John C. Stennis, is a Nimitz-class carrier whose air wing alone is more capable than the entire Iranian air force.”  They conclude, “the best response to Iran’s threats would be to send an American aircraft carrier back through the Strait of Hormuz as soon as possible, with flags waving and guns at the ready. If it can’t be the Stennis, the USS Eisenhower would drive home the message.”

The companion piece to this OpEd, “Iran Won’t Close the Strait of Hormuz” was written by Bradley Russell—a Navy captain—and Max Boot, visiting and senior fellows at the Council on Foreign Relations, respectively. Their argument: while it remains true that Iran’s conventional forces are little match for American military might, they have ample asymmetrical resources at their disposal to cause severe and prolonged disruptions to global oil markets. In 1984 during the Iran-Iraq war, Iran avoided direct attacks on U.S. forces, but scattered mines throughout the Strait and used small, maneuverable patrol boats to fire a variety of missiles at tankers. A fleet of aircraft carriers is not necessary to inflict sustained damage to the Strait’s daily flow of 17 million barrels of oil, or worse, to injure or kill American military personnel.

Analysts believe oil prices have already increased by $5 to $10 a barrel due to the uncertainty, with the capability to grow much larger in coming weeks depending upon how events unfold. Both of Wall Street Journal’s articles raise several key points, but there is also a greater force at work: if it were not for our dependence on the foreign oil being transported through this strategic waterway, the Strait of Hormuz wouldn’t be considered strategic in the first place. But since the world has no other options for its primary transportation fuel, we can expect prolonged oil price spikes and continued threats as Iran flexes the only weapon it really has.

Although the Strait currently remains navigable, Tehran is not leaving its intentions open to interpretation.  The Tehran Times reported today that “Iran’s threat of closing the Strait of Hormuz is a response to the United States’ threats against the Islamic Republic.” The article suggested that future practice sessions are likely, and in the words of Iranian Parliamentarian Parviz Sorouri, “If the world wants to make the region insecure, we will make the world insecure.” Under the United Nations Convention on the Law of the Sea (UNCLOS) Iran has the right to close the Strait if its interests in the waterway are threatened.

It is unclear how the United States will respond to these drills, amid ongoing debates regarding sanctioning Iran for its continued development of nuclear technologies. The Iran Threat Reduction Act, H.R. 1905, which is expected to pass in the House shortly, would tighten sanctions against the state and sanction the Central Bank of Iran if investigations find that the bank has supported Iran’s terrorist activities. House Foreign Affairs Committee Ranking Member Howard Berman (D-CA) said yesterday evening that these measures could “roil the global oil markets, but that this was worth the risk in order to prevent Iran from developing nuclear weapons,” The Hill reports. Other representatives have argued against the bill on the grounds that oil prices will spike if it takes effect.

Further complicating the matter, it is reported that Saudi Arabia has pledged not to increase output to compensate for production shortages from Iran, despite the U.S.’s efforts to secure assurances of a supply cushion.  OPEC’s Vienna meeting concluded today with a compromise between the price-hawkish Iran and the more dovish Saudis, by setting the cartel’s total production levels at 30 million barrels, thus maintaining but not increasing current output.

Now, the United States finds itself in an uncomfortable situation.  With the economy still lagging under high oil prices, a spike in response to sanctions would be problematic, but prolonged blockage of one-sixth of the world’s oil supply would have catastrophic repercussions.  Conversely, the U.S. and the west must maintain credibility regarding threatened consequences for Iran’s emerging nuclear program.  This is a perfect example of foreign policy with one hand tied behind our backs: the inability to take necessary actions against enemy states due to our crippling dependence on foreign oil.

But that’s history, and the annual two-week negotiations over addressing global climate change did end on Sunday with what the WaPo called “a last-minute deal.”  The deal?  An agreement to potentially reach an agreement that would apply something called “an agreed outcome with legal force” to developing nations.  This is arguably an advance on the Kyoto Protocol, which did not require developing nations to commit to reduce their greenhouse gas emissions.   And that’s important because some “developing nations” — namely China and India — are leading the globe in aggregate emissions.  To be fair, their per capita emissions are far lower than developed nations, but that shouldn’t give them a free pass.  The key negotiating issue since the US pointed out the fundamental unworkability of the Kyoto Protocol has been  how to account for developing nations’ exploding emissions without unfairly impeding their economic growth — after all, the developed nations built their economies on cheap fossil fuels and only subsequently has the world (well, most of it) realized that there will be highly negative consequences because of it.

It remains to be seen whether this year’s climate confab really moved the ball on this point.  Host South African foreign Minister Maite Nkoana-Mashabane certainly thinks so, as the WaPo quotes him saying, “We have indeed saved tomorrow today.“  Veteran climate watcher Alden Meyer, of the Union of Concerned Scientists, had a different view, noting failure to achieve agreement on reducing the gap between expected emissions and those most scientists believe are the maximum that the climate can endure without expensive and life-threatening damage:  “There’s nothing [in the agreement] that’s going to get the world to lift its game and close that gap.”

Maybe more important news this weekend came from the Nuclear Regulatory Commission, where dysfunction apparently reigns.  Both the WaPo and the WSJ reported Saturday on four NRC Commissioners, two Democrats and two Republicans, writing to the White House accusing Chairman Greg Jaczko of  ”actions and behaviors [that] are causing serious damage to this institution.”  That quote is from the WSJ, which runs an unfortunate lead sentence (“Four of the five members . . .”) — if you didn’t already know that there are only four commissioners and a chairman, you don’t find that out until the end of the piece, so casual readers may have thought there was a hold-out.  The fact is that all four of these highly respected professionals, Democrat and Republican alike, took the trouble of airing their concerns about the NRC’s leadership to the White House.  House Oversight and Government Reform Committee Chairman Darrell Issa, not the fuming four, released the letter to the media.

The bipartisan nature of the criticism made Senator Harry Reid’s (D-NV) otherwise laudable defense of his former staffer ring a bit hollow.  As reported in the WaPo on Sunday, he called the complaints “a politically motivated witch hunt.”  We’re guessing Senator Reid meant that Chairman Issa was hunting witches, not labelling the letter such.  But since loyalty in Washington is often in short supply, we’ll give him a pass either way.  Not so the NRC as a whole, an organization too critical to our energy future to have it’s oversight confined to the weekend papers.  Oversight hearings, anyone?

It’s important to note that political attacks on energy policies come from both sides, and a journalistic thread runs through the Solyndra scandal, hydraulic fracturing techniques, attacks over new fuel efficiency standards, and criticisms over electric vehicle battery makers. These stories are largely about politics, not energy policy, and they seem to view any energy program – government or privately funded, fossil or alternative – as equally injurious to the public trust,   regardless of their intrinsic worth.

All of us want transparency and accountability in government programs, and everyone should support funding decisions that are based on merit, not political connections.

But not all energy programs or projects are created equal.

Our organization believes the principal metric by which a new energy technology or program should be judged is whether it displaces oil use; because America’s dependence on oil is a major risk to our country’s national security and well-being.

There is no such thing as a free market for oil. Rather, it is controlled by national oil companies within a cartel that shares neither our values nor our interests.

This country currently imports more than 9 million barrels a day and since 2007, the impact of energy imports on our trade deficit has reached an astounding $1.4 trillion. This is an enormous amount of hard-earned wealth leaving U.S. bank accounts during the worst economic downturn in decades, and some of the money has likely trickled into the pockets of non-state actors who wish the U.S. harm. Additionally, our armed forces play the role of “global policeman” for oil supplies at great cost in blood and treasure to our servicemen and women.

A Wall Street Journal article published on Dec. 5 questions whether U.S.-based electric car battery-makers can survive, given strong competition from Asia and a slower-than-expected rollout of electric vehicles. Yet this market is expected to be robust in the years ahead, both in the U.S. and globally, so for a young industry to enter into a cycle of consolidation is not really a surprise.

And, the article would have been wise to compare the costs of government support to battery cells makers – $2.4 billion in 2009 – to the cost of U.S. oil dependence. A 2009 study by the RAND Corporation placed the cost of this energy security defense burden to the U.S. military and ultimately the American taxpayer at between $67.5 billion and $83 billion annually.

We should be viewing our energy policy as a response to these threats using proper economic and national security criteria, rather than labeling each new energy technology that draws public attention as a “case study” in politics.

Clearly, hydraulic fracturing technology for oil and gas drilling, auto industry innovations with fuel economy and improvements to lithium battery technology for electric cars all pass the energy security test. All three innovations decrease the amount of oil we import from overseas, which weakens the influence oil has over our foreign policy and narrows our trade deficit.

Electrification of the U.S. vehicle fleet in particular offers the opportunity to dramatically cut oil and improve America’s energy security over the long-term. There are already large amounts of spare capacity in U.S. electrical generation, the system offers very stable prices, and electricity is generated by a diverse set of domestic fuels.

Every technology has its critics, but each should be judged against energy security benchmarks that can clearly show whether taxpayers get a compelling return on investments in terms of oil displacement.  Our nation has allowed its foreign affairs and domestic energy policies to be influenced by outside actors for too long. Doing nothing consigns the U.S. to remain in its decades-long stalemate over energy policy. The only thing worse would be to enter each and every solution into a simplistic “political calculus” that leaves no winners and only losers.