November 2012, Vol. 239 No. 11

Features

Energy Policy Should Focus On Supply Security

America’s policymakers need to consider whether energy independence is really necessary to achieve adequate, reliable and affordable energy supplies, according to a new report from Deloitte.

The report – “Energy Independence and Security: A Reality Check” – explains that the United States already enjoys significant energy independence for most sectors and much of our economy. Transportation is really the only sector that remains dependent on imports; therefore, when people say the U.S. needs a secure supply of energy, what they really mean is a secure supply of crude oil.

The report indicates that America needs to take a multi-pronged approach when it comes to meeting its need for crude oil.

It suggests the U.S. needs to lower demand through continued improvement in the fuel efficiency of our vehicles – and that policymakers can hasten demand reduction through greater ride sharing, high-efficiency mass transportation and expansion of the electric vehicle fleet. In addition, the report argues that policymakers can expand the use of alternative transportation fuels such as methanol, ethanol and natural gas.

Further, according to the report, policymakers need to increase domestic oil and gas production while also obtaining more crude from “friendly” suppliers such as Canada, Mexico and numerous other foreign nations selling at market prices.

“While rising global demand for oil will likely keep crude prices relatively high, it also will provide a continuing stimulus for increased domestic production,” says report author, Branko Terzic, executive director of the Deloitte Center for Energy Solutions.

“Moreover, the introduction of increasingly sophisticated enabling technologies worldwide may herald the introduction of new countries as oil suppliers, and increase potential supplies from existing friendly sources.”

The report concludes that while U.S. energy independence may be unattainable in the near future, energy security is still a realistic and achievable goal.

The report recommends that policymakers continue, and even expand on, America’s traditional policies of market pricing and consumer choice, while also pursuing measured and effective environmental and efficiency regulations. For example, policymakers should:

* Support the prudent exploration and development of our abundant domestic energy sources, opening additional onshore and offshore areas to oil and gas exploration.
* Support our North American allies in the prudent exploration and development of their abundant domestic energy sources, thus adding additional security to the import portion of the United States energy portfolio.
* Back government policies that encourage greater energy efficiency in all sectors, including transportation, industrial, commercial and residential applications.
* Favor legislation that encourages multi-fuel, natural gas, electric and other alternative fuel vehicle programs, to continue to diversify the United States base of transportation fuels and alternatives.
* Continue to support the prudent and cost effective deployment of alternative and renewable energy sources into the energy portfolio, most notably wind and solar, in order to continue to diversify the United States base of electricity generation.
* Support research and development of clean coal and clean gas technologies to help ensure that these domestically abundant and secure fuels remain as part of the American energy portfolio well into the future.
* Increase research into and development of next-generation nuclear reactors, which promise to be safer and more fuel-efficient than previous models.
* Develop and enact a new national nuclear fuel storage and disposal plan to help secure nuclear power as a long term component of our domestic energy supply.
* Support open markets and free trade in energy products and their derivatives, allowing markets to predominate in directing investments to balance energy supply, demand and pricing.

To download the full report, visit www.deloitte.com/us/energysecurity.