Pending Energy Bill Does Little to Reduce US Foreign Oil Dependence

Fuels or energy sources used for electrical generation. Most electricity is generated by fuels other than oil. (image: doe.eia.gov)

The Obama administration has announced, broadly speaking, two main goals for their energy policy:
•    Fighting climate change
•    Reducing our dependence on often-unfriendly states for oil

There are other worthy goals also behind the Administration’s policy, such as creating new jobs in the green energy sector, but the two main thrusts are fighting global warming and improving both our trade balance and our national security by not importing so much oil.

The pending American Clean Energy and Security Act (a.k.a. Waxman-Markey bill) addresses the former goal—reducing climate-changing carbon emissions—but not the latter—ending our dependence on foreign oil.  Recent studies suggest that over the next 20 years, oil consumption would only be reduced 5 to 10 percent by the bill, the Kansas City Star reported on Friday. One of those studies was by the Administration’s own agency, the EPA (which came in at the lower end of that range) so it’s not likely that ideology or partisan politics are driving this conclusion.

Instead, the conclusion that the bill might only reduce daily oil consumption by 700,000 to 1.4 million barrels by 2030—when total U.S. consumption is projected to be 14.3 million barrels—flows naturally from the bill’s focus on electrical generation. In establishing a cap-and-trade system for carbon emissions, the bill incentivizes utilities and industry to shift to greener, cleaner power generation technologies.  For example, non-carbon-emitting solar, nuclear, wind, and hydroelectric power all will have economic advantages over the use of fossil fuel for electricity. In particular, coal, which emits the most carbon per kilowatt generated of all fossil fuels and which currently provides half of U.S. electricity, will be significantly impacted by the bill.

However, coal is domestically produced. Reducing the use of coal does nothing to increase energy independence. And oil, which is almost 60 percent imported, only generates 2 percent of U.S. electricity. That’s less than was generated in 2006 by alternative energy, before the focus on green power.

Sources of US electrical generation by percentatge in 2006. (image: wikipedia.org)

Instead, oil is used mostly for transporation—70 percent of U.S. oil consumption is transportation-related (mostly for gasoline). Home heating oil (used mostly in the Northeast) accounts for another 4.4 percent or so, which means that three-quarters of oil consumption—three-quarters of oil imports—are for energy-related uses which are not significantly affected by the new bill.

Since gasoline alone accounts for almost half of oil consumption in the U.S., if we want to tackle energy- and oil-dependence, we need to attack gasoline usage aggressively—mathematically, no single other use is large enough to make much of a difference. Obvious means to meet this goal include significantly increasing car and truck fuel economy targets; offering meaningful financial incentives for buying hybrid, alternate fuel, or fuel efficient vehicles; and increasing use of mass transit.

As a corollary, since it accounts for such a small percentage of oil use, home heating oil is the second-to-last thing to tackle in terms of moving towards energy independence (electrical generation by oil is the last). That’s not to say that home energy conservation and improving the efficiency of your furnace or boiler are not worthwhile—they’ll do their part for the environment, and also help your bottom line—but just that if politicians say that they are taxing or restricting home heating oil to help the environment, the most charitable interpretation is that they are not conversant with the statistics or not very good at math.

In the meantime, though, the current bill will affect electrical generation and hopefully reduce carbon emissions. However, it will do very little about our appetite for foreign oil, or our reliance on nations we’d probably rather not rely on.