The United States should put more energy-efficient cars on the roads and raise the oil tax if it wants to overcome its addiction to oil from the changing Middle East, analysts said Thursday.
President George W. Bush did not mention energy and tax efficiency in his State Address on Tuesday when he said "America is addicted to oil" from the Middle East and needs to reduce imports from there by more than 75% by 2025.
The reduction in imports of that size would require a major shift in the direction of the world's largest energy consumer, now leading to an increase more than a reduction of dependence on the Middle East, the center of 60% of world oil reserves.
"This is a problem to reduce the vulnerability of its economy from certain energy sources," said William Ramsay, deputy executive director of the International Energy Agency (IEA), energy advisory for 26 industrialized nations.
"And he (Bush) has correctly focused transportation as its biggest vulnerability point so far the (political) principle is meant to reject this high efficiency standard, but now is the time to use it."
The technology exists and is being used in Europe and Japan, but US car makers have lobbied hard to stop the government forcing them to fix the miles per gallon of their vehicles.
It not only leads to higher gasoline consumption, but also hurts the competitiveness of US car makers who are struggling as consumers increasingly demand more efficient cars.
Supply, supply, supply
Analysts say instead of promoting better efficiency, the US government is stepping up funding aimed at developing hydrogen-powered car technology and increasing biofuels like ethanol in gasoline.
Experts say the strength of hydrogen competitiveness is still decades away and biofuels can only replace a few percent of gasoline consumption.They also noted that Bush was silent about the oil tax in his State Speech.
Taxes in the US constitute about 23% of the price of oil, while in Europe the tax – as well as the price – is higher. British consumers pay almost 68% of gasoline taxes.
"In the short term, relatively little that the US can do to reduce its dependence on oil, less taxes and less economic standards, none of which the current government tends to do," Kevin Norrish said in a report for Barclays Capital.
"But in the long term, reducing US dependence on oil, especially in the transport sector, promises big challenges."
Worrying to disappoint US consumers, the government is focusing its attention on supply rather than demand as the government sees its growing oil addiction, analysts say.
"Always supply, supply, supply," said Frederic Lasserre, head of commodity research at SG CIB Commodities.
"Bush's remarks, and previous statements about long-term energy, are more foreign policy than energy policy," he said, not saying the United States should reduce its dependence on oil but that the US should reduce its dependence on one region.
Efforts to increase oil supplies from alternative producers outside the Middle East will help the United States in the global oil market, analysts say.
"The United States can not isolate itself from the global market so whether it buys its oil from the Middle East or not it will be exposed to the same market supply conditions as well as other importer prices," Ramsay said.
Alternative suppliers like the West African countries are by no means more reliable than the Middle East. Nigeria's biggest West African producer has just cut output after militants take hostage in the Niger Delta oil region.It is also unclear how the US government can encourage refineries to buy oil from one region more than any other region.
Refineries will buy the cheapest crude oil according to their needs regardless of its origin if it is not prohibited by trade sanctions.
The US Energy Information Administration, the statistical branch of the Department of Energy, estimates that the North American region will double imports from the Gulf region to 5.78 million barrels per day by 2025, up from 2.84 million bpd in 2002.
North American energy demand will increase from 23.8 million bpd in 2002 to 32.9 million bpd in 2005, according to the EIA. (* / rit)