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« Economic Security: Will the Third Oil Shock be the Charm? | Main | Economic Security: Consumer Driven. Ethanol Powered. »

October 17, 2008

Energy Security: What is it and Where Can I Buy Some?

Ethanol: Fact vs. Myth

Learn the truth about ethanol...

Happy Anniversary? There is Some Good News...

Today is the 35th anniversary of the 1973 Arab oil embargo.  The United States uses 15% more oil today as net imports have increased from 35% to 57%.  Our oil addicted nation now imports three times as much oil from Persian Gulf nations and oil imports account for almost half of the U.S. trade deficit in 2008. According to the U.S. Bureau of Economic Analysis, for the first eight months of 2008, net petroleum imports totaled $281.14 billion dollars (or $421.71 billion/year if that level is maintained over a 12-month period).

OPEC Net Oil Export Revenues Exceed $1 Trillion in 2008

Thirty five years later we have finally witnessed the convergence of energy, economic, environmental, national security at the top of the national political agenda. These issues  have always been intricately linked and connected to your personal security and economic freedom. So what is energy security worth?  Unlike greenhouse gas caps, credits, and trading which spur environmental security gains, energy security gains still do not translate into dollars per gallon at the pump for domestically produced alternative fuels.

We insure our bodies, cars, houses, boats, motorcycles, and even our pets against possible harm and misfortune.  We pay extra for quality products that we see as improved or that exceed our minimum expectations (e.g., cars, TVs, Starbucks, vodka, spring water, organic food, and premium gasoline).  When will you demand and pay for energy security? Never, if you think you it’s not a problem.  What do you think?  Not sure?  Please read on and let me know what you think.

Since Sept 11, 2001 it appears oil prices just kept rising. Until our recent economic woes set in.

Oilprices_2 

What is Energy Security?

"American energy policy has been focused on a narrow definition of energy security that strived to ensure sufficient supplies at affordable prices. This has translated into policies promoting diversification in supplies of oil and natural gas, with little emphasis on energy alternatives. A policy that relies on a finite resource concentrated in a few countries is doomed to failure. Our long-term security and prosperity require sufficient, affordable, clean, reliable, and sustainable energy.” U.S. Energy Security – A New Realism, Senator Richard Lugar (R-IN) speech to the Brookings Institution on March 13, 2006

Energy Security is National Security

"Energy security impacts every aspect of life in the United States, from the cars we drive and how much we pay at the gas pump to our vulnerability to foreign terrorism and our relationships with other countries. Many of the countries that export oil have unstable or hostile governments that threaten American national security. By buying oil from these countries instead of developing domestic fuels, we support governments that are repressive to their own citizens and potentially dangerous to the American people."  -- Energy Security IS National Security, Senator Richard Lugar (R-IN)

"The national security risk posed by our oil dependence requires fundamental change and a long-term serious commitment. You just can't call 1-800-dial-the-military." General Charles F. Wald, USAF (Ret.) Former Deputy Commander, U.S. European Command

"America's dependence on oil makes vulnerable the country's economic and military security and our nation must finally address this fundamental risk. As co-Chair of the Energy Security Leadership Council, I am completely committed to actively working with this diverse group of fellow business leaders to make the case for an aggressive, comprehensive policy to improve energy security." --
Frederick W. Smith, Chairman, President and CEO, FedEx Corp. (co-Chair) Energy Security Council

But in the interests of our national security, our climate, and our pocketbooks we should now move together as a nation – indeed as a community of oil importer nations – to destroy, not oil of course, but oil’s strategic role in transportation as quickly and as thoroughly as possible. April 18, 2007, Testimony of R. James Woolsey (former Director of the CIA) U.S. House of Representatives Select Committee on Energy Independence and Global Warming Hearings on Geopolitical Implications of Rising Oil Dependence and Global Warming

What are we paying for not having energy security?

How much do we really pay for oil and gasoline? - Institute for the Analysis of Global Security (IAGS)

Energy Security is about Terrorism and Geopolitical Stability: "Since the industrial revolution the geopolitics of energy – who supplies it, and securing reliable access to those supplies – have been a driving factor in global prosperity and security. Over the coming decades, energy politics will determine the survival of the planet." -- January 2008 Carlos Pascual, Vice President and Director, Foreign Policy , The Brookings Institution

"The wealth produced by oil underlies the power of the three totalitarian movements in the Middle East that have chosen to make war on us: the ruling Iraqi Baathists and Iranian mullahs, and al Qaeda, which was spawned by Saudi money. [..] We are at war. We should start by asking what we can do, as soon as possible, to undercut our enemies' power. Other considerations should now follow, not lead. [..] If we do not act now, we will leave major levers over our fate in the hands of regimes that have attacked us or have fallen under the sway of fanatics who spread hatred of the U.S., and indeed of freedom itself. [..] For all of them, their power derives from their oil. It is time to break their sword." - R. James Woolsey, CIA Director, 1993-95, Wall Street Journal, September 18, 2002

Energy Security: What is the Problem?

The Truth About Oil: Supply, Demand, Alternatives, Proven Reserves, and Geopolitics
The United States has 3% of the world’s oil. 14 of the top 20 oil companies in the world are government-owned.  90% of the world’s known oil reserves are controlled by those government owned oil companies. 50% of the oil reserves are owned by countries without democracies or free market economies. Oil demand is expected to increase by 50% by 2030. We need to find two new friendly democratic Saudi Arabia’s to make up for that new demand - Flexible Fuel Vehicle Club of America

Energy Security Is Peak Oil

M. King Hubbert conceived of Peak Oil in 1938. In 1956, he predicted that U.S. production would peak and begin declining in 1969. It actually occurred in 1970.  – Association for the Study of Peak Oil & Gas

All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.
William J. Cummings, Exxon-Mobil company spokesman, December 2005

"U.S. oil production peaked in 1970 and has been in decline ever since. The same happened in the U.K., Norway, Indonesia and Mexico, to name a few. In 2005 the Swedish Royal Academy noted that 54 out of 65 of the largest oil producing countries were in decline, so it is not difficult to comprehend that world oil production will decline before long." -- Dr. Robert L. Hirsh, past chairman of the Board on Energy and Environmental Systems at The National Academies and lead author of the “The Hirsch Report” — formally known as Peaking of World Oil Production: Impacts, Mitigation and Risk Management — sponsored by the Department of Energy.

Let’s stop the attacks on ethanol. Ethanol production today is on par with imports from three OPEC nation’s -- Joe Petrowski – Gulf Oil CEO, July 11, 2008

"With the embargo now a distant memory for many, we are still learning more about its lessons for America’s current dependence on foreign oil." -- Jay Hakes A Declaration of Energy Independence: How Freedom from Foreign Oil Can Improve National Security, Our Economy, and the Environment

That was then is now?

Are We Ready for the Next Oil Shock? The Washington Post, August 11, 2006, Frederick W. Smith and P.X. Kelley Energy Security Leadership Council Co-Chairs

July 23, 2008 -- The House voted 414-0 Wednesday to require the intelligence community to study the links between high energy prices and national security.  Under the legislation (HR 6545), the director of national intelligence would write a national intelligence assessment on topics such as the national security ramifications of Venezuela, Iran, or other oil-rich countries using their resources to put pressure on U.S. policy. House Calls for Intelligence Study of How Energy Prices Affect Security.  --  Tim Starks, Congressional Quarterly

September 9, 2008 -- Crude oil prices fell below the critical $100 a barrel level on Tuesday for the first time since April as hurricane Ike shifted its course away from the Gulf of Mexico and traders bet OPEC would leave production unchanged.Since jumping to an all-time high of $147.27 last July, the combination of the slowdown in the global economy, which is damping oil demand, and higher production from the OPEC oil cartel have brought down oil prices 30 per cent. Crude prices fall below $100 mark

Sept 10, 2008 -- OPEC has surprised the markets by agreeing to abide by the production limit it had set for its members in September 2007. The cartel views the market as oversupplied. Carola Hoyos in Vienna and Javier Blas in London, Financial Times

September 11, 2008 – 85 Percent of July Trade Deficit Caused by Imported Oil  U.S. Department of Commerce, Bureau of Economic Analysis, reported that Americans spent $52.8 billion on imported petroleum in July, twice the amount from a year earlier, and representing 85 percent of the month’s $62.2 billion trade deficit. During the period January–July, 2008, the United States has imported petroleum products valued at $276,905,841,000.

Where is the Oil and Who Owns it?\

The world's oil wealth is concentrated in a relatively few countries. 4 of the 5 nations with the largest oil reserves are in the Middle East -- Saudi Arabia at 267 billion barrels (1973) -- Iran at 133 billion barrels (1979) -- Iraq at 115 billion barrels (today) -- Kuwait at 104 billion barrels (1990).  Canada is 4th because of oil shale reserves. Oil reserves are also large in the United Arab Emirates, Venezuela, Russia, Libya and Nigeria. Adding Canda to these countries to the big five producers raises the total to 86 percent of world reserves.

Do the countries above look familiar?

                 Major Disruptions of World Oil Supply

Oil_and_war_graph

Source U.S. Department of Energy

Are the World's Oil Reserves in the Hands of Democracy?

Nearly 50% of the worlds oil supplies are in countries categorized as “mostly unfree or Repressed”  Just 3 of the 30 countries that control nearly all of the world's oil wealth score highly enough on The Heritage Foundation, 2006 Index of Economic Freedom to be categorized as free—the United Kingdom, the United States and Canada. These countries rely on private companies to run their energy industries, but they have only 16 percent of world reserves, almost 90 percent of it in Canada. The United States passed its production peak in the 1970s, and the United Kingdom may have done so recently. Neither is likely to add much to conventional world oil supplies. -- Vol. 1, No. 4, April 2006, Federal Reserve Bank of Dallas, Running on Empty? How Economic Freedom Affects Oil Supplies, by Stephen P. A. Brown and Richard Alm.

Energy Security Risks are not Restricted to our Borders

In the aftermath of Russia’s incursion into Georgia, U.S. Sen. Dick Lugar is embarking on a two-week, nine-nation mission that focuses on the trans-Atlantic alliance’s energy security. Lugar will meet with officials in France, Georgia, Azerbaijan, Turkey, Romania, Hungary, Ukraine, Germany, and at NATO and EU headquarters in Brussels.

It is time for the trans-Atlantic community to establish a credible energy security strategy that diversifies energy sources for all Europe, establishes a collective framework to work with Russia, and refuses to tolerate the use of energy as an instrument of coercion,”

“The absence of a collective energy security strategy will lead to greater fragmentation among European nations and across the Atlantic.  This fragmentation will not be exclusive to energy policy; it may also detrimentally impact our ability to act upon shared security and economic issues,” – Senator Richard Lugar (R-IN) April 15, 2008

"The recent conflict taking place in Georgia, however, is prompting fear among some. While Georgia is not a significant oil and gas producer, it is centrally located and has become a launching pad to transport those commodities to Europe. Indeed, the 1,100 mile Baku-Tbilisi-Ceyhan pipeline circumvents both Russia and Iran and is used to supply about 1 percent of the world's daily oil needs. The line, long a contention between Russia and Georgia, has not been damaged during the battle. But Russian-led Georgian separatists have threatened to sabotage it. For Russia, control of Georgia and the pipeline would restore much of its influence over many of the former satellites of the U.S.S.R.," says James Williams, publisher of the Energy Economist newsletter, in an interview with the Los Angeles Times. "It would have the clear benefit of increasing Russia's energy chokehold on Europe." -- Russia's Rise, Ken Silverstein, August 20, 2008, EnergyBiz Insider

Your Energy Security is Blowing in the Wind

"The storm slammed into Galveston, Texas, early Saturday and plowed across much of U.S. oil producing country in the process. Initial reports from oil refiners in Texas and Louisiana were encouraging. Most of the 14 refineries shut down in advance of Hurricane Ike — nearly 20 percent of U.S. oil refining capacity — could reopen by week’s end, several firms said. The Louisiana Department of Natural Resources reported that the basic infrastructure of that state’s oil and gas industry appears to have weathered the storm “with almost no damage.”  Preliminary surveys suggested that a number of production platforms in the Gulf of Mexico may have been destroyed, however.  The Department of Energy said Sunday it released a 309,000 barrels of crude oil from its Strategic Petroleum Reserve (SPR) to stave off any shortages at refineries caused by Ike or the earlier Hurricane Gustav.  Gasoline prices spiked nevertheless, climbing over $4 per gallon in several states Monday. President Bush said over the weekend that the Federal Trade Commission and Energy Department will keep close watch to ensure that consumers are not being gouged at the pump in the wake of the hurricane.  -- Energy Picture Grows More Complex In Wake Of Ike, Sept. 15, 2008 Adrianne Kroepsch

Americans Spent Ten Times as Much on Oil Imports in June Than Was Invested in All New U.S. Ethanol Producing Capacity Last Year: U.S. Senator Richard Lugar, (R-IN), August 12, 2008

In 2007, the Air Force spent $8 billion on fuel.  For every $10 increase on a barrel of oil, U.S. taxpayers must pay an additional $600 million.

Which Energy Security Weapons of Mass Construction do we Have to Fight Back With?

There are no magic beans.  Will we drill more oil (with 3% of the world’s oil?), use more coal, use more nuclear, use less, tax more, or wait for people to buy smaller cars and ride their bikes or take metro to newly designed cities – or continue down the path of improving biofuel production?  Right now, considering our drive don’t drive options, and for the immediate future it appears ethanol is the only significant weapon we have to fight oil imports.  We simply do not have the cars or the refueling infrastructure to make a significant difference with any of the other options (hybrid, plug-in, natural gas, electric, hydrogen) because it takes 17 years to turn the fleet over and possible longer considering the economy.  But we are making progress on both fronts.

U.S. Gasoline Demand Drops for 23rd Week, MasterCard Says

U.S. Ethanol Production To Surpass Middle East Oil Imports

The net imports of the world’s biggest consumer are expected to fall between now and 2030, ending what has been an almost relentless 30-year climb in the use of foreign oil and a fall in domestic production. In 2006, George W. Bush said in his State of the Union speech that America was “addicted to oil” – often imported from unstable parts of the world – and said he would work to address.  Guy Caruso, head of the US Energy Information Administration, said that that trend was set to continue as people adjusted to high oil prices and the impact of the Energy Independence and Security Act, which became law in December 2007, was felt. “The 1970s is the last time we saw any significant decline in net import dependency in the US. It shows that markets do work, policy changes do work, technology does work,” Mr Caruso said.

Are Alternative Fuels Like E85 Working? In some places E85 is Outselling Premium.

"For the month of August 2008, E85 sales in Minnesota were estimated at 2.1 million gallons - approximately 7% more than was sold a year prior in August 2007.  At an average price of $2.95 per gallon, E85 was 67 cents less than the average price of 87 octane gasoline in the state during the month of August.  For the period of January through August 2008, E85 sales were up more than 14% over the same period in 2007.  For the fourth month in a row gasoline sales in Minnesota fell - more than 11 million gallons or 4% in August, compared with August 2007 sales."  -- Kelly Marczak, Director, Minnesota Clean Air Choice Team, Clean Fuel & Vehicle Technologies, American Lung Association of Minnesota CleanAirChoice.org

After hurricanes Gustav and Ike, E85 was available to gasoline marketers and consumers in Atlanta after gasoline pipelines started to run dry. (PDF)Download e85_atlanta_biofuels_market_alert_100108.pdf

E85 Stations Exceed 1,800: Up 28% in One Year. "Only 7 states do not offer E85: Maine, New Hampshire, Vermont, Rhode Island, New Jersey, Alaska and Hawaii." - National Ethanol Vehicle Coalition, October 13, 2008

Poll Says 74% of Americans Think T. Boone Pickens' Energy Plan Can Work:
RenewableEnergyWorld.com, August 18, 2008

In a new national Sacred Heart University Poll, 74.0% of Americans said it was very or somewhat possible that the 10-year energy independence plan proposed by Texas oilman, T. Boone Pickens, could be accomplished. Pickens is running advertising touting his plan to use American ingenuity along with solar and wind energy as well as bio-fuels to cut dependence on foreign oil in 10 years. Only 14.4% of those surveyed indicated the plan was somewhat impossible or not at all possible to accomplish and 11.6% were unsure.

What happens if we don’t improve energy security?

Its getting worse and there is a tremendous economic opportunity left on the table of chance. It's not about what we have, it is about what we could have had, and what we might just get.

"Shock Wave" brings together a distinguished group of experts in energy, economics, the military, intelligence, politics, and foreign relations to explore the delicate balance between the supply of oil, increasing international demand, and the global political situation. At the center of the documentary is the ground-breaking war game "Oil ShockWave," a crisis simulation developed by Securing America's Future Energy and the National Commission on Energy Policy that asks the question: What would happen if events around the world stopped the flow of even a small amount of oil? The stimulation is led by Secretary of Defense Robert Gates, with a group including former Senator Don Nickles; James Woolsey, former CIA director; Richard Haas president of the Council on Foreign Relations; and others.

Where Can you Learn More About Energy Security?

Clean Fuels Development Coalition Energy Security Issue Brief

2007 National Summit on Energy Security with Senator Richard G. Lugar

Energy Independence and Security Act of 2007

United States Senate Committee on Energy and Natural Resources

U.S. Department of Energy/Energy Security

Congressional Record Search "Energy Security" and HR 3416 — America's Energy Security Trust Fund Act of 2007

The Institute for the Analysis of Global Security (IAGS) Journal of Energy Security

Association for the Study of Peak Oil & Gas

The Energy Security for American Families Initiative

Securing America's Future Energy (SAFE) and its Energy Security Leadership Council (ESLC) hold a news conference to release "A National Strategy for Energy Security, an innovative, comprehensive set of solutions to the myriad problems posed by America's dependence on oil."

Google “Energy Security”

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