Managing oil dependency

Nov. 13, 2006
The timing may be right.

The timing may be right.

As US midterm election results indicate a turnover in congressional power and the electorate’s calls for “change” are still rattling the political parties, the Council on Foreign Relations (CFR) is issuing this month a report urging that energy issues henceforth be better integrated into other aspects of US foreign policy because oil dependency is compromising national security.

The report-“National Security Consequences of US Oil Dependency”-explains “why and how” to accomplish that integration, said CFR Pres. Richard N. Haass as he introduced the independent task force report.

The report concentrates on the next 20 years and focuses mainly on oil, much of which comes from politically unstable areas of the world. Dependence “puts the US into competition with China, India, and other importing countries, which can challenge US foreign policy or strain relations with these countries,” said the task force.

In addition, major suppliers, such as Russia, Iran, and Venezuela, are using oil and gas exports to pursue strategic and political objectives, and major consuming countries are finding that dependence on imported energy is circumventing their ability to pursue foreign policy and national security objectives.

Common myths

The report debunks common myths of US energy policy and outlines a strategy for responding to foreign policy issues arising from dependence on energy traded in world markets.

One such myth is the feasibility of achieving energy “independence” through increased drilling “or anything else.” Such a goal, which “encourages the adoption of inefficient and counterproductive policies,” is unachievable for at least several decades, CFR maintains.

Another myth is that policies to decrease imports will lead to lower prices and that cheap energy alternatives will be readily available. Although prices may moderate to a degree, they will not return to the low levels seen in the 1990s, and it will take years to develop sufficiently economic energy alternatives.

And large Western companies do not control the price of oil, another myth. They control a fraction of the hydrocarbon reserves that national oil companies do.

A fifth myth, the report says, is that the world can “drill its way” out of its oil supply and price problems. The costs of developing and producing remaining reserves will be higher than those of existing reserves.


The real problem is the high and growing demand for oil, and the challenge facing the US for the next few decades is to develop policies that better manage its dependencies rather than vainly pursuing independence, CFR said.

Because the US has “limited leverage to achieve its energy security objectives through foreign policy actions, it has considerable ability to manage its energy future through the adoption of domestic policies,” task force members said. The task force recommended a three-step policy strategy to slow and eventually reverse US oil consumption:

  • A gasoline tax that would fund energy technology research and development.
  • Stricter corporate average fuel economy (CAFE) standards.
  • The use of tradable gasoline permits that cap the total level of gasoline consumed.

In addition, high energy prices are opening doors to innovation in withdrawing and marketing formerly “stranded” natural gas, which could replace oil use for home and industry use. The task force does not see a need to limit gas use.

Ultimately, CFR said, technology will be key to reducing dependence on oil and gas but only if investment is made available for its development. High energy prices help fund such technology development, but the task force recommends that the federal government expand incentives and investments for higher-efficiency vehicles; the use of biomass, electricity, and other oil transportation substitutes; enhanced production techniques; and efficiency-enhancing technology in industrial processes.

A second strategy is for the US to encourage efficient, transparent, and fair operation of world oil and gas markets; revise cooperative agreements reached in the 1970s; and remove protectionist tariffs on imported ethanol.

A third strategy: Reduce infrastructure vulnerability to terrorist attacks and natural disasters.

Fourth: Promote better management of revenues, and work to improve the social and economic prospects of the public.

And fifth: Better address the threats to national security created by energy dependence. Organize government resources to ensure attention and integration of the political, economic, technological, and security elements required for energy policy-making.

CFR has no affiliation with the US government.