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Every US president since Richard Nixon has expressed concern about America's growing dependence on imported oil. But effective action has proved elusive: Oil imports have more than doubled in the past 35 years -- from 30% at the time of the first oil shock in 1973 to around 65% today.

Yet the collapse in world energy demand and the fall of energy prices present a rare, once-in-a-generation opportunity. Congress and the Obama administration can work with energy producers to craft an energy policy that creates jobs, expands and diversifies the nation's energy supply, generates government revenue, and protects the environment.

Reaching those goals begins with rejecting the false choice between "drill, baby, drill" and a near-exclusive focus on alternative energies and conservation. An "all-of-the-above" approach holds far more promise.

President Barack Obama seems to recognize this. In his address to Congress, he spoke forthrightly about the need to tackle climate change -- while acknowledging the role of hydrocarbons in the overall energy mix, and emphasizing the need for energy security and efficiency. At BP we welcome his commitment to "invest $15 billion a year to develop technologies like wind power and solar power, advanced biofuels, clean coal and more efficient cars and trucks built right here in America."

BP has already demonstrated its commitment to a diverse energy portfolio. We're the largest producer of oil and gas in the US. We are also investing more than $8 billion over 10 years to develop solar, wind, hydrogen power and biofuels. We support energy conservation and efficiency, as well as addressing climate change via a cap-and-trade system to harness the power of the market to reduce CO2 emissions.

But if the country is to gain full value from the technology, knowledge and expertise possessed by BP and its major competitors, I'd like to offer policy makers a few suggestions.

1. Energy providers and governments must have confidence in one another. An adversarial stance does nothing to increase the supply of energy. Regulatory policies need to be sensible, stable and right the first time.
2. Energy security can only be built on a solid foundation of free markets and free trade. Two-thirds of the world's oil is traded across international borders. This huge and agile market makes it possible to respond quickly to supply disruptions, such as hurricanes or political unrest. Tariffs, heavy taxes, or restrictions on the free movement of petroleum products interfere with that process.
3. Transitional incentives are needed to make low-carbon energy competitive with other energy sources, and to kick-start technologies for large-scale carbon abatement, such as carbon capture and storage. But these incentives should taper away over time, so costs are driven down and the market can take over as quickly as possible.
4. America must stop looking to others for the oil it needs and actively develop its own hydrocarbon endowment. Even with the rapid growth of alternatives, fossil fuels will continue providing most of the energy Americans consume for decades into the future.

The search for new sources of domestic crude has been constrained by a lack of access to promising areas, notably the Outer Continental Shelf (OCS). Resource estimates for closed areas exceed 100 billion barrels of oil, with 30 billion recoverable with today's technology and at today's prices.

Opening up the OCS would enhance America's energy security. Moreover, a new study by ICF International estimates that it could create as many as 76,000 new jobs and generate a total of nearly $1.4 trillion in new government revenue by 2030.

No one in the energy business thinks America can drill its way to energy security. But a policy based exclusively or even primarily on conservation and efficiency is a recipe for ongoing scarcity and economic decline.

The prize is great and the time is right. When the world economy begins to recover -- and it will -- demand for energy will rise and the moment will likely have passed. We are extending our hand. We hope Washington policy makers will grasp it.

Mr. Hayward is chief executive of BP. This article was originally published here in The Wall Street Journal on February 25, 2009. The author has given his permission for a republication on atlantic-community.org.

Related Materials from the Atlantic Community:

• James Cricks: Cheap Oil Creates Long-Term Global Energy Risks
• Thomas Straubhaar:The $100 Barrel is a Blessing
• McKinsey on Going Green - Cheaper Than You Thought

March 13, 2009

Gunnar Schmidt, AEG, Silver Contributor (64)

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I like this comment! What's this?

Americans and Europeans need to increase energy efficiency and focus on renewable energies. There is so much potential. The higher the oil price is the more investment will go into these climate friendly efforts.

Therefore I am against opening up the Outer Continental Shelf for drilling. This would just delay the necessary investments in alternative energies and increasing energy efficiency.

Tags: | energy efficiency |

March 16, 2009

Christian Goetz

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I like this comment! What's this?

Opening new areas to oil drilling undermines efforts to improve the efficiency of existing methods. Mr. Hayward correctly notes that though the Outer Continental Shelf is estimated to hold some 100 billion barrels of oil, only 30 billion barrels are recoverable with our current technology at our current prices. By opening new areas to drilling, we are setting aside opportunities to improve our current technology in this field and recover stranded oil in wells that we already have access to. Though it can be argued that any action which gives consumers more access to oil is not going to help the environment in the long run, no matter how "carbon-neutral" the process is, energy security in our increasingly unsettled world, is important. That being said, further emphasis on securing hydrocarbon resources in new areas, simply prolongs the lack of true diversity in the energy industry. The big energy companies have realized that this lack of diversity will hurt them in the long run and have thus expanded their investments into the alternative energy field, but they remain reluctant to focus the majority of their efforts on this much more dynamic new sector, when public concern about energy security provides them with an easy platform from which to encourage further development of new oil fields. I do agree with Mr. Hayward, that a compromise between the focusing on developing the alternative energy industry and getting access to more oil, is probably the most economically viable way forward; however I disagree that drilling in new areas is the way to get more access to oil. In Michigan, we have many inactive oil wells which currently represent an environmental hazard. No one wants to clean them up because of the cost involved and the lack of financial incentive to do so. These approximately 200 inactive oil wells do actually have oil in them. According to the U.S. Department of Energy - Office of Fossil Energy (February 2006) report, the Illinois and Michigan Basin has 11.5 billion barrels of oil still in it, most of which could be recovered using enhanced oil recovery techniques. Those techniques would have the added benefit of requiring most of the inactive oil wells in the area to be sealed, thus reducing the environmental hazards and providing the needed financial incentives to do so. This is just one area in the United States, where more oil is available without resorting to new drilling. By focusing our oil securing efforts on these stranded-oil resources, we can drive innovation in the industry, actively clean up some of the environmental damage done by that industry in the past, and further develop energy security; all without opening new areas to the potential of environmental damage caused by the industry. Conservation and efficiency is not necessarily a recipe for scarcity and economic decline; it can also force more innovation and advancement, which in turn can drive economic growth. It might be a more difficult path to take, but the potential benefits are also much greater.

Tags: | energy efficiency |

March 17, 2009

Ria Voorhaar, Atlantic Community, Bronze Contributor (17)

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I like this comment! What's this?

The age of the fossil fuels is over. Arguing about whether they're still in the ground or not or when they might run out is futile. We cannot continue to burn fossil fuels - like oil and coal - and have a safe climate.

Alternative, sustainable sources are already powering much of the world. With the right policies, we could have 100% of our electricity from renewable sources within a decade. Options also exist for oil replacements. The sooner we invest in these alternatives the safer our future becomes.

The US should take a leaf from Germany's book where there are more people employed in the wind power industry than were ever employed in coal mining.

Threatening world leaders with energy scarcity is a tactic that belongs to the last generation.

The truth of the matter is that we don't have to choose conservation OR energy - we have the natural resources and the technology to have both now. It is the self-interest of these big fossil fuel companies that keeps them desperately holding on to the past.

If BP were seriously interested in renewable technologies, they would invest far more than a paltry $8 billion. Renewable energy is going to be the only energy source we'll have in a carbon-constrained world. You'd think a profitable company like BP would have the desire and the foresight to invest a greater proportion of their profits in the future - not cling to a method of energy generation that is outdated.
One can only conclude that they are not serious about renewable energy.

Right now - in the midst of this global financial crisis - is an excellent time for Governments to invest in sustainable energy. They'll create jobs, prop up regional economies, cut carbon emissions and when when energy demand does indeed rise we will be ready to meet it with 100 per cent sustainable alternatives.

Tags: | renewable energy |

March 20, 2009

Rob Steer, Freelance, Gold Contributor (100)

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I like this comment! What's this?

It will be interesting to see the impact on the energy and environmental sectors of the latest announcement from Shell that they will be focusing more of their resources on the development of energy from biofuels, and cease the funding of solar, wind and hydrogen renewables technologies

I personally disagree with this policy, not only because biofuel production has been linked to rising food prices, but also because it represents an approach akin to "putting all of one’s eggs in one basket."

Surely the challenge for Shell and others is to investigate all possible sources of renewable energy and not to self impose limits on research and development.

I for one hope that Shell review this policy at a later date and accept that biofuels are not the holy grail of renewable energy.

Tags: | renewable energy | biofuels | Shell |

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