Global Energy Policy

The U.S. continues its unending and frustrating struggle to define its energy future without success, led by leaders who could not care less. If they cared, they would make immediate non-partisan amends for the 40 years of wandering in the political desert since former U.S. president Richard Nixon declared energy independence after the first Arab oil embargo. They would establish an energy policy for the 21st century.

But that won’t happen in an election year. The pursuit of selfish power is far more important than the ongoing impoverishing of Americans at the gas pump and the threatened grid reliability of the electricity infrastructure. The Democrats want more energy from alternative sources to take care of their funders. The Republicans want more energy from traditional sources to take care of their funders.

Neither approach comes close to meeting the nation’s needs, which is nothing less than a global energy solution, defined as a comprehensive, coherent source of energy for now and the foreseeable future.

Global need

Energy is a global need and want. No nation can develop or grow without available and affordable energy. Africa’s impoverished condition will remain as long as it is unable to put energy to work like most of the rest of the world. The Organization for Economic Co-operation and Development countries see their growth restricted because they are being pirated by the Organization of the Petroleum Exporting Countries’ (OPEC) cartel. China’s growth will only be sustained by its commitment to the real world “all in, all the above” energy policy it’s currently implementing, where actions—not campaign sound bites—make measureable and tangible events happen.

Energy in the 21st century also has to become sustainable. The now known effects of the unfettered processes of molecular destruction from energy production during the past century can and should be addressed by process technologies that could be applied universally during the course of the 21st century. And natural energy sources that can create electricity without extraction techniques from evolving technologies will over time contribute more to sustainable energy production and distribution.

A global energy solution is not that difficult to describe or implement for simple reasons: it builds on what is; brings new opportunities to market; expands to meet demands of population and economic growth; takes advantage of efficiencies in production and consumption; and increases sustainability. How difficult is that?

Not very. Citizens readily grasp these fundamentals and want to get on with it because they are consumers and voters who have important things to do in life, like raise families and pursue their individual purposes. But politicians won’t have it. They predicate their policy making preferences with behaviors learned from the classical “Animal House” food fight, to the nation’s detriment.

By being more specific perhaps we, the governed, could better describe to our government representatives what a global solution consists of so that we can demand the outcomes we deserve for ourselves, our society, the economy and our security.

Five steps

Transportation fuel costs hit Americans where it hurts the most—the loss of disposable income. So let’s fix this first with a plan that works in this country and could be applied worldwide to the economic betterment of the whole world. Let’s break OPEC’s control on transportation fuels and the venomous effect of high gasoline prices. Here’s how it works for the U.S.

First, commit to restoring oil production in this country to 10 million barrels (bbl.) per day. We achieved this in the 1970s and 1980s. We know where the oil is, both onshore and offshore. Let’s increase domestic production from 7 million to 10 million bbl. per day by allowing the access that companies need to produce it. Yes, hold them accountable for their exploration and production practices to manage environmental risk, but get on with domestic production to reduce imports from non-North American exporting countries.

Second, get serious about domestic natural gas as a transportation fuel. Set in motion the policy enablers to displace 2 million bbl. per day of oil imports by establishing the goal and infrastructure to consume the equivalent by converting gas to diesel liquids and use of compressed natural gas for trucks, both local area fleet operations as well as over-the-road vehicles.

Third, utilize natural gas in personal vehicles and light trucks to displace the equivalent of 3 million bbl. per day of imported oil. By introducing flex-fuel engine technology into personal transportation vehicles, methanol from natural gas, coal or biomass, along with ethanol and butanol can substitute for gasoline and diesel at prices far less than today’s prices. Despite lower Btu content, the lower costs of substitutes create a market for expanding the range and volumes of domestically produced alternative fuels.

The capital required for manufacturing and distribution infrastructure for both natural gas and other alternatives can come from private sources, given the return on investment to grow an immense new market. We can all take to the bank the volume displacement of imported oil, the jobs creation to get the job done and the value creation that adds growth multipliers to a stagnant domestic economy.

Fourth, continue on the path of greater fuel efficiency for transportation vehicles. This effort will displace an additional 2 million bbl. per day of imports.

Fifth, meet the remaining need for oil (remember we need 20 million bbl. per day in a full employment economy) with imports from Canada and Mexico under the North American Free Trade Agreement.

Freedom from OPEC’s oil cartel and new investment in our domestic economy relieves the nation’s consumers from exporting up to $0.5 trillion dollars per year to pay for fuel. The money stays in the U.S. and contributes to our own transportation fuel independence. We set a leadership model for the rest of the world to emulate. We increase jobs, domestic economic growth and national security at the same time.

With regard to electricity production, we commit to availability, affordability and sustainability during short-, medium- and long-term plans to deliver all three elements by 2062, or 50 years from now. We certainly have the raw materials for all the electricity we’ll ever need from all sources of power production: coal, oil, natural gas, uranium-thorium, biomass, hydropower, wind, solar, geothermal and hydrogen (as an energy carrier). The issues to decide are how much from which source during which time period at what cost and with what environmental impact. In addition, we need to build the infrastructure that takes the electricity from where it is produced to where it will be consumed.

Crux of the solution

This brings us to the crux of a global energy solution. Our current federal government and the governance of energy cannot deliver on either transportation fuels or electricity needs in the 21st century as currently organized or operated. It is handicapped by three self-made obstacles: the perversity of partisanship, the preference of political time priorities over energy time (two year electoral cycles versus decades of continuity) and the dysfunction of governing energy via 13 cabinet level agencies, 26 legislative committees and subcommittees and more than 800 federal judges.

There is so much governance, nothing meaningful happens at the federal level. Compound that problem with 50 governors, 50 state legislatures and 50 state court systems, plus tens of thousands of counties and municipalities that set rules and govern their geography locally. Without intervening in the governance of energy, there is no global solution.

Governance of energy and the environment in the 21st century warrants the creation of an independent regulatory authority to eliminate the effects of flavor-of-the-day politics in policymaking. The energy system of the nation can benefit from the lessons of history that govern our monetary system.

Following on not one, but two, monetary system collapses early in the 20th century, 1907 and 1912, Congress, former president Woodrow Wilson and the U.S. supreme court, passed and signed in 1913 and later affirmed the constitutionality of the Federal Reserve Act. With statutory authority superseding Congress and the president, Federal Reserve commissioners, appointed by the president with advice and consent of the Senate, operate in the interests of the nation and the economy, not politics in the moment.

While no human institution is perfect, during the past 99 years the nation has become the world’s largest economy and utilizes the world’s only secure benchmark currency due to the soundness of our monetary system and its governance.

An independent regulatory authority for energy and the environment is needed now. The authorities should be fourfold in the context of creating a 50-year plan.

First, provide for more energy from all sources. Second, utilize technology to increase efficiency in the production and consumption of energy. Third, improve the environmental sustainability of the energy system. Fourth, ensure infrastructure is built to deliver energy to where it’s needed.

The independent board should include a diverse range of directors, including knowledgeable persons from industry, finance, academia, environmental and consumer backgrounds. Like the fed, the independent energy board should not be intimidated by special interests, or harassed by lawsuits, when it governs under its authorities.

The urgency of establishing this energy and environmental global solution is now. On our current path, the unacceptable alternative is gas lines and blackouts by mid-decade because of growing global demand for transportation fuels and the aging of, and new regulatory requirements on, our 20th century electricity infrastructure.

Our elected representatives are unlikely to agree upon or support this plan because it acknowledges that they have failed the American people. Therefore we, the people, have a choice: let the politicians prevail, continue the status quo and experience third-world energy conditions, or remind elected representatives who they work for and demand nothing less than a global energy solution for our nation.

For the sake of ourselves, our children and grandchildren—the people who really matter in this society—creating a 21st century energy and environmental system sooner is better than later. We can do this.

John Hofmeister is the former president of Shell Oil Co., founder and chief executive of Citizens for Affordable Energy Inc. and the author of Why We Hate the Oil Companies: Straight Talk From An Energy Insider.