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 June 2012 

Lt. Gen. Lawrence P. Farrell, Jr., USAF (Ret)New American Oil Boom: Will it Slow DoD’s Renewable Energy Momentum?

June 2012

by Lt. Gen. Lawrence P. Farrell, Jr., USAF (Ret) 

The Defense Department has been focused over two administrations on energy efficiency at the national and defense levels.

Both in the Iraq and Afghanistan wars, field commanders have recognized the need for much better energy efficiency on the battlefield. Marine Corps Gen. James N. Mattis famously said the military should be released from the “tether of fuel.” Another Marine Corps leader, Lt. Gen. Richard C. Zilmer, requested renewable energy for his field operations.

Both experienced first hand the difficulty of transporting liquid fuels. The logistics of fuel was expensive in terms of operational efficiency, dollars and lives.

By the way, this is not a new challenge for the military. On average more than 70 percent of the tonnage that forces bring to the battlefield is a liquid: fuel and water. Most of the fuel is needed to power forward-operating bases, and for aviation. Combat vehicles consume only about 10 percent of the liquid fuel on the battlefield. This recognition has led to numerous studies on energy and fuel and several initiatives in the Defense Department for energy efficiency with a particular focus on petroleum.

Lately, however, the increased production of natural gas and petroleum in the United States has rekindled the advocacy of energy independence in favor of more domestic oil and gas drilling. If only we will start to drill more and harvest more, the argument goes, this will free us of our dependence on foreign sources and bring energy prices down.

A series of recent analyses by retired military officers takes a different tack, and sheds some light on the issues and suggests a way ahead. The first set is a series of studies conducted by a military advisory board of retired generals and admirals under the auspices of the Center for Naval Analyses. The most recent study focused on petroleum. It concluded that our reliance on fossil fuels constitutes a significant national security threat to the United States and that we should pursue a more diverse mix of transportation fuels, rather than continuing our overreliance on oil as a singular fuel source. Its role as a singular source constitutes a unique vulnerability as we have few other alternatives. It affects the nation’s balance of payments, as $1 billion per day is spent on petroleum. It forces the United States to do business with countries that don’t share our values, and in some cases wish to do us harm. As former CIA Director and energy expert Jim Wolsey says, “We are funding both sides of the war on terror.”

Another problem with oil is that the market is unstable, as prices are subject to change as a result of unpredictable events. It forces reliance on unreliable suppliers, it is difficult to transport into combat zones, it exposes U.S. and allied troops to unnecessary dangers in the logistics of delivery. But it currently has no substitutes.

A recent investigation, also authored by a group of retired military officers and industry leaders, reinforces some of the same points and adds new analysis. This report, co-sponsored by Securing America’s Future Energy and the Energy Security Leadership Council, is titled, “The New American Oil Boom: Implications for Energy Security.” It documents the rise of domestic production of natural gas and petroleum. Crude production is at an eight-year high, and production of liquids, including biomass, has reached 8.8 million barrels per day. Imports are down for the sixth year in a row.

Rising production and reduced imports are a long-term trend. The study cites reduced demand for oil, because of the recession, rising efficiency and increases in domestic production as the key factors that are driving down costs. But the report cautions that increased production, even if imports go to zero, will not liberate the United States from oil dependency. The authors point out that oil is a global commodity, subject to worldwide price fluctuations. It is also a non-renewable resource, susceptible to volatile prices and shocks that are not under our control. They conclude that we must reduce the role of oil in our economy. The CNA study reached a similar conclusion: That the United States must move transportation off petroleum.

Cutting back on imported petroleum does have significant benefits. One is an improved balance of payments and the disconnection from unsavory regimes. It would also reduce the flow of funds to the other side of the war on terror. Keep in mind too, that recycled petro-dollars along with Chinese dollars fueled the mortgage-backed derivatives that sent the world economy into a tailspin.

But self-sufficiency in supply alone ignores the true vulnerability: That oil is critical to the U.S. economy and has no substitute, that it is expensive, that it consumes 8.5 percent of Gross Domestic Product, that transportation is dependent for 93 percent of its energy on petroleum and we have little control over a volatile price structure.

Thus, when speaking of petroleum, independence is a myth, regardless of where it comes from. The fact is that, for transportation energy, there is no diversity of supply or source.

In this context, diversity has strengths of its own. The current positive situation of domestic supply will last a few years at best — perhaps out to 2030 or so. At some point global demand and increasing difficulties to get supplies will catch up. It is worth recalling that increased prices drove the technology that has made possible the rise in supply, but prices are still high.

We have the gift of time to address the problem. Knowledgeable leaders in the Defense Department realize this. It is unlikely that they will slacken their efforts to bring solutions to operational capability. There really is no other choice.


Please e-mail your comments to lfarrell@ndia.org.

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