Nothing Short of Crisis: A Front-Row View of America's Energy Conundrum

Nicholas Freiling
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Posted: Jul 14, 2011 12:01 AM

Global oil supply is severely disrupted by a crippling attack on a key Saudi oil processing facility. Crude oil prices spike to $160/barrel. Economic recovery efforts in the United States face severe setbacks as gas prices near $6/gallon and pressures to address the growing national debt continue to be heard from around the world. Shock and confusion consume global financial markets, and the threat of further attacks is looming.

How do the US government and global markets respond? One can only speculate. But at today’s National Summit on Energy Security in DC, industry leaders and former government officials weighed in, participating in a realistic, war-game simulation of the above scenario.

Titled Oil ShockWave, the intense simulation featured several high-level former cabinet members and energy industry leaders, including former national security advisor Stephen J. Hadley, former Director of National Intelligence John Negroponte, and former Shell Oil CEO John Hofmeister. Playing the parts of top current cabinet-members, the participants offered their opinions and debated as to the best course of action to take to best preserve both the nation’s security and its already-fragile economy. The simulation was complex and realistic, as even the participants were not briefed beforehand.

Needless to say, the event made for an exciting morning. Watching high-ranking officials skillfully respond in “real time” to a crisis of this magnitude was encouraging, while the shocking but realistic facts of the scenario provided a subtle reminder that there is only so much government can do when faced with a crisis of such magnitude.

But by far the most significant take-away from the morning was the brief but mortifying glimpse of the truly fragile place the United States occupies in regards to energy security.

According to the Securing America’s Future Energy (SAFE), the United States is the world’s largest oil consumer at 19.1 million barrels per day (compared to runner-up China’s 9.1 MBD). The US transportation sector alone consumes more than the total consumption of any other single country in the world, and total global consumption is only increasing as demand in emerging market economies is growing rapidly. Couple all of this with today’s oil price volatility and the fact that the United States imports about half of the oil it consumes, and the security of America’s energy future looks very grim indeed.

In the short-term, it was agreed that there really is little that can be done to reduce America’s dependence on foreign oil. Developing domestic sources of oil and alternative energy technologies will take years, and there is currently no viable alternative to oil to meet America’s energy needs. If a crisis as the one described above (which was entirely believable) were to occur, especially with the national economy still in recovery-mode, the economic ramifications would be life-altering for millions of Americans.

But regardless, the Oil ShockWave participants were in unanimous agreement that waiting for a crisis to happen before acting is unacceptable. Though forced to respond to this simulated crisis last-minute, they commented afterwards on the folly of doing nothing during periods of relative stability to lessen America’s dependence on foreign oil. “They key is education…sustained, honest dialogue with the American people” said Stuart E. Eizenstat, former Deputy Treasury Secretary.

Former Shell CEO John Hofmeister reaffirmed this, but added that as much as Americans may want to develop green energy technologies, such innovations will likely be unable to meet America’s energy needs for years to come. “The pathway to the green economy should not be paved at the expense of hydro-carbon power,” he said, explaining that allowing a recession to occur now because of a refusal to deregulate America’s domestic oil industry is too high a price to pay to achieve the green technologies of the future.

The participants’ overall consensus was clearly summarized by Stephen Hadley after extended deliberation: “We need a comprehensive energy policy going forward so we can get off this corrosive dependence on foreign oil.” Though a severe energy crisis would certainly induce the public support necessary for significant action to be taken, waiting around for a crisis to happen is neither responsible nor wise. Deregulating the country’s domestic oil industry and encouraging the development of green technologies are both necessary if the United States is to avoid a crippling energy crisis.

But the most eye-opening moment of the event came during the question and answer period, when an audience-member who had attended the first Oil ShockWave simulation in 2005 noted that the consensus of the participants in that year was no different than the conclusions reached today. And back then, the “oil crisis” came about after a disruption in supply caused a spike in crude oil prices to the then-unthinkable (but now all-too-familiar) price of $100/barrel. Five years and two different administrations have failed to produce any real progress toward securing America’s energy future, and there is little talk today of achieving any real reform.

As Ambassador Susan Schwab noted, when it comes to America’s looming energy crisis, “We have met the enemy, and he is us.” For decades now, Americans have known about their over-dependence on foreign oil, yet inaction remains the status quo.