Energy Policy:

CFR task force urges integration of U.S. energy policy and foreign policy

As lawmakers struggle to determine the most effective ways to curb the United States' "addiction" to oil, concern over how energy dependence plays into national security is mounting. As a result, the Council on Foreign Relations created an independent task force to examine this issue. During today's OnPoint, task force member Phillip Sharp discusses the report, "National Security Consequences of U.S. Oil Dependency." He gives recommendations of how the United States can handle China's growing energy demands and discusses the need to integrate foreign policy and energy policy. Sharp also addresses the importance of implementing alternative fuels, efficient vehicles and developing offshore drilling in order to help ease energy dependence.

Transcript

Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Phil Sharp, a member of the Council on Foreign Relations independent task force that just released the report, "National Security Consequences of U.S. Oil Dependency." Phil is also president of Resources for the Future. Phil, thanks for joining me.

Phil Sharp: Happy to join you Monica.

Monica Trauzzi: Thanks. I wanted to first start out by having you explain why the task force was created and what the initial goal of the task force was.

Phil Sharp: Sure. Well, first of all, I have not been personally a part of the Council on Foreign Relations. But what they do is from time to time, on key topical issues, they form independent task forces so that the product does not represent a point of view of the Council on Foreign Relations, but rather the people that they brought together. And this one, of course, was fairly obvious of importance. It worked for the last six or eight months, at a time when oil was prominent on everybody's lips. Obviously the gasoline consumers in America felt the pain of the higher oil prices. But obviously there was growing concern about oil supplies from the Middle East, about the actions of the Venezuelans with Cesar Chavez, with what's his face in Venezuela and with the huge resources flowing into the coffers of countries that aren't necessarily friendly to the United States.

Monica Trauzzi: And one of the main points that's stressed in the report is that the U.S. needs to integrate energy policy into its foreign policy. Why is that so important?

Phil Sharp: Well, because we are definitely a part of the international scene, so there are resources, oil especially, but increasingly natural gas, are very important supplies that come out of the world markets. And whatever happens to those markets matters to us. Obviously, the oil supplies are concentrated in the Middle East, which is a tinderbox, which is a very distressing situation for multiple reasons. But also it is recognition that there is, within our government, there's been an incapacity to think broadly and strategically about these issues. On Capitol Hill, where I spend a lot of time, the jurisdictional divisions mean you tend to have two different conversations; the foreign-policy experts talking on the one hand, the domestic energy experts talking on another hand, and lots of other people in between. Even within the executive branch, which struggles to bring unity into policy, it has difficulty keeping these things coordinated and integrated. It has been so under Republican and the Democratic administrations. And the one thing that was trying to be stressed here is we have to do a better job, within our government, of having a whole communications. We'll get to some of the issues, but one of them is this whole issue of independence. Is it realistic or not? And sometimes, I think, people get off the beam on that issue precisely because they don't understand both sides of that equation.

Monica Trauzzi: And let's talk about that, because the report says, "The voices that espouse energy independence are doing the nation a disservice by focusing on a goal that is unachievable over the foreseeable future." And I think that's probably a striking comment to some because this idea of energy independence has been pushed a lot recently. So why is it such a far off concept or why can't we achieve energy independence?

Phil Sharp: Well, it is a striking comment, and hopefully that will get attention to it. It's not necessarily always a disservice if you think of it in terms of motivating people to take some steps we need to take. But the key thing is that there is a lack of understanding of how integrated our economy is and, in particular, our oil supply is with the world market. And while many of us wish, and in certainly the 1970s I made these speeches with great vigor about being independent, because we don't like having to adjust our foreign policy to oil suppliers. We don't like the fact that money goes into coffers which some of which gets drained off into terrorist activities. Those are things we want to stop. But the cost of being able to transform the consumption in the United States is very significant. A lot of the rhetoric that really does the disservice is not as much about independence as much as the assumption that this can be done without cost to the consumer or cost of the economy. As if there's some cheap energy source out there, which if only we'd just let it into the marketplace. Well let me tell you, our marketplace is open enough that investors will invest in it and consumers will buy it if it's cheaper. In fact, I would argue that the American consumer has been unwittingly an ally, a political ally of the oil industry if you're one of those people who believe that somehow we're doing this just because of the oil industry. I can assure you it's because the American consumers like cheap oil, and most of the time they get it. Now every now and then, like over the last few years, of course it's been a very painful and ugly change. That's beginning to temper.

Monica Trauzzi: You encourage exploration and production of oil and gas in areas such as Alaska, along the East and West Coasts, and in the Gulf of Mexico. This may increase national security because we wouldn't have to depend on these foreign sources of oil, but would you consider this a good option considering the amount of opposition that all of this has been facing?

Phil Sharp: Well, just one quick point. First of all, the report talks about the imperative of doing something on the efficiency side. Since oil goes, so much of it, into our transportation sector and that goes into our passenger cars, we have very strong indication that first and foremost the U.S. must do what it can to get a more efficient fleet, to get alternative fuels into the marketplace. So that is the first big proposition and it cannot be taken separately. And, certainly, I would not support a program that did not put a very heavy emphasis on that. And many of the members of the task force would not either. On the production side there is recognition, for example there's a Lease 181, for natural gas primarily, that's 100 miles off the shore of Florida. It is simply, in my view and many others, absurd that this is not getting developed, but the fear of onshore development and what it might do to tourism in Florida caused a political backlash on this several years ago. I think we're moving in the direction to open that up. ANWR remains very controversial regarding the natural gas thing. And I'm not convinced that's worthy of our trying to open it. The argument the report makes, frankly, is less, in fact, it indicates it's not that we expect extraordinary supplies out of these other places to drill, and that, therefore, we'll be able to solve our problem. They will help marginally, like other activity helps marginally. But also it's a little hypocritical for us to be, as our government has for 30 years and still must, trying to encourage the development of hydrocarbon resources around the world and at the same time say, oh, but we wouldn't want to touch our territory. Now, frankly, I'm not as swayed by this argument as some of my task force colleagues are because frankly the people that develop in other countries do so why? Because it makes economic sense to them.

Monica Trauzzi: What about the environmental aspects of it? Because when you push fossil fuels there are some environmental risks.

Phil Sharp: No question about it. And that is sort of what we have been doing. Again, the report, at the outset, says it doesn't consider a couple major issues on energy that must be considered. One is climate change, that means carbon management, which is one of the polluting issues out of fossil fuels. Oil, people may not realize, around the world is now and will be probably for 20 or 30 years the largest source of carbon dioxide. Coal, you get more out of a chunk of cold than you do out of equivalent oil, but the bigger polluter in that regard is oil. Now there are other pollutants too, we could talk about it. So, again, many of us on the task force believe the U.S. government and, you know, internationally has to get a handle on some kind of curb on carbon emissions. And we'd be wise to do so soon because part of what's happening in oil is it's starting to make major decisions about what we call unconventional sources, like the tar sands in Alberta. And as these investments get made we want them to be made in the understanding that there is going to be a restraint on carbon. Therefore, you don't want to make the choices that have the greatest carbon emissions to them.

Monica Trauzzi: So as part of this integration of energy policy and foreign policy, we probably have to be talking to countries like Venezuela and Saudi Arabia ...

Phil Sharp: No question.

Monica Trauzzi: ... and China a bit more.

Phil Sharp: No question.

Monica Trauzzi: What should the U.S. be saying to China? Because they're using more and more energy every year and in 10 to 15 years they're going to surpass the amount that we use.

Phil Sharp: Um-hmm.

Monica Trauzzi: What do we say to them?

Phil Sharp: Well, I think there are several things to say to them. And I actually visited in China with senior government officials about energy policy and they are quite interested. They both see competition with the United States, as we do with them, but they also see a common interest. We are both importers. Therefore, we have an interest in development of a world market that is efficient and effective. So this is a change in point of view from their historic view about markets, where they're beginning to understand that. And one of the things the report recommends is bringing them into the International Energy Agency, which is a coordinating mechanism of the consuming nations. This was created after the embargo in 1973 of primaries Western Europe, the United States and Japan. There are two other things on China. One is encouraging them, as they've already started to do, to undo the subsidization or the price control on gasoline, for example, in their country. Otherwise their consumption, like when we controlled prices, is just going to rise without any kind of tempering on it. They actually know this. They have announced that when they raised the price control level, so it's higher-priced, that they were doing about as much as they thought they politically could get away with at that time. But this is an important internal thing for them too. But the third and more troubling thing, as the report points out, is that at the moment the Chinese government is engaging in its search for new supplies of oil internationally, which is not a problem in and of itself, but when they go into Sudan or they go into one of these places where we have serious foreign policies, we and the rest of the world, with what's going on in these countries. They may make deals with that government that undermine the ability to discipline that local government into coming into the international community. And there is simply where our diplomacy, we obviously won't control that, but we want to intensely push in our diplomacy on that subject.

Monica Trauzzi: Switching back to the U.S. The report is pretty critical of the current administration. What has their reaction been? Have they given any indication of whether they're going to take the recommendations that the task force makes?

Phil Sharp: Well, I don't know. I think I wouldn't characterize it as necessarily just critical of the administration. I think what it's critical of, whether it's Democrat or Republican, is 20 years of not being able to come to grips with some of these issues in the United States. So I wouldn't want to characterize it as something that clear cut. The administration, in my view, and obviously I'm of another, have been of another party when I was in Congress, the administration deserves a lot of credit for having put this issue on the table at a time when prices were not rising, in which you could not get the American public attention to them. And I think there's more they need to do and that's what this report advocates to them and to the Democrats. It's really more critical to Congress frankly on a bipartisan basis than anything else.

Monica Trauzzi: Final question. We're almost out of time. The price of oil has dropped recently.

Phil Sharp: Right.

Monica Trauzzi: And a recent Washington Post article talks about the fact that as prices go down interest in alternative energy also goes down. Are you at all fearful that the recent price drop will just further enhance our energy dependence?

Phil Sharp: You bet. When I testified earlier this year about why they needed to take action on modernizing and reforming the CAFE standards, the fuel economy standards on automobiles, I spoke then and do now, it's not about me. It's everybody speaking this way. That we've had an on-again off-again policy because when the prices go down there's no interest in the government acting, there's no interest in the consumer buying those more efficient cars, there's no interest in the investor putting money into that or into alternative fuels. So there is this risk. Now the price level has only dropped back. It's still not where it was three years ago, and we don't expect it to go that low.

Monica Trauzzi: Okay. We'll have to end it on that note. Phil, thanks for being here.

Phil Sharp: Sure, absolutely Monica. Thank you.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

[End of Audio]

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