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Oil dependency not just an economic issue

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Oil dependency not just an economic issue
U.S. Sen. Richard Lugar, left, and retired U.S. Navy Admiral John Nathman discuss U.S. energency dependency recently. Photo by James V. Carroll

The United States' dependence on foreign countries for oil doesn't just mean a major inconvenience to the budgets of Americans. It also presents a national security risk.

That was the view recently shared by retired U.S. Navy Admiral John Nathman during a recent speech at an America's Path to Progress breakfast. Nathman is the former vice chief of U.S. Naval Operations and currently sits on the CNA Military Advisory Board, which is comprised of retired three- and four-star flag and general officers from the Army, Navy, Air Force and Marine Corps who study pressing issues of the day to assess their impact on America's national security.

"We're an energy-dependent country," Nathman said. "And because we're an energy-dependent country, it ... impacts our national security.

"This reliance on oil has very real effects on our national security and our military, and how they behave. When a barrel of oil changes by $10 a barrel, you, the citizen, pay approximately 25 cents more for a gallon of gas. The U.S. military pays a billion and a half dollars, in terms of price increases, to make up for that $10 a barrel. It really takes away from operating funds that support readiness. It takes away from our ability to buy other components that we may need. When we don't control that, it affects our stability economically. It affects our national security."

Nathman said that while the U.S. plays the role of peacekeeper, other countries reap the benefits. "We continue to pay higher and higher prices for oil while we're protecting the ability of those countries to engage in a global commodities system called ‘oil,'" he said. "Frankly, it's time to change some of that."

The problem of the unstable price of oil is by no means a new issue, Nathman said. It dates back 38 years, when, in 1973, "This country got some strategic messages: We no longer control the price of oil nor the flow of oil," he said. "We find out right then that we were an energy-dependent country. We have gone for the last almost four decades from a system of shock - like an oil embargo, or it's $4 a gallon in 2007, or that the price went up because of the Arab Spring. You pick your example. We've gone up and down ... but the price of oil has continued to climb."

And while that is a critical problem, Nathman urged caution when working out solutions. "We are not going to solve it overnight," he said. "It isn't a particular administration's problem. This is over many different administrations with different approaches. So when we start to solve this problem, there are ways to solve it, but it's going to take a long time."

In the meantime, Nathman said, the volatility will continue to occur, often without a legitimate reason. He pointed to the events in Libya, when revolution began taking place. U.S. gas prices spiked back up to nearly $4 a gallon - even though America gets less than 2 percent of its oil from Libya. "It changed the price almost 50 cents a gallon overnight because we had this really interesting problem," Nathman said. "We have speculation in our country, and because it's a global economy, we have speculation across the globe. Because of that, we see prices go up and down. You realize we had plenty of supply of oil and gasoline in the United States during the Libyan crisis, but the price still went up. We're going to see more and more of this ... because there's opportunities to make money."

The United States imports approximately 11 million barrels of oil a day, Nathman said. Of that, 60-70 percent of that comes from OPEC countries; one third of the oil comes from either Mexico or Canada. "There's a benefit to having strong relationships with Canada and Mexico, as we do now," Nathman said. "That's part of the answer we have to have: How do we align with certain friends with the oil that we have?"

The U.S. imports roughly 53 percent of the oil it uses, and Nathman said Department of Energy projections have that number still hovering at around 45 percent by 2035. "What does that mean to us economically?" he asked. "We pass $350 billion a year offshore to pay for the oil we import. It goes to people that fundamentally don't like us. You look at the money that Iran makes in its oil production, what Iraq used to make in its oil production, what Venezuela makes in its oil production - those are people that don't particularly care for the fact they see a strong American democratic power in this world."

Nathman said work is being done by the Department of Defense to move away from energy dependency; the private sector also is, through methods such as conservation and efficiency, such as electric cars. And while expanding the use of oil reserves in the United States is one step, it's not the entire answer. The United States currently is responsible for 2 percent of the world's oil reserves; doubling that amount only takes it to 4 percent.

"We use 25 percent of the world's oil reserves," Nathman said. "I know there's lot of excitement ... that there may be more energy reserves in our country than we expected. It doesn't fundamentally change the arithmetic that you're still using 25 percent. Just the mere fact that we increase our domestic oil production is part of the answer, but it isn't going to be an exclusive part."

Renewable blends of fuel is another potential path, Nathman said, and the country sees it as a critical juncture when it comes to energy dependency.

"We have the opportunity - by not pointing fingers, but by looking at each other across the table and saying, ‘This is more important for our country than one side winning or losing or making points,'" Nathman said. "We're good at these type of challenges, and we need to make it work."

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