Thursday, December 22, 2011

DOD's Green Chaos

A US congressional “super committee” has been assigned to develop a plan to reduce the federal deficit by more than $1.2 trillion over the next 10 years. This amount is more or less equals to the war expenses in Afghanistan and Iraq in the past 10 years.

Today, the US Department of Defense (DOD) is under “devastating” budget cuts but it continues to play the proud role of leader in the country’s green energy transition. Some of the main goals of this vision are reducing dependence on imports, increasing dependence on clean energy technologies, improving energy efficiency and conserving energy through culture change. This transition is deemed necessary and urgent by the DOD senior management.

We have heard many times by DOD officials that there are also many energy related threats to national security. Climate change, high priced and unsure supplies of imported oil coming from “unfriendly” nations, dependence on civilian electricity infrastructure, brining fuel to forwards operating bases are only a few but much publicized examples.

All these understandable intentions backed with unjustified arguments have been disturbing me for a while. Let’s take the argument of being dependent on oil imports from “unfriendly” countries.

If you go to the Energy Information Administration website, you will read the following: “Some may be surprised to learn that 49% of U.S. crude oil and petroleum products imports came from the Western Hemisphere (North, South, and Central America, and the Caribbean including U.S. territories) during 2010. About 18% of our imports of crude oil and petroleum products come from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates. Top Sources of Net Crude Oil and Petroleum Product Imports: Canada (25%), Saudi Arabia (12%), Nigeria (11%), Venezuela (10%), Mexico (9%).” I interpret the term “unfriendly” countries as OPEC countries in general and the countries in the Persian Gulf in particular.

The fact is that the US imports less and less crude oil from the Persian Gulf. Now let us have a look at the Annual Energy Outlook 2011 of the Energy Information Administration (released in April 2011). Table A11 (Liquid fuels supply and disposition) tells us that EIA expects US crude oil imports to decline from 9 million barrels per day in 2009 to 8.24 mb/d in 2030. If you include petroleum products the numbers will change but the picture will remain the same. Share of net oil imports (crude oil + petroleum products) in total oil supply will decline (from 52% in 2009 to 42% in 2035). (see data here).

The share of crude oil imports from the Persian Gulf in total crude imports is expected to decline from 24% in 2008 to 18% by 2035 (or from 2.34 million barrels per day in 2008 to 1.45 million barrels per day in 2035, see the table below). Even if the US imported very small volumes of crude oil from the Persian Gulf, it would remain sensitive to the impact of any halt in supplies from that region would have on oil prices. So, the DOD officials should not mix the level of oil imports with price setting in world oil markets.

I wonder how the DOD senior management would answer the following question: Does this justify the massive US military presence in the Gulf in the future? So, the arguments like protecting the flow of oil from the Persian Gulf is not a convincing reason anymore. Here is the logic the Pentagon tries to impose on people’s small brains: We have to protect the flow of oil from the Persian Gulf because it is vital to the US national security. Therefore the US military has to be there. On the other hand, the US has to reduce its reliance on oil imports from the region. This is one of the reasons why pushing for biofuels is important.

Ethanol has been used as fuel in the U.S. since at least 1908 and has been subsidized since 1978. A century later we are still told that biofuels has a bright future and will be costs competitive. Well, let me tell you one thing. People may be naïve but not necessarily stupid.
Pentagon's quest to "unleash us from the tether of fuel" is transparent nonsense under the current reality. Pushing for “green” energy to make the world safer because climate change poses a “serious threat” to America's national security (towards the end of this century) is another bogus argument. If we want to make the world safer we should show this same vision down the throat of the billions of the world’s poor who today risk death because of starvation and disease. Of course, the DOD has the authority to make its own energy choices but not at the expense of tax-payers.
DOD’s energy costs in 2010 were over $15 billion. Almost $12 billion of it was for oil. According to my rough estimates the DOD’s energy expenses in 2011 will exceed $18 billion, around $15 billion of which for oil. Yes, this is a large sum. Well, instead of trying to find ways to reduce its oil expenses the DOD buys more expensive biofuels, and then it complains that increasing oil costs will have negative impact on its capabilities.
Let me remind you what the current Secretary of Defense Leon E. Panetta wrote in Monterey County Herald on May 7, 2006: “It is not government but consumers that hold the key to smart energy policy in the future. What all of the presidential pledges of the past failed to do, the price of gas may just accomplish. It may not be pleasant to confront the prospect of $5.00 or higher a gallon gasoline but if that high price can ultimately create a demand for less oil and more alternative fuels like ethanol, then perhaps this high price may not just be a curse but a blessing.” Today, Mr Panetta is the Secretary of Defense. He should remember his words when the DoD services ask for extra funds to cover their oil costs.
The DOD should be responsible for the energy policy decisions it takes and accountable for the resulting consequences. The DOD’s current energy goals and policies are too expensive, too ambitious. They lack realism and coherence. The negative results of DOD’s unsustainable and chaotic green energy policy will soon show its face which will lead to the downsizing or abandonment of several plans.
Let me be clear. I am not against renewable energy sources. I am only against the blind push for them, for the sake of pretending “green”.
If the Pentagon is serious about its energy problem, it should first know how much energy it uses (paid for and unpaid for), where and how. I would like to ask a simple question to DoD senior energy officials: How do you explain the discrepancy concerning the DOD’s annual energy consumption documented in the EIA’s Annual Energy Review and DoD’s Federal Energy Management Report (for any given year)?
Moreover, the vague terms like operational energy and installation energy do not mean anything. For years I have been repeating the same question: How much energy does the DOD consume in continental US and how much outside continental US? My point is that the Pentagon must first get the facts right.

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