Phil Biggs covers the automotive industry for NewsTalk 1340 WJRW
September 5, 2013 – 6:30 am ET
DETROIT, Michigan. – Events the past two weeks in Syria remind us how fragile the United States has become regarding its oil dependency, and have put a spotlight on our glaring lack of a national energy policy. Regional conflicts such as the civil war in Syria can disrupt the flow of oil production here and worldwide, particularly as the potential rises for other parties such as Iran, Russia, and Israel to take a role. We may now be arriving at a precipitous moment in time regarding our century-old struggle to determine our own energy fate in this country. Here are my observations:
We cannot change the fact that the U.S. is an oil-thirsty country. While efforts to convert to non-fossil fuel alternatives are important, we must come to a realization that we depend on oil to live. According to the DOE, the U.S. consumes over 180 million gallons a day, and our nearly unquenchable thirst for gasoline shows no sign of abating soon. And, given the rising instability in the Middle East and Iran’s threats of closing the Straits of Hormuz, it is in our economic and political interests to reduce our dependency on supply from that region of the world. Meanwhile, the technical, business and systemic adoption of alternative energy sources simply cannot be integrated into American life as rapidly as some might like. And so we must accelerate our domestic oil supplies now as a bridge to the alternative energy options coming later this decade.
Washington has abdicated its role to set a national energy policy. For the past five years, as we’ve stared into the face of world unrest, the current administration has been unwilling to acknowledge that there are multiple stakeholders in the energy discussion, including oil, coal, and natural gas. The President’s efforts to create and control alternative energy markets defy precedent, and only serve to make events unfolding in Syria more risky. While the President cannot directly control worldwide oil pricing, he can use his position to influence both current and future sources here in the U.S. in support of private markets if he chooses.
We cannot domestically produce our way to lower gas prices in a mere six months but, over the course of a presidential term, we have the resources here in the U.S. to impact supply and lower overall cost of oil production and delivery. What’s really needed from Washington is a sustainable energy policy, not tilting at windmills. To not recognize how deeply wedded the U.S. is to oil and petroleum-based products in every aspect of our lives as Americans is shabby leadership, the effects of which hurt our middle class and put us all in grave danger as we rely on imports from the most volatile region on earth.
Businesses and consumers alike have urgent and similar daily energy requirements. The U.S. “no policy zone” affects all of us individually at the gas pump, and only hurts more during these times of uncertainty. When global logistics are impeded and distribution is disrupted, businesses and consumers pay more. Gas prices have remained stubbornly high over the past three years, as world markets detect no commitment by this Administration to address our own supply needs. Prices will only spike if the situation in Syria worsens.
Closer to home in the U.S. auto industry, the lack of a comprehensive energy policy has severely limited the OEMs and suppliers in their planning process, and it’s only becoming worse. As Automotive News editor-in-chief Keith Crain said recently, “The transportation industries need to know what will happen in the future. If you build planes, ships or cars, you had better have a good idea where to put your research and manufacturing dollars. If we don’t want to see the auto industry grind to a halt and bring the rest of the economy along with it, then our nation’s ineptitude on this (policy) matter has to end.”
What happens next? The current Administration appears to be intractable in its position to not set a comprehensive energy policy. That is bad news over the next few years, because our oil dependency is not going away any time soon. Crain says that Washington appears to have no idea what to do about these potential flare-ups in the Middle East and their resulting interruption of the oil and gas global value chain.
Coupled with our unwillingness to increase oil production domestically, we face possible energy shortages and potentially catastrophic economic fallout should the current Middle East civil wars escalate. The impact could damage our soft economic recovery here in the U.S. and affect many if not all our local and global companies. We need leadership more than ever to preserve the growth we’ve seen in the U.S. auto sector. The double-digit gains we have made could evaporate if we don’t move quickly to make the “no policy zone” a thing of the past here in America.
Phil Biggs is Partner, Automotive Markets, for the Bethesda, MD-based management consulting firm The Highland Group.
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