Op-Ed

U.S. energy policy needs to move beyond the status quo

That status quo is the policy of reliance on free access to Middle East Gulf oil and free access for Gulf exports to world markets.

We must move past this sluggish policy by supporting viable options for alternative fuel and reducing our dependence on Middle East oil.

What we have now is an international community facing the most difficult energy market it has ever experienced. The insurrection in Iraq, conflict with Iran and the Hezbollah attacks on Israel have driven the price of oil to record levels, with prices jumping nearly 30 percent this year.

To understand how American policies have changed in the past two decades, we can look at how the United States strengthened its relationships with key Middle East exporters, notably Saudi Arabia and Kuwait in the early 1980s. The United States relied on these countries to make the sizable oil-producing investments needed to maintain enough "surplus capacity" to form an oil supply cushion against disruptions in oil production elsewhere in the world.

In return, the United States government guaranteed the security of Saudi Arabia and its small Gulf neighbors. Thus, we keep American troops, prepositioned equipment and the U.S. Navy positioned in and around the Persian Gulf and Indian Ocean.

This surplus oil capacity has served as a vital protection to U.S. energy security. For example, when Iraq attacked Kuwait in 1990, so much oil existed in the international oil market that the loss of 5 million barrels of oil production each day from Iraq and Kuwait was easily replaced by production increases from Saudi Arabia, Venezuela, Abu Dhabi and other Organization of Petroleum Exporting Countries (OPEC) members.

This policy, while producing relatively moderate oil prices over the 1980s and into the 1990s was still an expensive one. The U.S. General Accounting Office estimate that from 1980-90 about $33 billion a year of the U.S. military budget was spent on defending oil supplies from the Middle East.

This changed after the terrorist attacks of Sept. 11, 2001, as the world shifted from a surplus capacity in oil to a "scarcity in capacity." There is little or no cushion to support sudden supply disruptions, such as the current BP America shutdown of an oil pipeline that supplies 8 percent of our nation's oil supply. We see this reflected in the constant fluctuations in the price of gasoline.

The Persian Gulf countries, and OPEC in general, are not investing adequate amounts to meet the rise in oil demand in the United States, China, India and other global emerging economies. In fact, OPEC capacity has fallen, not increased, over the past 25 years from 38.76 million barrels a day in 1979 to about 31 million barrels a day currently. Still, the Persian Gulf represents 25 percent to 30 percent of world oil supply, and we find ourselves locked in a delicate relationship with a region fraught with violence and instability.

While American foreign policy leaders have questioned the U.S. reliance on foreign oil from time to time during the past two decades, it was not until after the 9/11 attacks that the question of dependence on foreign oil became a central concern.

President George Bush's administration policy of strong diplomatic pressure on Middle Eastern governments to move forward with democratization is an important long-term policy goal, but it is hard to predict what impact this policy might have for stabilizing oil production.

Short-term policy goals should include serious efforts to reduce dependence on oil and reducing oil supplies from the Middle East. This can be done by simultaneously nurturing sources of "new" oil such as Russia, the Caspian and Canadian tar sands while at the same time allocating more substantial resources towards developing alternative energy sources such as biofuels and coal.

U.S. national and economic security will remain at risk unless we diversify our energy supply and move past the status quo.

Amy Myers Jaffe is the Wallace S. Wilson Fellow for Energy Studies at the James A Baker III Institute for Public Policy of Rice University

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