Schlesinger: US in better oil, gas position now than in 1973

The US is in a better oil and gas position now than it was 40 years ago when Arab oil producers cut off shipments in response to US support of Israel soon after the Yom Kippur War began, former US Defense and Energy Sec. James Schlesinger said.

But that’s no reason to be complacent, he said during an event at which the US Energy Security Council released a new report, “Fuel Choices for American Prosperity.” While the country has made important strides in reducing crude oil imports, it won’t ever be free of them as long as its transportation fuels are almost entirely petroleum-based, it argues.

Schlesinger agreed, but only to a limited extent. He said the US should move aggressively to supplement oil products in its transportation fleet with natural gas. “We have no idea how much shale oil we have, but there’s lots of shale gas available domestically for us to use in transportation,” he said.

As for ethanol and other nonfossil fuel sources, Schlesinger suggested proponents are engaged in “political incantations” similar to when many US politicians said they were committed to energy independence simply to get a favorable response from their audiences.

“The public gets excited about legislation when the price of oil goes up,” he observed. “When it comes down, it loses interest, and legislators do too. Today, we’re in a different situation where we may exert more influence globally because of our supplies. The Chinese, by contrast, are concerned because they have to rely on Middle East oil and the US Navy to keep supply lanes open.”

Asked to grade US energy policies over the last 40 years, Schlesinger gave them “a high D-plus,” adding, “We at least have moved beyond the point where we were begging Middle East producers to keep supplying the West oil…. Higher oil prices ultimately led to the reduction of Arab oil producers’ control of the market. Today, we’re much closer to energy self-sufficiency.”

‘Off the treadmill’

Robert C. McFarlane, who was President Ronald Reagan’s national security advisor from 1983 to 1985 and cofounded USESC, said continued heavy reliance on petroleum for transportation fuel stifles US economic growth. “We need to adopt policies that move us off the treadmill of the last 40 years where we pay more and more for oil, and reach a point where consumers can pull up to the pump and choose which fuel they want,” he said.

Promoting deployment of vehicles open to fuel competition will require easing regulatory and tax policy barriers, the report’s executive summary said. “Once the share of fuel-competitive cars and trucks in the total vehicle fleet passes a certain threshold—for light duty vehicles, that threshold is 15-20%—and only at that point, will there be a business case for fuel stations to install or retrofit infrastructure to serve competition fuels,” it said.

“At the same time, a proliferation of fuel-competitive vehicles will create a demand opportunity and thus drive the private sector to expand capacity in those fuels that investors expect to be economic over the range of oil prices they anticipate,” the executive summary continued.

It urged Congress to create “a topline fuel competition [corporate average fuel efficiency (CAFE)] credit” for automakers that open at least half the vehicles they manufacturer to competing fuels, and ensure automaker compliance with CAFE counts as compliance with greenhouse gas regulations under the federal Clean Air Act.

The report also recommended further deregulation of the vehicle conversion market while enable safe, but low-cost, conversions; expansion of EPA’s proposed Tier 3 gasoline rulemaking to include all alcohol fuels and the broadest range of feasible blends; taxation of all motor vehicle fuels on their energy content instead of volume; and removal of bureaucratic barriers for states to use transportation fuel strategies to meet their CAA obligations.

Globally, the report called for formation of a US-China-Brazil alcohol fuels initiative which would welcome other countries with robust alcohol fuels programs; expansion of international collaborations on electric vehicles; development of international standards for auto aftermarket fuel retrofits; distribution of educational materials to foreign governments on the benefits of developing nonpetroleum transportation fuel alternatives; expansion of the US-China shale gas initiative; and full engagement in international efforts to reduce methane flaring.

Contact Nick Snow at nicks@pennwell.com.

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