High gasoline prices are certain to result in one thing – lots of politicians making speeches and finger pointing. Congress has resorted to its traditional playbook by hauling major oil executives up for hearings to score some political points, even though they know full well that American oil companies are not responsible for setting the price of their product. The administration has announced and re-announced its commitment to wean us off foreign oil. Yet the reality is that the price of oil reflects growing strains in the global oil market and America remains dependent on foreign countries for more than half of the oil we use.
One thing has changed – the roster of the largest energy companies in the world is no longer a who’s who of American companies – it is now dominated by state-owned oil companies in China, Russia, Brazil and countries in the Middle East. And we have let that happen.
Simply put, the rest of the world has left America in the dust when it comes to oil production. The bulk of production is now pumped by national oil companies (NOCs) owned by national governments. Many of these NOCs are located in unstable regions of the world, by nations that do not share Western values.
While these NOCs currently hold a large portion of the world’s proven oil reserves, the truth is that we simply don’t know the extent of America’s vast resources. We have not done an inventory in decades, which makes current statistics, like the frequently cited one that America only has 3 percent of the world’s reserves, at best meaningless if not outright misleading. We didn’t know five years ago that we had more natural gas than Saudi Arabia has oil and today we don’t know how much oil we really have on and off our shores.
The oil that we do know we have is largely under lock and key. The U.S. has vast untapped reserves on the Atlantic and Pacific Coasts, the Gulf of Mexico, and the Arctic, but most areas are off-limits for exploration. In a refreshing nod to reality, the House of Representatives passed legislation in recent weeks designed to open some of those areas up for exploration. But just days after passage, a similar effort in the U.S. Senate fell far short of the 60 votes needed to pass.
Many senators that opposed that effort instead supported legislation designed to raise taxes on oil and natural gas production – which would only serve to push prices even higher. That should make those families trying to get in their cars for summer vacation puzzled, if not angry.
A little over a year ago we had a tragedy in the Gulf, the Macondo oil spill, and regulators and industry have rightfully taken a hard look at best practices to prevent future spills. Industry itself stepped up to the plate and invested billions of dollars to develop several new marine well containment systems to ensure they had more capacity to deal with the specific problems that led to this disaster. Yet the Gulf is not back to work yet and the prolonged moratorium imposed by the administration has cost our economy billions of dollars and thousands of American jobs.
This “permitorium” has driven oil and gas operators out of America and to foreign waters – and those rigs, along with their jobs and revenue, aren’t coming back anytime soon.
While the Obama Administration has been quick to take credit for an increase in domestic oil production last year, the reality is that since the exploration of a single well takes years; current output was determined long ago by decisions that were made by previous administrations. The consequences of the current administration’s inaction will be felt this year but more acutely over time. New leases and permits must be issued now in order to ensure future production.
There is some good news on the horizon – a potential game changer that could shift our energy deficit back in America’s favor. The U.S. has massive quantities of oil shale, which is rock containing materials that convert to oil when heated. U.S. oil shale reserves are estimated to contain nearly two trillion barrels of oil – more than all of the conventional oil reserves for the rest of the world.
In 2009, Secretary Salazar cancelled rulemakings that would have allowed research and exploratory work to begin in Colorado, Utah and Wyoming. The Department of Interior has not been heard from on this issue since, prompting an oil shale expert from the Colorado School of Mines and three Colorado State Senators to accuse the administration of stalling. Meanwhile, every day America sends over $1 billion overseas for oil. Imagine if that money were to be invested here in American communities.
Finally, if America is not going to produce more of its own energy, then at least one would suppose that we would seek to import more oil from our largest and most stable trading partner, Canada.
Apparently not. The proposed Keystone XL pipeline from Alberta to Texas would allow America to import an additional 1.1 million barrels of oil a day from Canada. The pipeline would create 250,000 permanent jobs and generate billions in new revenues for states and localities. Yet the project has been waiting four years for a permit to proceed. Despite the completion of environmental impact analysis by the U.S. State Department, the EPA has interfered and is holding up the project. Canadian producers have been left to guess what the fate of the pipeline might be, while eyeing China as a potential destination for Canadian oil since the U.S. appears to be uninterested. Fortunately, it is not too late for the administration to act soon and approve the pipeline.
With this type of policy paralysis in Washington, it is no wonder that gas prices have risen. We prefer to shelve our problems rather than solve them. That’s bad news for America and certainly does not reflect the America that led the world in the last century.
The U.S. lacks a long term strategy for energy production, and the Obama Administration appears determined to ensure that our nation remains reliant on foreign sources of oil to fuel our economy. As Americans fill their tanks this summer, they should be mindful of the choices that their elected leaders are making, since it is consumers that are left to deal with the consequences.
Karen Alderman Harbert is president and CEO of the U.S. Chamber of Commerce's energy policy arm, the Institute for 21st Century Energy.