Thinking Outside The Barrel
By Senator Richard G. Lugar
As submitted to Business Week
March 27, 2006

In a remarkable moment during the State of the Union address, President George W. Bush caught the attention of the nation with five words: ``America is addicted to oil.'' Soon after the speech, I talked to the President about energy, and he admitted that he had not anticipated the impact of that statement or that some commentators would find it incongruous.

I believe he is sincere in wanting to focus efforts more on pursuing alternative energy sources. But his Texas roots, his high-profile advocacy of opening up the Arctic National Wildlife Refuge to drilling, and other associations with the oil industry have created long-standing public impressions that the President is an oilman who believes in the oil economy.

Bush's predicament mirrors the nation's own love-hate relationship with oil. For decades the energy debate in the U.S. has pitted so-called pro-oil realists against idealistic advocates of alternative energy. The pro-oil commentators have attempted to discredit alternatives by saying they make up a tiny share of energy consumed and that dependence on oil is a choice of the marketplace. They assert that our government can and should do little to change this. Former Exxon CEO Lee Raymond echoed such reasoning in 2005, when he noted that in 25 years, even with double-digit growth rates, alternatives like wind and solar power will still provide less than 1% of the energy needed to meet worldwide demand. ``I am more interested in staying focused on the 99%,'' he said.

YES, ADVOCATES of alternative energy must resist the temptation to suggest that energy problems are easily solved. They are not. Relieving our dependence on oil is going to take huge investments of time, money, and political will. But the difficulty of solving the problem doesn't make doing so any less necessary. With less than 5% of the world's population, the U.S. consumes 25% of its oil and will spend about $320 billion on oil imports this year. Most of the world's oil is concentrated in places either hostile to U.S. interests or vulnerable to political upheaval or terrorism.

Given that sobering outlook, I believe the balance of realism has passed from those who argue on behalf of oil and a laissez-faire energy policy relying on market evolution to those who recognize that life in America will be far more difficult in coming decades unless there is a major reorientation in the way we get our energy. No one who cares about U.S. foreign policy and long-term economic growth can ignore what is happening in Iran, Russia, or Venezuela. And no one who is honestly assessing the decline of American leverage around the world due to our energy dependence can fail to see that oil is the albatross of U.S. national security.

We need an urgent campaign, led by a succession of committed Presidents and Congresses, to promote alternative sources. We could take our time if this were simply a matter of managing an industrial conversion to more cost-effective technologies. Unfortunately, U.S. dependence on ever-scarcer fossil fuels has already created conditions that threaten our security and prosperity and undermine international stability.

Most of the world's oil and gas is not controlled by those who respect market forces. Foreign governments control up to 77% of world oil reserves via national oil companies, which set prices through production decisions -- and can easily shut off the taps for political reasons.

I am not suggesting that markets won't someday come into play to stanch America's oil dependence. Eventually, because of scarcity, terrorist attacks, market shocks, and foreign manipulation, the high price of oil will lead to enormous investment in, and political support for, alternatives. The problem is that such investment won't happen overnight. Even if it did, building supporting infrastructure and changing behavior could take decades. In other words, by the time a sustained energy crisis fully motivates the market, the resulting investment will come too late to prevent the dire consequences of our oil fixation. This is the very essence of a problem requiring government action.

That's why I hope we will look back on President Bush's declaration about oil addiction as a seminal moment in U.S. history. Like President Richard M. Nixon using his anticommunist credentials to open up China, President Bush could use his standing as an oilman to lend special power to his advocacy of renewable energy. Such action is long overdue.