Commentary Magazine


Topic: Securing America’s Future Energy

What Will America’s Oil Boom Bring?

Every now and then, the Iranian regime threatens to close the Strait of Hormuz or some al-Qaeda activist comes close to bombing a major oil facility, and pundits spring up and point out the cost of American reliance on foreign oil, only to be forgotten when the news cycle moves on. The fact that American politicians focus so little on energy security is nothing short of policy malpractice. The Chinese have made energy security their primary strategic ambition and have reaped the benefits. The issue for the United States is not simply jobs—although creating productive, private sector jobs should be the goal of any government—but rather national and economic security.

Enter “Securing America’s Future Energy” (SAFE). Co-chaired by General P.X. Kelley, the former commandant of the U.S. Marine Corps, and Frederick Smith, chairman, president, and CEO of FedEx, the organization has assembled a marquee list of top military brass and CEOs, who together make the case that energy security is not only an economic issue, but a national security matter as well. Together, the business and military experts discuss energy issues with greater fluency and depth than politicians of both parties. This is reflected in SAFE’s new report, “The New American Oil Boom,” released yesterday. Because of government regulation, the oil boom may not be as pronounced as it might be but, even so, the United States last year became a net exporter of refined petroleum products for the first time since 1949.

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Every now and then, the Iranian regime threatens to close the Strait of Hormuz or some al-Qaeda activist comes close to bombing a major oil facility, and pundits spring up and point out the cost of American reliance on foreign oil, only to be forgotten when the news cycle moves on. The fact that American politicians focus so little on energy security is nothing short of policy malpractice. The Chinese have made energy security their primary strategic ambition and have reaped the benefits. The issue for the United States is not simply jobs—although creating productive, private sector jobs should be the goal of any government—but rather national and economic security.

Enter “Securing America’s Future Energy” (SAFE). Co-chaired by General P.X. Kelley, the former commandant of the U.S. Marine Corps, and Frederick Smith, chairman, president, and CEO of FedEx, the organization has assembled a marquee list of top military brass and CEOs, who together make the case that energy security is not only an economic issue, but a national security matter as well. Together, the business and military experts discuss energy issues with greater fluency and depth than politicians of both parties. This is reflected in SAFE’s new report, “The New American Oil Boom,” released yesterday. Because of government regulation, the oil boom may not be as pronounced as it might be but, even so, the United States last year became a net exporter of refined petroleum products for the first time since 1949.

Petroleum fuels account for 37 percent of U.S. primary energy demand, and during the past five years, U.S. households and businesses have spent a total of $755 billion annually, a major drain on disposable income. Transportation is especially hostage to oil. Liquid fuels provide 97 percent of the energy needed to move cars, trucks, seaborne ships, and aircraft. When the White House pursues policies that limit domestic fuel production, they cripple the economy and empower foreign exporters. Ethanol is no solution. Not only does it drive up the cost of food, but because ethanol-based fuels are priced on the same scale as petroleum fuels, they do not lower the price.

The report, however, is clear-eyed about what the current American oil boom will mean and, as important, what it will not:

As U.S. levels of oil imports continue to fall, the trade deficit will improve, and the transfer of U.S. wealth abroad will decrease. This will help strengthen the dollar and increase investment in the domestic economy… But it is important to be clear-eyed about the effect the boom in oil production will have on American energy security. Rising domestic production will not shield consumers from oil price volatility, and it will not lower gasoline prices over the long term. It will also not allow the United States to abdicate its role in the Middle East.

SAFE is correct that “America’s dependence on oil represents one of the most dangerous and pressing national security threats facing the country today.” Their conclusion that “as long as the United States remains dependent on oil as the primary fuel in our transformation sector, the nation will remain vulnerable to the effects of oil price volatility and debilitating price shocks” will be more controversial. Any strategy, however, that strengthens the economy and marginalizes Saudi and Iranian influence is a noble one to pursue.

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