OPEC embargo - 40 years later

Oil is the lifeblood of our economy. Petroleum fuels are the largest source of our energy supply, outpacing natural gas and coal. In the transportation sector, which accounts for more than 70 percent of U.S. oil demand, petroleum fuels account for 93 percent of total fuel needs. In other words, oil holds a virtual monopoly over America’s mobility.

This dependence leaves our economy and national security at the mercy of a highly volatile global oil market still heavily influenced by OPEC. In fact, the cartel’s members today control nearly 80 percent of global proven reserves, significantly more than they held in 1973.

The global oil market is also subject to drastic swings generated by events that impact supply—major weather events, wars, and terrorist attacks, to name a few. Today, despite record increases in U.S. oil production, global markets remain tight due to production shortfalls and instability in countries like Iraq, Libya, Nigeria and Sudan—as well as sanctions on Iran. With Saudi Arabia currently pumping oil at near capacity, the global economy may be just one event away from a devastating oil price spike. 

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The economic and fiscal costs of our oil dependence have been staggering. Every U.S. recession during the past 40 years has coincided with a spike in global oil prices. Since January 2007, net U.S. expenditures on imported oil have totaled nearly $2 trillion, representing more than half of our trade deficit over the period. And one recent study commissioned by SAFE and conducted by independent economists found that oil dependence added $1.2 trillion to the national debt between 2002 and 2012.

Finally, oil dependence has been tough on American families and businesses. Last year, the average U.S. household spent a record $2,912 on gasoline – an enormous jump from 2002, when the average was just $1,235. That’s roughly $1,700 a year in household disposable income poured down a gas tank rather than into family savings. Think of it as an oil dependency tax on Americans.

Of course, these costs arguably pale in comparison to the undermining effect that oil dependence has on U.S. foreign policy when dealing with major producers like Iran.

Now the good news. The domestic energy boom is creating an unprecedented opportunity to help mitigate the risks of oil dependence and has the added bonus of spurring economic growth, creating jobs, and reducing the trade deficit. America’s reemergence as a leader in oil production is far from the only bright spot. Recent years have seen a proliferation of advanced transportation technologies, including vehicles powered by electricity and natural gas, creating a unique opportunity to support, encourage, and accelerate real solutions to generate greater fuel diversity and more efficient oil use.

There are now almost 20 plug-in electric passenger vehicle models available to U.S. consumers, and over 110,000 natural gas vehicles are estimated to currently cruise our nation’s roadways. Plug-in electric and natural gas vehicles are getting high consumer satisfaction marks while becoming more widely available at competitive prices. The nation’s vehicle fleet overall is becoming increasingly efficient, with further strides likely over the next several years. 

The bottom line is that America has never been better positioned to end its dangerous dependence on oil than it is right now.  We need to capture this opportunity. The domestic oil boom has already reaped tremendous benefits, but integrating natural gas and electricity into America’s transportation system is a necessary way to diminish both our dangerous reliance on a single commodity and our economic exposure to the global oil market.  

Today, the fate of the U.S. economy is just as bound to the global oil market as it was in 1973, and the Middle East remains volatile, with events in Syria threatening to spread violence into key regional oil producers, including Iraq. We have the tools to ensure that we’re not once again facing this scenario 40 years from today. It begins by changing the fundamental way that America thinks about energy and transportation.

Diamond is the founder, president and CEO of Securing America’s Future Energy (SAFE), which is sponsoring “OPEC Oil Embargo +40: A National Summit on Energy Security” on October 16 in Washington, DC, to highlight the enduring threat posed by America’s continued reliance on oil and emphasize the urgent need for action to combat this vulnerability.

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