The United States already imports some 55 percent of its oil needs,
and no amount of domestic production expansion, Alaskan or otherwise,
will put a significant dent in that. Everything must be viewed through
the lens of mitigation.
And that is precisely what the Bush administration is trying to
accomplish. The new energy plan, which in reality is preparing for a
more confrontational foreign policy, consists of three main components.
Until now, LNG use in the United States has faced two obstacles. The
first is its cost, but since natural gas prices in the United States
have doubled in the past five years, this is no longer prohibitive. The
second is state opposition to the facilities, largely on environmental
grounds. Bush's proposal would allow the FERC to override such
objections.
===================================================================
U.S.: Bush's Energy Proposals and the Politics Thereof
April 27, 2005 22 30 GMT
Summary
The Bush administration is putting forward a series of proposals to
address the country's "energy crisis." Stratfor examines the proposals
to show what works and what does not, and why America's energy concerns
are actually political in nature.
Analysis
While speaking at a conference of the Small Business Administration on
April 27, U.S. President George W. Bush laid out a five-part plan for
improving the U.S. energy situation.
Unlike the energy bill, which remains perennially stuck in Congress,
Bush's proposals either do not need full congressional approval or,
when they do, are not nearly as controversial as things like drilling
in Alaska's Arctic National Wildlife Refuge. That does not mean that
the Bush proposals will be adopted, only that their chances of becoming
policy are much better.
But like the energy bill, few of Bush's new policies promise to
actually solve the problem of constrained energy supplies. Answers to
those questions lie at home, in the political no-man's-land of energy
conservation, and abroad, in foreign production levels. Both are
largely beyond the government's ability to influence through policy,
since such factors depend upon the preferences of American consumers or
foreigners. For example, the Bush plan calls for increased
international collaboration on energy-saving technologies and expanded
tax credits for consumers who purchase fuel-efficient cars that sport
hybrid, fuel-cell or diesel technologies. Such items are nice in that
they promote energy conservation but, as envisioned, are only tiny
steps that do little to effect solutions to the overriding problem of
energy supply.
Ironically, from an economic standpoint, the American energy market is
working roughly as it should. Despite high prices -- which result from
a mix of factors, such as ravenous demand and minimal surplus
production, seasoned by geopolitical risk -- there have been no
disruptions in shipments, and the industry as a whole remains healthy.
But what the Bush administration is seeking is not so much an end to
the ballyhooed energy "crisis" or to bring gasoline prices down from
their current highs as it is the development of a more secure energy
framework from which the country can operate as American foreign policy
shifts gears.
To understand the Bush administration's "energy" policies, one must
first realize that these new ideas do not stand alone: Washington is on
the cusp of a new era, and its emerging energy policy is simply part of
a new whole.
The jihadist war is winding down, and with a nascent indigenous
government forming in Iraq, many U.S. soldiers will be returning home
in the months to come. This is freeing up bandwidth for American
foreign policy to deal with other matters, most notably broad
geopolitical offensives against China and Russia.
But for the United States to deal effectively with those matters, it
first must find as many ways as possible to insulate itself from
international energy vicissitudes so that its foreign policy is as free
from foreign entanglements as possible. It is not so much about
reducing dependence on foreign energy as it is about maximizing freedom
of movement. That is particularly the case since the United States
cannot produce enough oil domestically to bridge its supply/demand gap
with any energy policy. The United States already imports some 55
percent of its oil needs, and no amount of domestic production
expansion, Alaskan or otherwise, will put a significant dent in that.
Everything must be viewed through the lens of mitigation.
And that is precisely what the Bush administration is trying to
accomplish. The new energy plan, which in reality is preparing for a
more confrontational foreign policy, consists of three main components.
First, the Bush administration wants to empower the Federal Energy
Regulatory Commission (FERC) to override state objections to the
construction of facilities that import liquefied natural gas (LNG).
Like oil production, natural gas production in the United States is on
a slow downward spiral. Unlike oil, natural gas cannot be transported
via tanker under normal conditions; it first must be supercooled into
liquid form.
Also unlike oil, LNG is produced by countries such as Brunei, Trinidad
and Tobago, Algeria, Egypt, Qatar, Australia, Indonesia, Nigeria and
soon Norway, which the United States finds friendlier to its foreign
policy goals.
Once offloaded, LNG is heated and fed into the existing U.S. natural
gas transport infrastructure, negating the need for the extensive
infrastructure development common to most new energy sources.
Until now, LNG use in the United States has faced two obstacles. The
first is its cost, but since natural gas prices in the United States
have doubled in the past five years, this is no longer prohibitive. The
second is state opposition to the facilities, largely on environmental
grounds. Bush's proposal would allow the FERC to override such
objections.
The second new policy proposal, establishing risk insurance to
encourage the construction of new nuclear power plants, similarly seeks
to plug a gap in the U.S. energy matrix. The United States has not
built a new nuclear power plant since the Three Mile Island incident in
1979, mainly because of public opposition. In reaction, the government
long ago adjusted the licensing process to encourage new construction,
but no company wanted to be the first to jump on board, despite broad
advances in nuclear technologies. The Bush proposal would allow
interested parties to obtain risk insurance to cover any losses from
delays due to the revised licensing process.
Now, this will not actually change any regulations or directly alter
consumer mindsets. What it will do is result in more domestically
produced electricity that does not draw upon foreign petroleum.
Currently, only some 21 percent of U.S. electricity comes from nuclear
power.
The third component -- a proposal to build oil refineries on former
military sites -- would plug a different sort of gap. For one thing,
new refineries would mean more fuel and competition and therefore lower
prices, a big relief to U.S. consumers. But while the nuclear and LNG
proposals seek to reduce oil use by substituting other fuel sources
while securing long-term power supplies, new refineries would instead
relocate a portion of the energy supply chain onto U.S. soil. No new
refineries have commenced operations in the United States in 30 years.
As a result, the United States now imports more than 20 percent of its
total consumption of refined products and half of its gasoline.
The unavoidable U.S. dependence on oil imports means that it will
always face policy constraints. Taken together, however, these three
measures would go a long way to freeing the United States from trends
-- and countries -- that could otherwise limit U.S. foreign policy
options.
Ultimately, there are only two countries that might one day square the
circle of limited oil production, which could bring prices down in the
long term. The first is Saudi Arabia, the world's largest oil exporter
and possessor of the world's largest reserves. But the House of Saud
has a vested interest in keeping global output as close to global
demand as possible; the thinner the difference, the higher the price.
Saudi Arabia will certainly increase its own output as the years roll
by, but it has little interest anymore in seeking a cushion. That is
something that Bush almost certainly took away from his April 26
meeting with Saudi Crown Prince Abdullah, and in the end gave a tad
more oomph to the April 27 mix of largely non-oil proposals.
The other possibility is Iraq, which boasts the world's second-largest
proven reserves, despite the fact that three-quarters of its territory
remains unexplored. Once Iraq gets an internationally accepted and
domestically legitimate government, the only limitation on its
production will be where it chooses to cap it. For a state that was
locked off from the world for some 20 years and then involved in three
wars, that cap is going to be high.
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