U.S. consumes 25% of the world’s oil
but has only 2% of the world’s reserves.
As shown at right, 62% of the world’s
proven oil reserves
are located in the Middle East.
As a result, world oil production increasingly
will be centered in that region.
“Keeping America competitive
requires affordable energy. And
here we have a serious problem:
America is addicted to oil, which
is often imported from unstable
parts of the world.” –
President George W. Bush
oil imports have steadily climbed as consumption
increases and domestic production declines,
as shown at right.
Imports now supply about 60% of total U.S.
for about two-thirds of all U.S. petroleum
and oil supplies 96% of the energy consumed
Thus, the U.S. transportation sector could
not operate without oil.
This dependence translates into military
and foreign policy risks because of the
importance of protecting access to needed
oil reserves in unstable areas. President
Jimmy Carter put it clearly in the 1980
State of the Union address when he said:
“An attempt by any outside force to
gain control of the Persian Gulf region
will be regarded as an assault on the vital
interests of the United States of America,
and such an assault will be repelled by
any means necessary, including military
“The prices that people are
paying at the gas pumps reflect
our addiction to oil. Addiction
to oil is a matter of national security
concern … [S]ome of the nations
we rely on for oil have unstable
governments, or agendas that are
hostile to the United States. These
countries know we need their oil,
and that reduces our influence,
our ability to keep the peace in
some areas. And so energy supply
is a matter of national security.”
– President George W. Bush
trade has resulted in an enormous transfer
of wealth to oil-producing states –
half a trillion dollars in 2006 alone.
This cash flow has financed corrupt and
repressive regimes opposed to American interests.
Columnist Thomas Friedman and others have
observed that there is “an inverse
relationship between the price of oil and
the pace of freedom,” and that the
U.S. is “funding both sides in the
war on terrorism."
Unfortunately, diversifying the
sources of U.S. oil supply does not materially
affect the economic risks of dependence.
Because oil is a global commodity, freely
traded, the price of oil is determined on
the world market. It responds to the forces
of supply and demand and to political events,
no matter where they occur. Even if the
U.S. shifted all of its oil imports to relatively
safe sources, such as Canada and Mexico,
it would not be protected from a price shock
– whether caused by politics, war,
The only way to reduce the risks associated
with oil is to reduce the demand for it
– in other words, to increase the
efficiency of oil consumption and increase
the use of alternative fuels.
Biofuels could significantly reduce
the amount of oil needed to fuel American
cars and trucks, which constitutes two-thirds
of the nation’s total demand for oil.
Together with efforts to improve fuel economy,
biofuels could reduce U.S. gasoline consumption
to nearly zero.
There is no guarantee that biofuels
will directly displace imported oil; biofuels
will also displace some domestically produced
oil. However, biofuels will give consumers
something they have never had – a
choice – and thus will be a damper
on both the volatility of oil prices and
the effect of those swings on the U.S. economy.
Skeptics are quick to point out that the
U.S. could not possibly grow enough corn
to replace all of the nation’s petroleum
use. Indeed, the limit of ethanol production
from corn is generally estimated to be 15
to 20 billion gallons per year.
However, the use of additional feedstocks
will allow the replacement of a larger share
of gasoline demand, now running at 140 billion
gallons per year.
Secretary of Energy Samuel Bodman recently
announced a goal of making cellulosic ethanol
a practical and cost-competitive alternative
by 2012 (at a cost of $1.07 per gallon)
and displacing 30% (60 billion gallons)
of gasoline by 2030.
This is consistent with the joint study
published by the U.S. Departments of Energy
and Agriculture on the future potential
of biomass feedstocks.
Others have suggested a goal of 100 billion
gallons a year.
Of course, supply provides only
half the answer to reduced oil dependence.
Increased vehicle efficiency also reduces
total oil consumption and enables a given
amount of biofuels to displace a larger
share of petroleum. Thus, doubling the fuel
economy of the vehicle fleet in the U.S.
– for example, through the widespread
introduction of plug-in hybrids with flexible-fuel
capability – would not only reduce
by half the amount of oil consumed, it would
also double the share displaced by biofuels.