The Argument for a 30% Reduction in Oil Use

Why does dependence on imported oil cause national heart palpitations in ways that dependence on other imported commodities does not?

Just look at our dependence on imported bananas. The U.S. is a bit player on the commercial banana production scene. Every year, we fork over nearly $2 billion to foreigners to buy their bananas. Where's the outrage?

Getting serious now. The banana is not a strategic commodity for the U.S. Bananas do not have a monopoly over the American food market. If banana prices shot up or banana supplies dropped—and, by the way, there is a real danger that a virus could do a serious number on the Cavendish cultivar that dominates the export banana trade—the U.S. economy wouldn't grind to a halt.

Not so with oil. Oil is a strategic commodity. Oil has a monopolistic lock on the transportation energy market, and reliable, affordable transportation makes the modern economic world go 'round. Lack of control over oil supplies and pricing puts the U.S. over economic and security barrels. That's why a new report from a panel of retired generals and admirals from the Center for Naval Analyses' Military Advisory Board says reducing dependence on oil is vitally important.

The report quickly zeroes in on why worries about dependence on imported oil misses the full scope of the problem. It calls for a 30 percent reduction in oil dependence. Not a 30 percent reduction in imported oil dependence but a 30 percent reduction in oil dependence, regardless of source.

Here's why: "Our overreliance on oil is made worse by our lack of control over global supplies, which is why, in this report, we focus on oil generally and not on foreign oil specifically. Oil is a global commodity, and"—listen closely, politicians—"any amounts of oil produced in North America become part of the global supply. When global prices spike upward, the domestic price also spikes—we don't get 'big-box store' discounts just because of our nationality."

Not that increased domestic oil production in suitable areas wouldn't help in the near term to shave down the gap between global demand and supply, the report says. There is excited talk among energy experts that conventional oil from the Bakken and other domestic deep shale formations could substantially boost domestic oil output and drive imported oil dependence below 50 percent. Still, domestic production alone would not feed the maw of American transportation energy demand, nor would it disentangle the U.S. entirely from the global oil market. Oil's monopoly over transportation must be broken, the report argues.

The report picked a 30 percent reduction target for interrelated defense and economic reasons. If the Strait of Hormuz or another shipping chokepoint through which oil tankers pass were closed down, the U.S. could get by without major economic damage if it were 30 percent less dependent on oil. And, a 30 percent reduction "would enhance our capacity to innovate, in large part because alternative energy investments would no longer be torpedoed by swings in oil prices caused by market forces or deliberately imposed by foreign cartels," the brass said. In short, the U.S. would have a lot more freedom of maneuver, something any field or fleet commander can appreciate.

How to achieve that 30 percent reduction and break oil's transportation monopoly? Start with efficiency, the commanders say. "The benefits of efficiency are so obvious and sizable that it is amazing to consider how or why our country has failed to insist on (or at least incentivize) it up to now." Obvious, that is, except to ideologues and entrenched interests dictating the agenda inside the Beltway. Just sayin.'

The report discusses candidate oil competitors and lays out their pros and cons, which energy geeks and other knowledgeable observers already know. Biofuels can be produced with simple, well understood technology, but there are supply chain barriers and food security issues. Natural gas is cleaner than oil and available in abundance at home, but concerns about water pollution will require enforcement of best practices in the gas fields. Coal can be converted to liquids, but the process is twice as carbon-intensive as refining fuels from petroleum. Electric cars would go a long way toward breaking oil's transportation monopoly, but there are access concerns with rare earth minerals required for making advanced batteries.

For the near term, the report pinpoints efficiency, biofuels, methanol, electric cars, and natural gas as the most promising contenders for edging oil off its throne. Ultimately, the commanders say, it will come down to voters putting pressure on politicians to act: "If our leaders don't take the necessary steps to make us more secure, we can make different political choices." That, we can.