America Needs a Handle on Energy
By Senator Richard G. Lugar
As submitted to Roll Call for the Energy and Environment Policy Briefing
April 24, 2006

Congress last year passed an important energy bill, but that did not end the need for more action. International developments are calling attention to the growing importance of energy, and the world’s dependence on Middle East petroleum, as a major national security concern. Crude oil prices have doubled to nearly $70 a barrel, our oil imports are at record highs, and rising powers like China and India are making ever greater demands on world energy supplies.

Consequently, oil is becoming a greater magnet for conflict. From Iran to Russia to Venezuela, we are seeing energy increasingly being used as a weapon, one that can have as devastating an impact on a country as war. China’s quest to buy up oil reserves is leading it to forge partnerships with some of the planet’s most repressive regimes.

Countries made rich by the run-up in oil prices are spending their new wealth to buy influence. Foreign governments control more than three-quarters of the world’s oil reserves, enabling them to set prices by their investment and production decisions. The flood of money pouring into their coffers gives them more latitude than ever to shut off the taps for political reasons.

Nations that import oil—which account for 85 percent of the world’s population—are finding their economies damaged, their political options constrained and their influence weakened. That includes the United States. As Secretary of State Condoleezza Rice recently told the Senate Foreign Relations Committee, “The politics of energy is warping diplomacy around the world.”

President Bush in his State of the Union address acknowledged this new era of energy insecurity when he said, “America is addicted to oil.” With imports accounting for 60 percent of our oil consumption, this addiction is not only costing us money—at $60 a barrel, our oil import bill would be about $320 billion this year—but is becoming a grave threat to our national security.

Under these circumstances, we can no longer wait for the market to force more conservation and encourage a shift to other energy sources. We face urgent problems today that are constraining our living standards, undermining our foreign policy goals and leaving us vulnerable to the machinations of rogue states.

While our constituents feel the economic impact most directly, energy is not just a pocketbook issue. Energy is the albatross of U.S. national security, as I called it in a recent Brookings Institution speech. Last year’s energy bill, with the leadership of Senator Domenici and Senator Bingaman, recognized the importance of a diverse energy portfolio. To build upon that progress, we need robust government action not only to promote research into alternative fuels and energy efficiency, but also to deploy these oil saving technologies into the economy rapidly.

On the conservation side, the government should encourage consumers to buy—and manufacturers to build—more high-mileage autos, like the popular gas-electric hybrids. I support legislation that has been introduced to give tax incentives to car manufacturers and auto parts makers to invest in building more advanced technology cars and to expand the current incentives for consumers who buy them.

Likewise, we can speed the introduction of alternative fuels by focusing in the near term on ethanol, now made from corn. Soon it can be manufactured even more inexpensively from grass and other biomass through so-called “cellulosic” technology, which is poised for commercial take-off. Ethanol can be integrated easily into our current transportation infrastructure through E-85, a blend of gasoline and 85 percent ethanol, and flex-fuel cars that can burn any combination of gasoline and E-85.

To kick-start this shift toward E-85, which would lessen our oil dependence, I support legislation that would give incentives for more ethanol production and have introduced a bill that would require automakers to ramp up quickly their output of flex-fuel vehicles.

America’s efforts to lessen its own petroleum use will not have their maximum potential geopolitical and global impact if other countries simply consume the oil we save, keeping markets tight, prices high, and the producers in control. To tackle head-on the foreign policy implications of the world’s oil dependence, I have introduced the Energy Diplomacy and Security Act.

The bill calls on the administration to invigorate existing bilateral energy partnerships and seek new ones with key producing and consuming countries, with a special emphasis on increasing the use of sustainable energy sources. In order to enhance our energy security, international partnerships require the strong political backing and strategic focus this bill would provide.

The bill would also seek to strengthen one of the most important safeguards against conflict over oil, the provisions for major countries to share emergency oil stocks in case of a supply disruption. It calls for establishing cooperative emergency plans with India and China, which are currently not members of the International Energy Agency, and extending oil sharing agreements to other developing countries.

Finally, the bill calls on the administration to weave a more reliable energy security fabric within our own hemisphere, working more closely with Canada and Latin America on emergency preparedness, conservation, sustainable energy, and energy access for the poor.

I am encouraged by the President’s focus on our petroleum vulnerability—as a former Texas oilman, he is in a unique position to redirect American energy policy. Just as Nixon went to China, President Bush could lead an all-out campaign for renewable energy.

We must be realistic and admit that we cannot solve our energy dilemma overnight. There is no silver bullet. But we must also be optimistic that with sustained Congressional leadership and commitment to the long haul, along with American ingenuity, our country can build a sustainable, secure energy future that would in the process create new jobs and new industries to reinvigorate our economy.