A National Strategy for Energy Security
Earlier today I spoke at the National Press Club in Washington, DC to report the findings of a study commissioned by the Energy Security Leadership Council. The ESLC is comprised of some of America’s business CEOs and retired four-star military officers. They make recommendations for a policy to reduce U.S. oil dependence and improve energy security.
In September, the ESLC released A National Strategy for Energy SecurityAmerica’s cars and SUVs consumed about 8 million barrels of oil—around 40 percent of our total oil consumption. So our transportation system is nearly 100-percent reliant on a fuel we are forced to import, and whose volatile price is subject to geopolitical events beyond our control. (www.secureenergy.org), which presents a long-term vision for our energy security. The National Strategy’s centerpiece goal is the electrification of short-haul surface transportation. Right now, 97 percent of all fuel used for transport comes from oil.
The study we released today, conducted by the Interindustry Forecasting Project at the University of Maryland and Keybridge Research, looked at the long-term economic effects of our policy proposals. This team, collectively, has decades of experience building and performing simulation studies with large-scale econometric models and conducting public policy research on energy and macroeconomic issues. Our goal was to produce a detailed, sober analysis based on conservative, realistic assumptions stretching out over the next four decades.
In short, the study finds that the policy proposals we have put forward would result in dramatic benefits for the American economy. Specifically:
- By 2050, the typical U.S. household would have $4,046 more in annual income (in constant 2008 dollars) with our energy policy package than without it. During the four-decade period modeled, households would experience an increase of $3.9 trillion in aggregate income because of our policies.
- What’s more, by 2050, the typical U.S. household would be spending less per year directly on energy for transportation. The combination of higher income and less spending on energy would allow the average household to enjoy $5,025 more every year.
- The U.S. would experience a significant reduction in oil imports under our policy package. By 2050, oil imports would be lower by 6.6 million barrels. Cumulatively, the U.S. would import nearly 60 billion fewer barrels of foreign oil. As a result, our trade balance would improve by about $275 billion.
- With higher levels of income and GDP, net U.S. federal revenue would be a $1.46 trillion higher than without the ESLC policy package.
- By 2050, total employment would have increased by 3 million more jobs under our policy than without it. There would be 225,000 more manufacturing jobs, 514,000 more in travel and tourism, 108,000 more jobs in professional services and 44,000 more in agriculture.
Just as important is what the ESLC policy package will do to help our economy withstand future oil shocks. Four and five dollar-a-gallon gasoline and $147-a-barrel of oil are less than a year behind us. We cannot prevent oil price shocks, and I guarantee you that was not the last oil shock we will ever see. Events from terrorist attacks and cartel collusion to accidents and natural disasters will continue to affect global petroleum prices, sometimes dramatically. In the past, that has been a recipe for economic disaster. We have seen five economic recessions since the early 1970s.They were either preceded by a big spike in oil prices or concurrent with a spike.
What we can do is insulate ourselves from the effects of future shocks. And that is precisely what our policy package does.
The reduced dependence on imported oil that results from our policy will act as a 400 billion dollar insurance policy for the U.S. economy, saving 1.8 million jobs in the event of a severe oil shock. The difference in national disposable income—the real money that American families rely upon to pay their bills—would be $448 billion if an oil shock were to occur in 2040, when most of the policies we recommend would have taken hold. This is a massive cushion against what we have already seen can be a crushing economic blow. This is why America must act now.