[A-List] ...Select Committee on Energy Independence and Gl. Warming-- US House of Repres.

[Macdonald Stainsby <mstainsby@xxxxxxxxx>]

Prepared Statement before the Select Committee on Energy Independence 
and Global Warming U.S. House of Representatives
http://www.cfr.org/publication/13128/
Witness: 	
Richard N. Haass, President

April 18, 2007

Geopolitical Implications of Rising Oil Dependence and Global Warming

Mr. Chairman:

Let me begin by congratulating you and your colleagues on establishing 
this new select committee. The issues in your purview are among the most 
important facing this country and the world.

This is underscored by the topic of today, your first hearing.  The 
geopolitical implications of rising oil dependence and global climate 
change for the United States are great and likely to become even greater 
with time.

Let me address each of the questions you have posed to me and my fellow 
witnesses.

I will begin with how ever-increasing dependence on imported oil affects 
U.S. national security. The short answer is that it does, in many and 
important ways. Four stand out:

First, American and global dependence on the Middle East for oil 
artificially increases the importance of this part of the world.  This 
is not to say it would not be important even if there were no oil in the 
region or if the United States and the world were not dependent upon the 
region’s oil.  The United States would still have important, even vital 
concerns relating to terrorism, non-proliferation, conflict resolution, 
Israel, and so on.  But there is no denying that energy makes this part 
of the world far more vital than it would otherwise be and reduces 
American willingness and ability to tolerate developments that were they 
to occur in other regions would provoke less of a response.  And just to 
be clear, let me stress that this concern for oil and gas is not tied to 
protecting the interests of the large oil companies but rather to 
maintaining adequate access on acceptable terms to a vital raw material.

Second, the fact that the United States imports roughly 60% of the oil 
it consumes leaves the U.S. economy vulnerable to supply interruptions 
that even in small amounts can cause price increases and in larger 
amounts cause not only price increases but economic disruption.  The 
United States would be vulnerable economically to supply interruptions 
(and price spikes) even if it imported far less oil given the extent to 
which others are vulnerable and the degree to which U.S. economic 
fortunes are tied to those of others.

Third, the need to pay for oil imports exacerbates the already 
considerable current account deficit, which in turn further weakens the 
dollar and makes the United States more dependent on (and vulnerable to) 
the decisions of other governments.  Approximately one-third of the 
annual current account deficit, or some $250 billion, is attributable to 
oil imports.

Fourth, American demand for oil contributes to upward pressures on 
prices and provides massive revenues to producers.  One of the top five 
oil exporters to the United States is Venezuela, whose foreign policy is 
anti-American in large measure.  The top two exporters of oil in the 
world, Saudi Arabia and Russia, carry out policies at home and abroad 
that at times run counter to American values and interests.  Iran, the 
world’s forth largest exporter of oil, is in large part able to conduct 
the problematic foreign policy it does because of high oil revenues.  In 
addition, massive inflows of oil revenues can be as much a liability as 
a windfall in another way in that they often work against efforts to 
promote market economies and the rule of law.

The second question posed asks whether it is urgent that the United 
States do something about this state of affairs.  It is.  It is also a 
national failure, a bi-partisan failure, that this country is consuming 
and importing as much oil as it is today, more than three decades after 
the first oil shock that accompanied the October 1973 Middle East 
conflict.  It is a matter of some debate as to whether U.S. energy 
security has actually deteriorated despite that and subsequent crises: 
the United States is more dependent than ever on imports, but U.S. 
energy intensity is down and international markets seem better able to 
weather disruptions.  But whatever the relative judgment on energy 
security, it is not what it needs to be in absolute terms.  That said, 
it has taken us decades to get to where we are today, and will take 
decades for the situation to change fundamentally.  There is, however, 
no reason to delay.  Every day we as a country wait to act only 
increases the price we pay for the current state of affairs and makes it 
that much more difficult and costly for us to change them.

Should climate change be treated as a national security matter?  The 
short and clear answer is “yes.”  Countries are unlikely to go to war 
over levels of greenhouse gas emissions, but they may well go to war 
over the results of climate change, including water shortages and 
large-scale human migration.  Climate change, by contributing to 
disease, extreme weather, challenges from insects that attack both food 
production and people, water shortages, and the loss of arable land, 
will also contribute to state failure, which in turn provides 
opportunities for activities such as terrorism, illegal drugs, and 
slavery that exploit “sovereignty deficits.”  Development, democracy, 
and life itself will not thrive amidst such conditions.

The last two questions can best be answered together, as they ask for 
recommendations for reducing oil dependence and greenhouse gas emissions 
and addressing both climate change and energy security.

Energy security is not easy to define.  It is a relative concept, in the 
sense that it is impossible to achieve total energy security – just as 
it is impossible to achieve full security (or complete invulnerability) 
in any realm.  A traditional definition of energy security would be one 
that emphasized minimizing U.S. vulnerability to supply interruptions 
and price increases.  This “reliability and affordability” approach to 
energy security is inadequate, as it does not capture the additional 
rationales for reducing consumption of oil (imported or otherwise) in 
order to curtail the flow of resources to unfriendly governments and to 
reduce the adverse impact on the world’s climate.  As a result, we need 
to adopt a broader definition of the concept.  Energy security is 
directly related to the ability to manage the form and amount of energy 
produced, consumed, and imported so that the United States reduces its 
vulnerability to supply and price fluctuations, the flows of resources 
to unfriendly producer countries, and the adverse impact on the global 
climate.

A range of prescriptions, some familiar, some not, flows from this 
broader approach to energy security.  One is the desirability of 
diversifying sources of oil and other energy supplies.  Such 
diversification reduces the impact of losing for whatever reason access 
to the output of any single producer.  The United States has done this 
in the oil realm, as only Canada provides the United States in the range 
of 20% of its total oil imports.  90% of U.S. crude oil imports are 
distributed to more than ten countries.

The United States can also help reduce its vulnerability to supply 
interruptions through contingency planning, including the maintenance of 
the strategic petroleum reserve (SPR) and various stand-by international 
sharing arrangements.  Congress would be well-advised to assess both the 
adequacy and guidelines for use of the SPR.  Also in need of overhaul is 
the International Energy Agency, which needs to be amended (or 
complemented by the International Energy Forum) so that major countries 
such as India and China are fully included in global planning.

The entire energy infrastructure – production areas, pipelines, pumps, 
refineries, terminals, power plants, and so on – needs to be made more 
robust and made more resilient.  This involves better intelligence and 
law-enforcement cooperation, enhanced protection of critical sites, and 
provision for the redundancy of critical components.  There is also no 
substitute for the ability to protect and clear critical transitways.

Supply diversification and related measures have their limits, however. 
 The price of oil reflects global supply and demand, so the price of 
oil will rise if more than a negligible amount of oil is taken off the 
market.   In addition, the United States is in principle more vulnerable 
to supply interruptions given the rise in terrorism and the increased 
role of national oil companies, who are more likely to reflect 
government policy when it comes to making decisions about production and 
sales.

Another way to increase diversification of supply is to increase 
domestic production, which is now below 7 million barrels a day. 
Expressed differently, the United States imports some 2/3 of the oil it 
consumes. It is doubtful new drilling (even with new technologies that 
increase recovery rates) could appreciably affect this number given the 
falling output of many mature wells and fields and the growing domestic 
demand for oil.  Still, the United States ought to increase the amount 
of exploration and development that it allows, especially in coastal 
areas.  Again, though, no combination of diversification of external oil 
supplies and increased domestic production can satisfy the demands of a 
comprehensive energy security posture.

Alternative forms of energy, including coal, natural gas, nuclear, 
solar, wind, geothermal, and biofuels, are also central to any 
discussion of energy security.  One reality to contend with though is 
the fact that most of the oil produced and imported is used in the 
transport sector—and that most of what fuels the transport sector is 
oil.  Massive substitution is not a near-term option.  In the medium and 
long-term, fuel-efficient “pluggable” hybrids that use electrical power 
appear promising.  So as well does cellulosic biomass, which can 
substitute in significant quantities for gasoline without disrupting 
food supplies or requiring anything near the amount of energy needed to 
produce corn-based ethanol.  One short-term step that should be taken is 
the removal of the tariff on ethanol imports.

Coal is and will remain the principal fuel for electricity generation. 
It generates half the electricity in the United States.  Coal is readily 
available in the United States as well as in both China and India.  It 
is also relatively inexpensive.  China is building large coal-fueled 
plants at the rate of two per week; India is building them at a rate 
closer to two per month.  The problem is that coal is a major 
contributor to greenhouse gas emissions.  As the recently-released MIT 
study The Future of Coal makes readily apparent, the climate change 
problem will continue to worsen unless something can be done about coal. 
The reality, though, is that there is no realistic alternative to coal; 
the principal question is whether technology can be developed, proven 
and introduced with sufficient speed and on a sufficient scale to 
capture and then sequester the massive amounts of carbon dioxide 
existing and planned plants will produce.  The government ought to work 
with industry in creating an investment and regulatory environment that 
accelerates the emergence, testing, and fielding of such technology in 
the United States and around the world.  In the meantime, the government 
should only authorize the construction of coal plants that use the most 
advanced, efficient and clean technologies and that are designed to 
incorporate emerging technologies designed to capture carbon.

Nuclear power is the ideal form of fuel for electricity production given 
that it adds hardly at all to climate change.  Nuclear power stations 
now provide some 20% of U.S. electricity.  There will be hurdles to 
maintaining, much less increasing, this percentage.  Politics is one 
problem.  The last reactor to be completed was ordered nearly four 
decades ago and became operational in 1996.  There are currently 103 
reactors operating.  Even with 20 year extensions of their planned 
lifespan all existing reactors will be decommissioned by the middle of 
this century.  Just replacing them will require building two reactors a 
year for the next fifty years.  It is not clear this rate of 
construction in the United States (coupled with ambitious building 
programs elsewhere) is sustainable.  Indeed, a forthcoming study 
(Nuclear Energy:  Balancing Benefits and Risks) written by Charles D. 
Ferguson of the Council on Foreign Relations concludes that “Nuclear 
energy is not a major part of the solution to further countering global 
warming or energy insecurity. Expanding nuclear energy use to make a 
relatively modest contribution to combating climate change would require 
constructing nuclear power plants at a rate so rapid as to create 
shortages in building materials, trained personnel, and safety 
controls.”  Other analysts are more bullish about the prospects for 
nuclear power, although even if they are correct it will not prove 
transformational for decades if then.  In addition, a greater emphasis 
on nuclear power will raise security challenges as well as demands for 
safe storage of spent fuel.

In short, developing alternatives will over time make a difference, but 
it will not solve the problem.  What is more, no energy security policy 
can be considered comprehensive without a significant emphasis on 
reducing the consumption of oil and oil products.  The United States 
daily consumes some 21 million barrels of oil and oil products.  The 
policy question is how best to slow or better yet reverse this growth.

Increasing the tax on gasoline would have the most immediate impact. 
U.S. taxes (18.4 cents per gallon at the federal level) are low by world 
standards.  If politics required, an increase in the federal fuel tax 
could be offset by reductions or rebates in other taxes or made more 
palatable by designating revenues for energy-related investments.

Tightening fuel efficiency standards is a good mid-term approach given 
the time it will take for more efficient cars and trucks to be built and 
to replace the existing fleet.  One area deserving exploration is what 
might be done to accelerate the replacement of low-mileage vehicles with 
hybrids and relatively fuel-efficient cars and trucks.

All of the above would affect climate change.  Climate change policy, 
however, is something different.  Congress and the administration should 
develop guidelines for the post-Kyoto Protocol, post-2012 world.  They 
should work with state governments, business, and academic experts.  It 
is essential that the United States be a full participant in any 
negotiations and in any resulting regime – and that it approach such 
negotiations with a national policy in place.  Developing countries need 
to be a central (although not necessarily equal) participant in a 
post-Kyoto framework.  Some sort of carbon tax or cap and trade system 
will likely work best.  Factored into any plan should be a positive 
credit for forested areas that absorb carbon dioxide.  Even before then, 
U.S. aid policy should be adjusted to provide financial incentives to 
discourage deforestation and encourage reforestation.

We will also need to consider whether and how future trade negotiations 
and the WTO process itself address climate change.  Many of the 
innovations that will reduce emissions (such as nuclear power stations 
and cleaner coal plants and capture and sequestration technology) are 
costly.  Questions such as how to treat subsidies and the role (if any) 
of tariffs to deal with producers who give short shrift to climate 
concerns require study.

I want to close with a few general thoughts on this subject.  Despite 
the formal name of this select committee, “energy independence” is 
beyond reach if by independence is meant an ability to do without 
imports of oil and gas.  A recent Task Force (National Security 
Consequences of U.S. Oil Dependency) sponsored by the Council on Foreign 
Relations concluded “During the next twenty years (and quite probably 
beyond) it is infeasible to eliminate the nation’s dependence on foreign 
energy sources.”  A more useful and realistic task is how to manage 
energy dependence or, better yet, how best to promote energy security.

Similarly, energy security cannot be promoted through any single policy 
or breakthrough.  Rather, what is required is a family of policies.  The 
U.S. government will need to adjust to help bring this about.  The 
creation of this select committee is a step in the right direction; so, 
too, would be a directorate in the National Security Council staff 
devoted to energy security and the inclusion of the secretary of energy 
more regularly and centrally in national security meetings.  Energy 
security properly defined is now too intimately a part of overall 
security to be left out of the most important deliberations of our country.


--
Macdonald Stainsby
Coordinator, http://oilsandstruth.org
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