We will, Obama said, reduce our imports of petroleum by one-third by 2025.
While the goal is new, the initiatives mentioned to support the goal are not. In sum they are:
- Produce more domestic oil, through sets to accelerated permitting and development.
- Encourage and subside more biofuels, both existing ethanol and new forms, particularly cellulose-based.
- Make vehicles more efficient, primarily through existing automobile mileage standards, and new ones for trucks.
- Continue development of alternative-fuel vehicles, mainly electric-drive for consumers. Encourage fleets to consider alternative fuel vehicles.
- Continued investment in R&D on new fuel technologies.
If "Energy Security" is your hobby-horse, the speech included nothing to get excited about. The plan's components are all existent. In fact, all the programs date back to the Bush Administration; every one of them was included in the Energy Security and Independence and Security Act of 2007 (which also infamously outlaws conventional light bulbs). While Obama can fairly take credit for amping up some of these programs, the jury is still out on whether the Administration has, or intends to, deliver on accelerated oil exploration.
Obama's target is even more underwhelming when one considers what has happened in the two years since his chosen benchmark year of 2008. In that interval imports have fallen 15% to 9.44 MM bbl/day (to 49% of total demand).
Yes, you read that correctly. The President announced a goal of a 33% reduction when we've already notched 15 percentage points. Interestingly, "a depressed economy" did not appear on the White House list of policy levers related to this goal -- but to date it's been the biggest contributor to the decline. A mandated increase in ethanol usage was the other leading cause.
So the President's "One Third by 2025" is not a serious new program, but a political repackaging of warehouse items in anticipation of continued high gas pump prices.
What would a serious "Energy Security" initiative look like? Without question, the core component would be a petroleum tax. Oil is the only energy resource we import on a net basis. If one is serious about reducing its use, a tax is the most effective and efficient policy tool.
To be clear: I'm not criticizing Obama for not calling for a gas tax. It's quite debatable whether real oil "energy security" is worth the cost of achievement. I'm just pointing out that like all the Presidents since Nixon, he is not serious about dramatically reducing oil imports. (From Nixon and others, though, he has learned to avoid announcing overly ambitious targets that now, on You Tube, look silly.)
A couple meta-studies of consumer behavior suggest that the long term price elasticity of gasoline is at least -.50. That is, for any percent price increase (that sticks around for years) consumption will decline about 50% of that amount. So, if we wanted to decrease overall gasoline consumption by 18%, a gas tax of 36% would be about right. At $3.50 a gallon, we're talking about a tax of $1.25/gallon, or $4.75 gasoline. Want to be import free? That appears to require a tax of $7.00, or $10.50 gas. On the bright side: for you deficit hawks, the tax would raise over $1 trillion a year.
When a President starts talking about energy security with a gas tax, I'll pay increased attention.