Joint Force Quarterly #39  [Printer-friendly version]
November 15, 2005


[Rachel's introduction: "Current energy strategy assumes that this
country can meet its oil needs by managing the oil-producing
countries diplomatically and militarily. However, this thinking
overestimates the available oil supply, ignores growing instability
in the oil-producing countries, and understates the military costs of
preserving access." Note that this important military strategy paper
does not take into account global warming or the unsustainable nature
of contemporary industrial agriculture.]

By John M. Amidon

[We have added a few links within this article for clarification.--
Rachel's editors.]

The American presence in the Middle East stretches back to the closing
days of World War II, when President Franklin Roosevelt met King Saud
aboard a U.S. warship in the Suez Canal. Through the ensuing 30 years,
Washington sought to maintain oil access and contain the Soviet Union
by cultivating Persian Gulf allies. The mutually beneficial
relationship between the United States and the Middle East oil-
producing countries was forever altered by the Yom Kippur War and
the subsequent petroleum embargo. The 1973-1974 embargo highlighted
the strategic importance of the Middle East and elevated oil access to
a core national interest. The end of the Cold War and the rise of
Islamic fundamentalism further shifted the security focus from keeping
a mutual enemy, Russia, out of the region to fighting much of the war
on terror within the region.

Dependence on imported oil, particularly from the Middle East, has
become the elephant in the foreign policy living room, an overriding
strategic consideration composed of a multitude of issues. In the
short term, U.S. options are driven by the imperative to achieve a
favorable outcome in Iraq and Afghanistan and on other battlefields of
the war on terror, but we must also find a way to extricate ourselves
from reliance on the Middle East and other oil-producing countries.

Current energy strategy assumes that this country can meet its oil
needs by managing the oil-producing countries diplomatically and
militarily. However, this thinking overestimates the available oil
supply, ignores growing instability in the oil-producing countries,
and understates the military costs of preserving access.

Today's strategy must adopt a more realistic view of the limited
available oil and recognize the diplomatic and military costs of
obtaining it. If the strategy were to correctly estimate the remaining
supply and recognize the cost to the Nation of accessing that oil, it
would encourage users to consume less and accelerate development of
alternatives. The United States must embark on a comprehensive plan to
achieve energy independence -- a type of Manhattan Project for energy
-- to deploy as many conservation and replacement measures as

Current Energy Policy

In May 2001, the National Energy Policy Development Group published
the Administration's National Energy Policy, which states:

"Extraordinary advances in technology have transformed energy
exploration and production. Yet we produce 39 percent less oil today
than we did in 1970, leaving us ever more reliant on foreign
suppliers. On our present course, America 20 years from now will
import nearly 2 of every 3 barrels of oil -- a condition of increased
dependency on foreign powers that do not always have America's
interests at heart."[1]

The policy calls for enhanced efficiency in existing domestic
oilfields and exploiting heretofore environmentally denied areas such
as the Alaska National Wildlife Refuge (ANWR). Although increasing the
domestic fraction of our oil consumption is a worthy goal, achieving a
meaningful effect will be difficult, given that domestic production is
declining at a rate of 1.5 million barrels per day.

The report also urges improved conservation:

"A recent analysis indicates that the fuel economy of a typical
automobile could be enhanced by 60 percent by increasing engine and
transmission efficiency and reducing vehicle mass by about 15 percent.
Advanced lightweight materials offer up to 6 percent improvement in
mileage for each 10 percent reduction in body weight."

The primary means of increasing automotive economy is through mandated
corporate average fuel economy (CAFE) standards.

Responsibly crafted CAFE standards should increase efficiency without
negatively impacting the U.S. automotive industry. The determination
of future fuel economy standards must therefore be addressed
analytically and based on sound science.

Taken in whole, the National Energy Policy does not offer a compelling
solution to the growing danger of foreign oil dependence. The 2004
Department of Energy budget for all types of renewable energy totaled
$1.3 billion, increasing just 0.1 percent from 2002 to 2004, while
lagging the entire Department of Energy budget, which increased 5.9
percent. Even if ANWR were fully exploited, proven reserves total
about 7.7 billion barrels of recoverable oil, enough to supply the
Nation for just over a year. Although the National Energy Policy sets
forth a range of conservation and alternative technologies, no
meaningful fiscal policy steps have been taken to bring them to the

Dwindling Global Supply

In 1956, geophysicist M. King Hubbert pioneered a model for
petroleum extraction known as Hubbert's curve. It predicts that early
in the life of an oilfield, production will increase rapidly due to
infrastructure growth. The field will reach a point where production
peaks and, barring new discoveries, no addition of technology will
yield further gains. Thus, "Hubbert's peak" marks the onset of
decline, a trend that accelerates as the cost of further extraction
approaches the commercial value of each barrel pumped.

In many "easy" oil instances, the oil is actually pressurized coming
out of the ground, reminiscent of the gushers seen in Hollywood
movies. In an oilfield with this so-called high lift, the price of oil
at the wellhead is less than $5.00. Post-wellhead costs are added
through royalties, transportation, refining, delivery, and profit. As
more oil is extracted, it becomes necessary to pump the oil from the
ground; thus the wellhead price rises through the life of an oilfield.
Eventually, the cost of extracting the next barrel of oil exceeds the
oil's market value, and the well is capped.

Hubbert based his model on oil production within the lower 48 states,
the region where oil was first commercially exploited on a large
scale. He predicted that within a given oilfield, the peak in new
discoveries would be followed within a few years by a peak in
production, and then decline. He also postulated that peak production
would occur when approximately half of the total reserves in a given
area were depleted. Hubbert forecast in 1956 that lower-48 oil
production would reach its maximum about 1970, which has proved true.

The United Kingdom's portion of the North Sea oilfields reveals a
similar pattern. These fields reached their Hubbert's peak in 1999 and
are now in decline, with production expected to cease after 2020.

Hubbert's concepts might be applied to global oil production as well.
Prior to 2000, the majority of studies projected an ultimate
recoverable supply of 2 trillion barrels of oil. In 2000, the U.S.
Geological Survey (USGS) forecast a 50 percent increase in estimated
world reserves to 3.003 trillion barrels. As soon as it was published,
the study came under fire for what many considered optimistic
assumptions. Discounting the USGS results, there has historically been
broad agreement that the world's ultimate oil supply equaled
approximately 2 trillion barrels. In one recent study, the average
estimate of 76 studies works out to be 1,930 billion barrels, of which
920 billion (48 percent) have been consumed.

Today, the oil supply prediction camp is divided among the optimists,
represented by organizations such as the USGS, and pessimists such as
the Association for the Study of Peak Oil and Gas. The optimists agree
that Hubbert's peak is coming but will not occur until 2021 at the
earliest and 2112 at the latest, with 2037 as the median date. The
pessimists believe the USGS study was based on speculative methodology
and the peak is as close as 2007. The pessimists cite the growing gap
between discovery and production. They say that if the USGS
predictions are accurate, the annual discovery rate between 1995 and
2025 needs to average 21.6 billion new barrels. New global oil
discoveries over the last 12 years have averaged 7.4 billion barrels
annually, far below both USGS predictions and global consumption,
which averaged 28 billion barrels a year for the same period. Since
1980, more oil has been extracted than has been offset by new

America's Fragile Oil Lifeline

Most of the world's so-called easy oil has already been discovered or
extracted, leaving the bulk of the undiscovered or unexploited oil in
deep water, or other isolated locales far from transportation
infrastructure and markets. The most promising possibilities for
discovery are in the Caspian Basin and Russia, areas torn by strife
and instability. A prediction of future oil production patterns
(produced by the pessimists) forecasts a peak in global oil production
in approximately 2007.

Since the USGS report of 2000, most studies have distanced themselves
from its numbers. A summer 2004 report by BP-AMOCO estimated the
remaining oil supply at 1,147.8 barrels,[2] a figure in close
agreement with the estimate of the U.S. Energy Information Agency,
1,266 billion barrels.[3] These studies buttress the view that we are
approaching worldwide peak oil production.

Although the pessimists offer a convincing argument presaging a peak
in global oil production, what if they are wrong? What if technology
and discovery can delay it far into the 21st century? Assuming the oil
is available somewhere on the globe, can we reliably deliver it here?
During 2003, the United States averaged imports of 12.2 million
barrels per day, representing 62 percent of its total oil demand. Much
of this imported oil comes from politically volatile parts of the

Saudi Arabia has the world's largest oil reserve, estimated at 250
billion barrels (Gb).[4] Peak Saudi production will not occur until
2020; thus Saudi Arabia will remain "the indispensable nation of oil."
Saudi Arabia is ruled as a feudal monarchy, with absolute authority
held by the descendants of Abd al-Aziz ibn Saud, who rose to power in
1932. Its vast oil wealth masks a nation with pressing demographic and
political problems. More than half of all Saudis are under 18 years of
age. This group is plagued by limited educational opportunities and
high unemployment, factors that have made Saudi Arabia fertile ground
for religious extremism. The official state religion is Wahhabism, an
inimical form of Islam that is the philosophical antecedent for Osama
bin Laden and his followers. The government has taken steps to
eliminate terrorist funding and curtail al Qaeda recruitment within
the kingdom; however, the long-term prognosis for success is not
clear. In the meantime, Saudi Arabia remains the linchpin of U.S.
energy security even though it is beset by political tension, internal
dissent, and a looming demographic crisis.

Mexico is tied to the U.S. economy through the North American Free
Trade Agreement (NAFTA), which has been a mixed blessing for Mexicans.
Although elimination of all trade barriers led to a flood of foreign
investment and industrialization during the 1990s, many of these jobs
have since moved to even lower wage countries. NAFTA was championed as
a solution for emigration problems, but Mexicans continue to migrate
north in search of employment and higher wages. A legacy of political
corruption, high unemployment, and the corrosive effects of a
burgeoning narcoeconomy represent great challenges.

Mexico has made no major oil discovery since 1980. The pessimists
estimate that Mexico has approximately 22 billion barrels (Gb) of oil
remaining. Production will peak around 2015. Although Mexico is
currently a net oil exporter, growing domestic consumption will exceed
production by 2010, closing the Mexican spigot as a source of oil for
the United States.

The Venezuelan oil industry was born in 1866, only 7 years after
production began in the United States. Venezuela used this leadership
in 1960 to midwife the birth of the Organization of Petroleum
Exporting Countries (OPEC), going on to nationalize Venezuelan
resources in 1976.[5] The country's history has been characterized by
revolution, counterrevolution, and dictatorship. The latest chapter
began with the election of Hugo Chavez in 1998. Although Chavez came
to power as a populist reformer, an 18 percent contraction in the
economy and his dictatorial practices triggered a national work
stoppage in 2002, slowing oil production to a trickle.

Venezuela possesses about 50 Gb of conventional oil reserves, with
exploitation having peaked around 2003. Venezuela also has a vast
reserve of heavier oils, estimated as high as 1,200 Gb, which equals
the entire conventional reserve remaining worldwide. The greatest
barrier to exploiting this resource has been the low recovery rate of
useable oil (10-15 percent) and the high front-end cost. In the early
1990s, the government set the exploitation tax at 1 percent in an
effort to draw the massive foreign investment required to bring heavy
oils on-line. In October 2004, Chavez raised these tax rates to 16
percent to correct "foreign domination mechanisms."[6] Low internal
consumption will place Venezuela at the forefront as a U.S. energy
source for decades. But access will hinge on the policies of Hugo
Chavez and his successors.

Nigeria was a British colony until it gained independence in 1960.
Between 1966 and 1999, it was ruled by a series of military
governments and torn by ethnic civil war and religious strife. Nearly
2 million perished from violence, hunger, and disease. Nigeria today
is ruled by a democratically elected government, which has a well-
deserved reputation for corruption. "For decades, powerful elites in
the capital of Abuja have monopolized the allocation of petroleum
revenues, providing relatively little to the ethnic minorities of the
Niger Delta region, where most of the oil is buried. These minorities
have grown increasingly dissatisfied and have launched armed attacks
on oil facilities, causing a sharp drop in exports."[7] Nigeria
retains substantial oil resources, estimated by the pessimists at 40
Gb, with a production peak forecast for approximately 2009.[8]


Table 1: Military Subsidies to Price of Gasoline at the Pump

Costs of Middle-east Operations and 9/11:

Total Cost of Gulf War I: $300 billion

Annual peacetime force structure cost for units tasked for the Middle
East ($60 billion x 13 years): $780 billion

Annual cost of no-fly-zone enforcement and deployed Army forces in
Kuwait, 1991-2002 ($15.38 billion x 11 years): $168.3 billion

Economic cost to the U.S. economy of the 9/11 attacks: $585.2 billion

Cost of operations in Iraq (based on substantial withdrawal in 2008):
$308.9 billion

Cost of Operation Enduring Freedom and follow-on operations in
Afghanistan ($1.68 billion/month in 2002 + $1.1 billion/month,
2003-2004): $45.6 billion

Uzbekistan aid and airfield access payments, 2002: $0.320 billion

Uzbekistan aid and airfield access payments, 2003-2004: $0.357 billion

Foreign aid to Pakistan, 2002: $0.696 billion

Foreign aid to Pakistan, 2003-2004: $1.2 billion

Kyrgyzstan foreign aid and airfield access: $0.500 billion

Foreign aid to Tajikistan: $0.563 billion

Foreign aid to Turkmenistan: $0.274 billion

Total U.S. gasoline consumption, 1991-2004 (gal.): 1,716.96 billion

Hidden fuel price subsidy at the pump (cost of Middle east
operations/total consumption): $1.276 per gallon

Sources of data provided on pg. 71 here.


During 2003, the worldwide oil industry produced an average of 68
million barrels per day, with every producer but Saudi Arabia
operating at maximum capacity. Saudi excess oil production capacity
currently stands at less than 1 million barrels per day, a 0.7 percent
world production capacity cushion. The continued viability of the U.S.
energy lifeline hangs on political and economic stability in nations
such as Saudi Arabia, Venezuela, and Nigeria. Interruption of oil
production in any of the teetering countries described here would
trigger immediate price rises and economic dislocation. The
simultaneous loss of several oil-producing nations due to boycott,
sabotage, or war would be an economic catastrophe.

The Military Challenge

Military operations to ensure energy access and price stability have
added an invisible subsidy to the true cost of imported oil. From 1991
to 2004, the average cost of a gallon of unleaded gas at a U.S. pump
was as high as $2.28. When the $2.2 trillion cost of 9/11 and all
Middle East/Central Asia operations since Desert Shield are factored
into the 1.71 trillion gallons American consumers have used since
1991, the cost at the pump rises to $3.56 per gallon (see table). The
current energy strategy understates these costs of seeking energy
security through military action. The invisible hand of market forces,
which should trigger oil conservation at a price of $3.56 per gallon,
has been disrupted by the externalized military cost.

Future military efforts to secure the oil supply pose tremendous
challenges due to the number of potential crisis areas. Besides the
nations already mentioned, the bulk of the world's oil reserve is
concentrated in the Middle East and Central Asia. In order of proven
resources, these countries are Iraq, Kuwait, United Arab Emirates,
Iran, Russia, and the nations surrounding the Caspian Basin. This
region, especially the Arab nations, has been referred to as the
"gap," an area characterized by poverty, disorder, and social

The Middle East is faced with explosive population growth. By 2020
this area's population is projected to pass 800 million, a 30 percent
increase. This surge will place huge strains on already struggling
governments and provide a ready source of recruits for grievance
organizations such as al Qaeda, for whom dissatisfied young males have
been described as a center of gravity.

The last oil frontier lies around the Caspian Sea. Although previous
estimates placed its oil resources as high as 110 Gb, further
exploration has lowered expectations to 17-33 Gb, well below those of
Iraq or Kuwait, but still substantial. Over the long term, natural gas
may prove the most valuable resource there.[9] Four of the six Caspian
Sea states are former Soviet republics and are eager to free
themselves of all vestiges of Russian domination. Only two of the
four, Azerbaijan and Kazakhstan, have significant oil resources.
Turkmenistan and Uzbekistan can only hope to enjoy economic benefits
through pipeline transit fees. All existing and proposed Caspian
pipelines pass through some of the world's most war-torn real estate,
including a proposed pipeline across Afghanistan.

The bulk of demand during the next decade will come from Asia. "In
1993, after decades of self-sufficiency, Chinese domestic oil
production could no longer satisfy demand, which had shot up because
of the country's extraordinary economic growth. Since then, China has
imported more oil every year, from 6.4 percent of its consumption in
1993, to 31 percent in 2002, to a projected 60 percent by 2020."[10]
The Asia-Pacific region's dependence on Middle East oil may exceed 90
percent by 2010.

Military and economic efforts to expand oil access in the Caspian
Basin, like our actions over the past 60 years in the Persian Gulf,
could bring the United States into conflict with energy-hungry
regional powers such as China and India. Played out far from
traditional U.S. supply lines, clashes would minimize our advantages
in naval and air power and depend largely on ground forces and
asymmetric warfare.

The world energy delivery system is incredibly fragile. This
vulnerability creates a vast universe of options for hostile nations,
terrorists, and antiglobalists to create mischief by sabotage,
destruction of key facilities, or interdicting transportation
bottlenecks. The giant Ras Tanura loading facility in Saudi Arabia
processes half of all Saudi production and thus a tenth of all global
production each day. An attack on it could take half of Saudi oil off
the market for at least 6 months, triggering a worldwide economic
catastrophe. "Such an attack would be more economically damaging than
a dirty nuclear bomb set off in midtown Manhattan or across from the
White House in Lafayette Square."[11]

Energy Consumption Patterns

Petroleum provides nearly 40 percent of all energy used in the United
States, a share that is forecast to rise over the next 20 years.
Increasing reliance on oil coupled with declining domestic production
will trigger increasing demand for foreign oil. Today, imports
comprise 62 percent of total petroleum consumption, predicted to rise
to 70 percent by 2025.

The main users of petroleum are the transportation and industrial
sectors. Oil provides 95 percent of the energy for transportation and
20 percent for the industrial sector. Recognition that world oil
supplies have reached Hubbert's peak will have major implications in
the industrial world. Worldwide consumption is rising 3 percent
annually, with the greatest growth in China. The oil energy industry
generates annual revenues of $2.1 trillion. Most transportation
technologies have useful lifetimes of 15 years or more. Transition to
alternative technologies could thus render part or all of this
investment worthless and will not be undertaken until the economic
arguments are unimpeachable. Although rising prices and sagging
supplies will eventually produce clear incentives to conserve and
deploy alternative energy sources, in many cases these signals may not
arrive until very late in the supply collapse, minimizing time for
classic economic incentives to act.

The first barrier to solving this problem lies in public and
policymaker perceptions. Oil price shocks and fluctuations have been
common since 1974, but each time the warnings proved false. For that
reason alone, it may prove difficult to convince the public and
policymakers that an era of permanently limited oil supplies has
arrived. Predicting the shape of the post-peak supply is also hard.
Although Hubbert's theory depicted a symmetrical curve of growing and
then shrinking production, the actual production pattern is highly
dependent on the geology of individual oil fields and the level of
investment in production technology. Further, some portion of the
production shortfall may be offset by conservation and increased use
of other fuels such as natural gas, oil sands, coal gasification, and
synthetic oil. During World War II, German engineers discovered that
synthetic oils manufactured from coal become viable substitutes at a
cost of around $60 per barrel. The shape of the peak and the impact of
"swing" fuels such as synthetic oil are difficult to predict. However,
the key fact to remember is that none of these replacement
technologies will happen overnight; rather, they will be the result of
deliberate policy and investment decisions with lead times that may
approach a decade.

Before discussing what will work, let us remind ourselves of what will
not work. Developing additional resources offshore or in the Arctic
will not provide the long-term solution. Oil economics have supplied
great incentives to discover more sources over the past decade.
Despite these incentives and ever more sophisticated technology, new
discoveries are not keeping pace with consumption. Alaskan production
at Prudhoe Bay peaked in 1988. The much-touted ANWR is estimated to
contain about 7.7 billion barrels of recoverable oil, enough to supply
the United States just over a year. Although tar sands and heavy oil
hold promise, their economics and energy balance are daunting at best.
In sum, trying to drill our way out of this crisis will not address
the real problem, which is soaring demand and the danger of military
conflict over shrinking resources.

Phase I: Conservation

A national energy plan along the lines of the historic Manhattan
Project is needed now. America faces a strategic imperative to
decisively deploy a range of solutions, both interim and permanent, to
address energy security. Such an effort might consist of two phases:
conservation and the energy power shift.

The U.S. fuel savings record is not impressive. The aftermath of the
19731974 oil embargo saw the establishment of Government-mandated
automotive mileage standards. By 1985, the average fuel economy of the
U.S. fleet had risen from 12.9 to 27 miles per gallon (MPG) to 27 MPG.
However, since 1985, these gains have remained largely static as
economy targets remained unchanged. Improved fuel economy has been
thwarted by the policy decision to set separate lower economy
standards for trucks. The growing percentage of lower-economy trucks
has led to a decline in the overall economy of the automotive fleet.

Even at $2.25 per gallon, there are few incentives for Americans to
conserve. At this price level, the annual penalty of driving a gas-
guzzling sports utility vehicle (SUV) instead of a more economical
four-door car is about $500 per year. The dearth of economic
incentives coupled with gas prices considerably lower than the highly
taxed Europeans pay means that oil consumption per dollar of GDP is
now more than 40 percent higher than in Germany and France.

Hybrid automobiles. Hybrids are a revolution in automotive design that
combines a conventional gas engine with an electric motor. There are
three hybrid cars and three hybrid trucks among the 2005 model year
offerings. The three cars, all from Japanese automakers, average over
50 MPG and are mature designs of considerable research and
engineering. Replacing every vehicle with a high mileage hybrid would
cut consumption in half, nearly eliminating the need for imported oil.
Improving the average fuel efficiency of the entire car fleet by just
5.3 miles per gallon could displace all Persian Gulf imports.[12]

Ethanol-based fuels. Expanding production of ethanol alcohol offers a
means of replacing imported oil with a domestic agricultural product.
All current automobiles can operate on fuels up to 15 percent ethanol.
Flexible fuel vehicles (FFV) are designed to operate on mixed fuels up
to E85, a mixture of 15 percent gasoline and 85 percent ethanol. Over
4 million automobiles on the road are factory-equipped to use E85
fuels. Retrofit to FFV capability is a straightforward process that
costs about $50 per vehicle.

Ethanol-augmented fuels are available mainly in the Midwest, where
ethanol is made using a corn-based fermentation process. Today, 81
plants around the country are manufacturing corn ethanol with a
capacity of 3.4 billion gallons per year; 15 plants under construction
will add a further 670 million gallons per year. Corn ethanol critics
observe that it takes more energy (in the form of fertilizers, farm
machinery, processing into ethanol, and so forth) to grow the corn and
distill the ethanol than is available in the final product. The corn
ethanol production chain is dominated by corporate producers who have
mobilized substantial political support for a corn ethanol tax subsidy
regime of $1.4 billion per year.

Corn is a poor choice for ethanol feedstock since it is the most
irrigation and fertilizer-intensive crop grown in the United States,
and corn used for ethanol drives cattle feed prices higher, creating
hidden costs at the grocery store. Although a nascent corn ethanol
industry has developed, future expansion should be discouraged through
a removal of the tax regime. Unsubsidized corn ethanol actually costs
$2.24 per gallon to produce, making it uneconomical except in times of
very high oil prices.[13]

The biorefinery and cellulosic ethanol. Instead of valuable corn, the
biorefinery produces ethanol using the starches and cellulose present
in agricultural waste and byproducts such as corn stalks, rice straw,
paper mill waste, recycled urban waste, and dedicated woody stemmed
crops.[14] Many of these sources of cellulosic ethanol are considered
negative-cost feed stocks, meaning they have no food value and farmers
must pay for their disposal. This gives cellulosic ethanol a much
higher net energy balance than corn-based ethanol. Studies at
candidate biorefinery sites in Indiana and Nebraska found that
collocating ethanol biorefineries with existing power plants would
allow production for $1.05/gallon to $1.60/gallon depending on the
biomass selected. Cellulosic ethanol offers great promise for rural
areas that have seen considerable depopulation due to modern farming

"One cellulose ethanol plant would enhance energy security by
replacing crude oil imports of 2.4 to 2.9 million barrels per year;
increase farm income by $25 million per year by creating economic
value for residues that currently have little to no value or are
simply viewed as waste; create economic development by creating over
1,000 new jobs during peak construction, and almost 200 new permanent
jobs and about 450 spin-off jobs."[15]

Biorefineries also hold great promise for urban areas. A typical large
city has a substantial surplus of yard waste and wood debris, products
that can no longer be deposited in landfills. New York and
Philadelphia pay $150 per ton to dispose of municipal solid waste.
Creating a simple urban wood recycling routine of household recycling
bins would ensure a steady biomass supply and strengthen the economics
of urban biorefineries through proximity to markets. Building an urban
biorefinery in the hundred largest metropolitan areas could produce 7
billion gallons of ethanol a year, offsetting imported oil by 5
percent while helping solve urban waste problems.

The biorefinery is not a fanciful dream. In 1975, Brazil initiated a
domestic ethanol program based on sugar cane waste. Over its 30-year
life, the ethanol industry has produced $50 billion worth of ethanol
while supporting 700,000 Brazilian jobs. Electricity cogenerated at
biorefineries provides 9 percent of national requirements. Ethanol
supports a fourth of domestic petroleum demand and can be priced more
cheaply than gasoline.[16] According to testimony in the Senate,
sufficient cellulosic biomass is available in the United States right
now to displace up to 10 percent of today's oil imports.[17]

The first step of implementation will be to emplace economic
incentives to conserve fuel. New hybrid vehicles enjoy a tax credit of
$1,500, which is due to expire in 2006. This program must be expanded,
and although taxation and incentives are anathema to many politicians,
a cost-neutral regime that taxes production and purchase of low
economy models and rebates for purchase of hybrids and FFVs must be

The second step is to resume increasing the CAFE fleet fuel economy
requirement. The requirement has remained static at 27.5 MPG since
1985, while light trucks and SUVs have essentially received a free
ticket. The CAFE fuel economy requirement must resume its move upward
in a fashion that produces sound public policy outcomes without
exceeding the engineering capability of the automotive industry. The
SUV and light truck requirement, set at 20.7 MPG, needs a realistic
economic target that balances the needs of the consumer with national
energy security.

Step three institutes a crash program to build cellulosic ethanol
facilities. Placement studies for ethanol plants designed to consume a
mixture of agricultural wastes and grain have estimated a construction
cost of $27 million to build a facility capable of producing up to 15
million gallons of ethanol per year. At a proposed site in North
Dakota, suitable agricultural waste and inconsumable grain are already
available to produce 12.5 million gallons of ethanol a year at no
cost. Many potential sites could solve existing waste disposal
problems, exploiting negative-cost biomass to turn waste into
treasure. National Renewable Energy Lab studies show that an
investment of $31 billion would build 225 plants capable of producing
enough ethanol to replace over 10 percent of gasoline consumption.

Farmers need incentives to grow energy crops such as switchgrass, a
native plant that does not require fertilizer or irrigation. It is
estimated that 15 percent of the North American continent consists of
land that is unsuitable for food farming but workable for switchgrass
cultivation. "If all that land was planted with switchgrass, we could
replace every single gallon of gas consumed in the United States with
ethanol."[18] Farm policies that encourage energy crop plantations are
crucial for creating a firm supply base for cellulosic ethanol.

Expanded use of hybrid cars and biorefineries provides an interim
strategy that enhances energy security while smoothing the transition
to the next phase of an energy Manhattan Project, the "Energy Power
Shift,"[19] a move to emerging transportation technologies that offer
permanent energy security.

Phase II: The Energy Power Shift

Although the "hydrogen economy" is widely cited in political
discourse, its practicality is doubtful. Proponents cite the vast
renewable energy from wind, solar, and biomass sources. Massive wind
farms, occupying merely a portion of the Dakotas, could theoretically
produce sufficient hydrogen through electrolysis to power all domestic
transportation needs. Although it is possible to produce hydrogen in
this fashion, storing, transporting, and distributing it to markets is
problematic. Waiting to transition to the hydrogen economy ignores
proven and inexpensive good technology in favor of unproven and costly
perfect technology. Instead of hydrogen, phase II should focus on
plug-in hybrid vehicles and optimizing the biorefinery concept.

Plug-in hybrid electric vehicles (PHEVs). The next evolutionary step
from the Toyota Prius, PHEVs use the same principle as today's hybrid
with the addition of a larger battery and a 120 volt electric wall
plug. The PHEV charges its battery at night from the wall socket or
even while parked at work. The enlarged battery is capable of driving
the PHEV entirely electrically below 35 miles per hour (mph) for about
60 miles, well within the typical commuting range. When the PHEV is
driven faster than 35 mph or beyond 60 miles, the conventional motor
picks up the load. Fully operational prototypes have already been
built using modified Toyota Priuses. These existing PHEVs average up
to 180 MPG in typical commuter profiles since most driving is done in
electric-only mode. The energy-per-mile cost of electricity is a third
the cost of gasoline. PHEVs transfer a large portion of the
transportation energy bill to the electric grid, whose capacity is
underused at night and can grow through the addition of existing and
proven renewable energy technologies such as wind, solar, and
distributed fuel cells.

Improved biorefinery. The centerpiece of the second pillar of phase
II, improved biorefinery, is the thermal conversion process (TCP), by
which the geological conditions that produce oil are recreated. A
technology demonstration plant in Carthage, Missouri, is producing 500
barrels of oil a day using turkey manure, bones, paper products, wood,
municipal waste, and sewage. The TCP produces usable oil at a cost of
40 cents per gallon using landfill waste as a feedstock.

Although the steps outlined in phase I will offer breathing space
against the demise of the oil-based economy, rising demand and falling
production suggest that a transition to phase II must be defined,
capitalized, and executed with rigor. The 2005 Department of Energy
budget earmarks $2.5 billion for all categories of energy research.
Given that the United States has spent $2.2 trillion over the past 14
years seeking energy security through military action, $50 billion
spent to accelerate the arrival of PHEVs, TCP biorefineries, or other
as-yet-undefined technology would seem a policy decision ranking with
Thomas Jefferson's Louisiana Purchase.

An ancillary bonus -- clean air. Environmentalists have championed
many of the above ideas for years but have been largely ignored or
grudgingly placated with half-measures. Until now, economic
considerations have trumped many of the environmentalists' arguments
as cheap gas and lack of government commitment knocked the props out
from under the green platform. The Manhattan Project for energy would
provide an ideal convergence of interests, bringing the economist,
diplomat, soldier, and environmentalist under the same tent. In
addition to girding energy security, PHEVs and TCP biorefineries offer
dramatic improvements in the pollution impact of the transportation
sector by either eliminating noxious byproducts entirely or
transferring to less polluting energy sources.

America's Strategic Imperative

The current world energy situation poses a national threat
unparalleled in 225 years. The economy, particularly the
transportation component, has become heavily dependent on foreign oil.
Concurrent with rising demand are indications that world production
may soon peak, followed by permanent decline and shortage. Moreover,
most of the remaining oil is concentrated in distant, politically
hostile locations, inviting interdiction by enemies.

Over the last 60 years, policymakers have repeatedly applied
diplomatic and military triage to the problem of national energy
security while generally ignoring the economic prospects for a
solution. Today, the Nation is engaged in a global war on terror
throughout the same resource-rich area on which the safety of its
economy hinges. Economic stagnation or catastrophe lurk close at hand,
to be triggered by another embargo, collapse of the Saudi monarchy, or
civil disorder in any of a dozen nations. Barring these events, rising
world demand and falling production could place the United States in
direct military competition with equally determined nations. It is
doubtful that any military, even that of a global hegemon, could
secure an oil lifeline indefinitely. Failing to take urgent economic
steps now will necessitate more painful economic steps later and
likely require protracted military action.

Meeting this dilemma with a technical solution plays on America's
greatest strengths, those of the inventor and the innovator. Rapid
execution of a two-phase Manhattan Project for energy will provide
near-term relief measures while laying the foundation for the long-
term establishment of an "Energy Power Shift" economy. Reduced
dependence on imported oil would also allow the Nation to pursue a
more pragmatic foreign policy, freed of the necessity to engage in all
episodes of Middle East or OPEC history. This strategy denies al Qaeda
and its allies a key argument in their war against the United States;
reducing the strategic importance of the Middle East will obviate the
need for "us" to be "there" and diminish the cultural friction between
Muslims and the West. Absent the plausible charge that the U.S. role
in the Middle East is motivated solely by oil, U.S. efforts to nurture
democracy, and local perception of those efforts, could result in a
new era of good will. Although this problem is daunting, it is not
unsolvable; instead, it demands prompt and certain action to ensure an
energy-rich and peaceful future.

"When you are drifting down the stream of Niagara, it may easily
happen that from time to time you run into a reach of quite smooth
water, or that a bend in the river or a change in the wind may make
the roar of the falls seem far more distant. But your hazard and your
preoccupation are in no way affected thereby."[20] --Winston Churchill


Lieutenant Colonel John M. Amidon, USAF, wrote this article as a
student at the Air War College. Joint Force Quarterly, or JFQ, is
published for the Chairman, Joint Chiefs of Staff, by the Institute
for National Strategic Studies, National Defense University, to
promote understanding of the integrated employment of land, sea, air,
space, and special operations forces. The journal focuses on joint
doctrine, coalition warfare, contingency planning, combat operations
conducted by the unified commands, and joint force development.


[1] National Energy Policy Development Group, National Energy Policy,
May 2001, available at

[2] BP-AMOCO, BP Statistical Review of World Energy, June 2004,
accessed at

[3] Guy Caruso, U.S. Oil Markets and the Middle East (Washington, DC:
U.S. Department of Energy, October 20, 2004).

[4] "Country Assessment: Saudi Arabia," Association for the Study of
Peak Oil Newsletter 21 (Cork, Ireland: 2002).

[5] "Country Assessment: Venezuela," Association for the Study of Peak
Oil Newsletter 22 (Cork, Ireland: 2002).

[6] Iain Bruce, "Venezuela Raises Oil Drilling Tax," BBC News World
Edition, October 11, 2004.

[7] Michael T. Klare, "Growing Militarization of Our Oil Dependence,"
The Boston Globe, October 12, 2004.

[8] "Country Assessment: Nigeria," Association for the Study of Peak
Oil Newsletter (Cork, Ireland: 2003).

[9] U.S. Department of Energy, Energy Information Agency, Country
Analysis Briefs: Caspian Sea Region (Washington, DC: Department of
Energy, June 2004).

[10] Institute for the Analysis of Global Security, Energy Security in
East Asia, August 13, 2004, available at

[11] Gal Luft and Anne Korin, "Terror's Next Target," The Journal of
International Security Affairs (December 2003), available at

[12] Rocky Mountain Institute, Fuel Supplies and Security (Snowmass,
CO: Rocky Mountain Institute, 2004), available at

[13] David Pimentel, "Ethanol Fuels: Energy Balance, Economics, and
Environmental Impacts Are Negative," Natural Resources Research 2
(June 2003).

[14] BC International Corporation, Ethanol From Biomass Process,
November 13, 2004, available at

[15] U.S. Senate, Proceedings and Debates of the 108th Congress, 2d
Session, September 15, 2004.

[16] Amory B. Lovins et al., Winning the Oil Endgame (Aspen, CO: Rocky
Mountain Institute, 2005).

[17] U.S. Senate, cited above.

[18] Sam Jaffe, "Independence Way," The Washington Monthly
(July/August 2004),18.

[19] Barry J. Hanson, Energy Power Shift: Benefiting from Today's New
Technologies (Maple, WI: Lakota Scientific Press, 2004).

[20] William Manchester, The Last Lion: Winston Spencer Churchill
Alone: 1932-1940 (New York: Little, Brown and Co., 1988), 198.