In a week when other congressional panels seemed more interested in berating major oil company executives and federal government officials, the House Foreign Affairs Committee's May 22 hearing on US dependence on oil from overseas suppliers and its foreign policy implications offered a dramatic contrast.
It seemed to be less politics as usual and more an examination of an otherwise overlooked issue. Several of the committee's members seemed more interested in what the witnesses had to say than in taking public positions to win re-election in November.
Chairman Howard L. Berman (D-Calif.) set the tone in his opening statement. "Dependence on foreign oil has broader ramifications four our foreign policy and energy security," he observed, noting that it has influenced the nation's entire Middle East policy since World War II.
"Clearly, the world faces increasing competition for the fossil fuels that drive global industry, transport, and economic growth. Rising powers such as China, India, and Brazil have a growing appetite for energy. To satisfy their thirst for oil, some are looking to buy energy from regimes that the United States finds problematic. China, for example, has been supporting the oil industries of Iran, Sudan and Burma. Such energy deals can undermine the international community's influence on these countries in matters ranging from nuclear proliferation to genocide to political freedom," he continued.
Additional observations
"Our foreign policy must focus on ensuring reliable [energy] supplies. Unfortunately, increased amounts of oil are concentrated in countries with unfavorable regimes," added Ileana Ros-Lehtinen (R-Fla.), the committee's ranking minority member. The Organization of Petroleum Exporting Countries' success is inspiring natural gas exporting nations to consider forming their own cartel, she noted.
"We have the same goal every other country has: a strong economy with affordable, reliable energy," suggested Gene Green (D-Tex.). But Christopher H. Smith (R-N.J.) pointed out that "control of global oil resources is becoming concentrated in fewer and fewer countries."
Witnesses said that the United States already is paying heavily for its dependence on foreign oil in ways beyond its citizens' pocketbooks. The need to keep oil flowing has shaped US policy and relationships in the Persian Gulf for more than 50 years, according to David B. Sandalow, a senior fellow in foreign policy studies at the Brookings Institution. "By making us central players in a region torn by ancient rivalries, oil dependence has exposed us to resentment, vulnerability and attack. Osama bin Laden's first fatwa in 1996 was titled 'Declaration of War against the Americans Occupying the Land of the Two Holy Places,'" he told the committee.
"Today, deep resentment of the US role in the Persian Gulf remains a powerful recruitment tool for Islamic fundamentalists. Yet the United States faces severe constraints in responding to this resentment. With half the world's proven oil reserves, the world's cheapest oil and the world's only spare production capacity, the Persian Gulf will remain an indispensable region for the global economy so long as modern vehicles run only on oil. To protect oil flows, US policymakers will feel compelled to maintain relationships and exert power in the region in ways likely to fuel Islamic terrorists," Sandalow said in his written testimony.
'A crude reality'
Anne Korin, co-director of the Institute for the Analysis of Global Security, said the United States faces "a crude reality: While its relations with the Muslim world are at an all-time low, more than 70% of the world's proven oil reserves and over a third of production are concentrated in Muslim countries. The very same Shi'a and Sunni theocratic and dictatorial regimes that most strongly resist America's efforts to bring democracy to the Middle East are the ones that, because of the market's tightness, currently drive the world oil economy."
Poorer countries are feeling the impact of higher crude oil prices the most, she continued. "People throughout the world who live on $2 a day are suffering far more than we can imagine as their economies hemorrhage. This has profound implications for global security, driving regional unrest, increasing poverty and nipping in the bud progress towards democracy. Countries that are still carrying debts from the 1970s oil shocks are now being looted by OPEC price fixing. In fact, we are witnessing a tremendous transfer of wealth from the world's poorest nations to the world's producers of oil," Korin said in her written testimony.
"Ironically, high prices may also prove to be a problem for some of the world's major energy exporters, especially those with weak government institutions," said Paul J. Saunders, executive director of the Nixon Center. "In Russia, for example, the government has been fighting fairly hard to slow inflation by controlling government spending. However, the longer prices stay high, the more the Russian public expects from its government. Holding the line on public spending risks discontent due to disappointment – but opening the spigot risks rapid inflation that delays discontent but cannot prevent it."
High worldwide energy demand also raises serious questions, he continued. "In Europe, demand for natural gas is expected to grow by approximately 200 billion cubic meters as early as 2015, creating a 23% 'demand gap' that European energy companies are already working to fill. Many energy experts agree that only two countries can provide the necessary volumes of gas on a commercially-viable basis: Russia, which already supplies about 40% of Europe's gas, and Iran. With this in mind, so long as the United States and Europe agree on isolating Iran, Europe has little alternative but to increase its already high degree of reliance on Russian gas," Saunders said in his written testimony.
Pressure on Central Asia
Central Asia is increasingly became a competitive arena for Russia and China, he continued. "Because of growing domestic demand and declining domestic production, Russia needs Central Asian natural gas to meet its export commitments to Europe. But China needs Central Asian gas too, to supply its continuing economic growth, and China's success in making deals has already forced Moscow to pay higher prices for the gas it buys," he said.
Farther south, said Saunders, India's growing energy demand has led that nation's government to cultivate ties with Iran as the world's second largest holder of gas reserves after Russia. Many Americans found Iranian President Mahmoud Ahmadinejad's recent visit to India troubling, he observed. "For its part, however, India is hard pressed to find other sources of the gas it needs and does not welcome American advice on its foreign policy," he said.
This places India at a crossroads, according to Korin. The country can either tie itself to Iran and its gas reserves, via a proposed 1,600-mile pipeline, or continue to develop its coal reserves and expand its coal-fired power generation, which makes sense from an energy security standpoint but may pose a problem in terms of global climate change. A third option is to expand nuclear power development in collaboration with the United States, but foot-dragging in New Delhi is delaying ratification of a nuclear agreement between the two countries, she said.
"It appears that the Iranian option may hold sway. As the largest democracy in the world, India is a vital ally to the United States. Congress should explore all options, including encouraging India and Pakistan to pursue an alternative pipeline route from Turkmenistan via Afghanistan, to ensure that India does not tie its economic future to Iran," Korin said.
Alternatives are needed
The ultimate US solution, she maintained, is to strip oil of its strategic value with a virtual monopoly on transportation fuel by developing a variety of alternative feedstocks. "For a cost of less than $100 extra as compared to a gasoline-only vehicle, automakers can make virtually any car a flex-fuel vehicle capable of running on any combination of gasoline and a variety of alcohols. Flex-fuel vehicles provide a platform on which fuels can compete and let consumers and the market choose the winning fuels and feedstocks based on economics," she said.
Developing plug-in electric vehicles could have the single biggest favorable impact, Sandalow maintained. "They can break our oil addiction, cut driving costs and reduce pollution. To help end the United States' oil dependence, there is no higher priority than putting millions of plug-in electric vehicles on the road soon," he told the committee.
The good news is that such cars on their way, with General Motors planning to put its plug-in Chevy Volt in showrooms by 2010 and Toyota, Mitsubishi, Ford and other automakers close behind, he added. "Yet Congress needs to act, to pick up the pace of this transition. Tax incentives for the purchase of these vehicles would quickly build the market. The federal government should use its enormous purchasing power to help bring these cars to market as well," Sandalow said.
"Since we hardly generate any electricity from oil, using electricity as a transportation fuel enables the full spectrum of electricity sources to compete with petroleum," said Korin. "Plug-in electric hybrid vehicles can reach oil economy levels of 100 miles per gallon of gasoline without compromising the size, safety or power of the vehicle. The key is changing our thinking from miles per gallon to miles per gallon of oil-based fuel. It is not the total energy consumption of the vehicle which is the problem; it is the portion of that energy that comes from petroleum."
Saunders said that more steps will need to be taken. "The realities are that the United States has vast and growing energy requirements and that changing our consumption patterns will be slow and costly," he indicated. A sustained, bipartisan approach and a level of political commitment comparable to fighting the Cold War will be needed. So will greater dialogue with other major energy consumers, especially China, and with major suppliers, but only with "a combination of clear communication that the United States supports and will act to defend the effective functioning of international energy markets with efforts to develop more systematic rules that would aim to prevent disruptive disputes, minimize further redefinition of the terms under which international energy companies operate by supplier countries, and maximize investment in new production," he maintained.
Contact Nick Snow at [email protected]