March 1, 2011
Guest Post: Energy, the Untapped Secret for Deficit Reduction
Foreign oil imports have skyrocketed from 24 percent in 1970 to over 65 percent. Domestic industries could change that, argues Coskata’s CEO.
For all the deficit concerns surrounding President Obama’s FY 2012 budget the last few weeks, few observers have noted how the proposal begins to plug one of the deepest and most often forgotten holes from which America is gushing money: our growing addiction to oil.
The President’s budget plan calls for eliminating roughly $4 billion in annual federal subsidies to oil and gas companies. For decades, America has been subsidizing its dirty energy habits resulting in record profits for oil companies -- and with oil hitting $100 a barrel last week, these subsidies are no protection against taxpayers paying $4 a gallon at the pump. However, these tax breaks are only the tip of the iceberg when it comes to the costs of our petroleum addiction.
Every year, our economy exports more than $300 billion -- the equivalent of $1,000 for every man, woman and child in the U.S. -- to foreign countries for oil. To put that number in perspective, $300 billion is about 60 percent of the total U.S. trade deficit, and equivalent to half of our national defense budget. In fact, a large portion of our $660 billion in defense spending goes to protecting our interests in oil-producing nations.
The combination of foreign oil dependence and tax subsidies ensure that with each gallon of petroleum extracted from the earth, we’re burying ourselves deeper into long-term debt, and opening ourselves to become more beholden to a fiscally and environmentally untenable source of fuel.
The only way to stop this fiscal spillage is to end oil subsidies and use that money to invest in homegrown, renewable energy. Continued investments in wind and solar energy are essential, but they do very little to reduce our dependence on oil. Specifically, we must embrace commercial-ready alternative technologies that can help us supplant oil’s virtual monopoly over our engines.
One such shovel-ready energy alternative is advanced biofuels. Despite the blanket myths surrounding biofuels recently, any impact on food prices is dwarfed by that of the global dependence on petroleum. However, advanced biofuels make the food vs. fuel argument moot, as these fuels are made from a wide variety of non-grain materials and can compete head-to-head with oil without long-term government subsidies.
As it turns out, these homegrown fuels aren’t only capable of powering our cars; they can fuel our economy, creating jobs and development from coast to coast in America’s most depressed rural regions. In fact, the Department of Energy estimates that realizing the current Renewable Fuel Standard will create more than one million new jobs that will never be exported. This job creation and rural economic development is exactly what America needs to carve out new sources of government revenue.
The wait to cash in on these benefits shouldn’t be long, provided that the government takes the necessary steps to establish an enduring policy that creates the biofuel infrastructure for the long term and sends a positive signal to the investment community about the future market for these fuels. This is what the industry sorely needs -- and it's what made the difference in countries like Brazil where they are producing over 6.7 billion gallons of renewable sugarcane ethanol per year.
We are starting to see this commitment from the U.S. government in the form of $6 billion of new clean energy investments in the President’s budget and the recent commitment of more than $405 million dollars in loan guarantees for advanced biorefineries. This is a great start, but it’s just a drop in the bucket for what we’re currently spending importing dirty oil. If the U.S. is serious about reducing our dependence on foreign oil while stimulating our economy, then we have no choice but to end the subsidies to oil companies and invest that money to ensure a long-term market for advanced biofuels.
If we don’t act soon, we will only fall further behind our global competitors. China is already investing billions in a green powered economy, and has announced up to $700 billion more in its quest to become the international leader in renewable energy.
For decades, our leaders have promised movement on energy independence with time-worn policies that have failed to catalyze action in the private sector. Our imports of foreign oil have gone from 24 percent in 1970 to over 65 percent today. Washington has perpetually adopted a short-term, on-again, off-again policy that has ensured that the oil needle is firmly fixed in America’s arm.
It’s time to think about the long game. This budget is the starting point we need, signaling a refusal to continue subsidizing oil and instead investing in meaningful energies that won’t add to our trade deficit, harm our environment and stunt our energy security.
With our nation doling out so much money for our unsustainable oil dependence today, this is the only investment that makes sense for the future. In the long term, inaction on this issue is the greatest risk of all.