2013-05-21T11:47:41-04:00 David Burwell http://www.huffingtonpost.com/author/index.php?author=david-burwell Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for David Burwell Good old fashioned elbow grease. tag:www.huffingtonpost.com,2013:/theblog//3.2499255 2013-01-22T17:23:26-05:00 2013-03-24T05:12:02-04:00

David Burwell http://www.huffingtonpost.com/david-burwell/ ran aground on New Year's Eve and has parked it safely in Kuliuk Harbor. The hard work of repair is getting started -- the first step in a determined attempt to salvage its nearly $5 billion bet on finding recoverable oil reserves in the Cukchi and Beaufort Seas north of Alaska. But the question remains -- why are they doing this?

Intuitively, drilling for oil in the seas north of Alaska seems masochistic. For most of the year the ocean is dark, storms are intense, the weather horrible, and the temperatures -- well, Arctic. Working on or under the ice in frigid seas requires significant foresight and preparation, and it is dangerous. Back-up rigs are needed in case of a blow-out (to drill relief wells), as is a separate containment ship to reduce damage in the case of spills. The entire enterprise is an unending battle of technology versus Mother Nature. And, as we know, Mother Nature always bats last.

It is not as if the world is running out of oil. Total consumption is about 32 billion barrels of oil a year and known readily recoverable reserves are about 1.3 trillion barrels. The U.S. Geological Survey estimates that there are between seven and eight trillion barrels in the world and up to now about one trillion barrels have been extracted and consumed. Thanks to new fracking technology, the International Energy Agency now estimates that U.S. will be the largest liquid fuels producer in the world by the 2020s, and a net oil exporter by 2030 -- even without any new Arctic oil production.

Moreover, according to the United Nations 2012 Carbon Emissions Gap report, the world budget for additional C02 emissions consistent with staying below the 2 degree Celsius global warming limit is between 1000-1500 gigatons from 2000-2050. Emissions beyond that amount will almost inevitably trigger catastrophic ecological impacts. In just the first ten years of this century, global C02 emissions were about 420 gigatons from fossil fuels (coal, oil and gas). Known global reserves of these fuels contain at least another 2700 gigatons. Given these numbers, and the fact that the cost of producing oil in the Arctic, while still indeterminate pending actual oil discoveries, will almost certainly be over $70 per barrel of oil lifted, the wisdom of oil drilling in extreme locations must be questioned. In Iraq, the similar cost is estimated to be around $15 per barrel, reserves are huge, and many fields are still unexplored.

With all these challenges, and burgeoning new reserves opening up in sunnier climes, why are oil companies risking so much money and braving brutal conditions to drill in the Arctic? The answer may be surprising -- that is what we tell them to do. U.S. tax laws and securities regulations almost force oil companies to continually seek new reserves in extreme environments, while punishing them for diversifying into a wider spectrum of renewable, climate-friendly fuels.

This occurs in a number of ways. Direct subsidies exist as production tax credits for new wells drilled, intangible drilling cost deductions, reserve depletion allowances, royalty and severance fee waivers for drilling both on and off-shore, and generally lower royalty rates (when paid) compared to many other countries. While not determinative of capital asset allocation, these subsidies incentivize more and more drilling--wherever.

Regulation also plays its part. Under the Securities and Exchange Commission (SEC) rule 4-10 oil and gas companies must publicly disclose the value of their "economically producible" recoverable reserves at the end of every calendar year. This is a way of letting investors understand the full value of assets under management. If oil and gas companies can't achieve a 100 percent replacement rate every year, their stock price can suffer. Renewables don't count in this replacement allocation since the resources (sun, wind, ocean currents, geothermal) aren't privately owned, they can't be claimed as "economically producible." Nor do manufactured reserves such as biofuels. This discourages oil and gas companies from investing in such alternative fuels because they get no benefit in terms of investor confidence.

There are also tax benefits for investing in "depletable resources." Separately from the discriminatory SEC rules, the tax code affirmatively blocks company access to investment capital in renewable energy through its rules on master limited partnerships (MLPs). An MLP is a business structure where corporate tax is avoided while distributions are taxed as dividends, not ordinary income and shares are traded on stock exchanges. But there's a catch: MLPs are only allowed under the tax code for investments in "depletable" sources such as fossil fuels, not renewable fuels. The logic, though perverse, is the same as the SEC rule on "economically producible" -- they can't be owned privately so they can't be depreciated, taxed, or declared as a recoverable reserve. For purposes of the tax code and SEC disclosure rules, renewables don't exist.

Given this policy framework, who can blame oil and gas companies from finding and producing new oil and gas reserves, especially since their core competency is in doing just that? Until our tax and securities oversight laws level the playing field by rewarding energy companies for making bets on renewables and remove the incentives for going after ever more fossil fuels, drilling for oil in ever more dangerous places will continue.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1847726 2012-09-11T18:22:42-04:00 2012-11-11T05:12:01-05:00

David Burwell http://www.huffingtonpost.com/david-burwell/ public health threat, especially in cities. It leads to heat stroke, heat exhaustion, and is a catalyst for ground-level ozone creation as well as asthma and lung disease.

However, and perhaps even more importantly, heat may be the bridge to climate consensus. While extreme heat is not climate change in itself, it amplifies the heat impacts of climate change -- thus also amplifying the threats to human health. It therefore provides an opportunity that allows climate believers, agnostics, and deniers to work together to address a common threat to our society. Regardless of the motivations, dealing with extreme heat can help mitigate climate change, providing added benefits to society.

That heat is an amplifier of climate change -- especially in cities -- is not a theory. It is a fact, and it has a name: "the heat island effect." When the weather gets hot, cities get hotter. According to 50 years of data collected by Brian Stone at Georgia Institute of Technology, this heat island effect can be anywhere from two to 12 degrees Fahrenheit compared to the surrounding countryside. Since more than 50 percent of the global population now lives in cities -- a percentage that is expected to rise to 70 percent by 2050, this is a growing problem.

And heat kills -- 70,000 in Europe during the heat wave of the summer of 2003 and more than 10,000 in Russia in 2010, the year of the wildfires. Heat stimulates a photochemical reaction that converts vehicle emissions to ozone -- a precipitator of asthma and cardiovascular disease. Heat also facilitates the transmission of pathogens, thus accelerating the spread of disease.

What's next? Do we just crank up our air conditioners higher -- hoping the power grid doesn't fail and that we stay healthy enough to avoid succumbing to these new threats? Abandon our cities? The reality is that there is no place to hide from a hotter future. Regardless of our location on the ideological spectrum, we have to address this problem together. To paraphrase former Mayor Fiorello LaGuardia of New York City, there is no Republican or Democratic way to deal with heat.

The cause of urban heat islands is well known. Impermeable and dark pavements, roads and parking lots; vehicle emissions; dark roofs; waste heat from air conditioning and power generation, loss of tree canopy and urban vegetation that both shades sunlight and helps evapo-transportation. The solutions are also well known -- more porous and lighter pavement, white roofs, energy-efficient buildings, fewer vehicles driven less miles, more tree canopy and vegetation, and better storm-water management.

The issue is pressing. It need not be an Alfonse-Gaston routine where everyone politely steps aside waiting for someone else to move first. New York, Houston and Los Angeles have each pledged to plant one million trees. San Francisco is painting it roofs white; Chicago is replacing alleys with permeable surfaces; Philadelphia is building integrated storm-water management systems, trapping water to nourish urban forests, vegetation and greenways; and bike-share and car-share programs are popping up everywhere.

States can help as well, with tax and finance policies that encourage cities to act. California has adopted a Transit Priority Program that accelerates mixed use development approvals near transit combined with bike share and car share facilities. It has also approved the creation of local-option Infrastructure Financing Districts (no car dealerships or big box retailers allowed), with authority to issue bonds for transit and other infrastructure improvements. Debt will be paid off over 40 years from the higher-district tax receipts

There is also a role for the federal government -- most directly by tailoring federal infrastructure assistance in urban areas to projects that minimize, or actually reduce, heat effects. Heat-reduction measures could be included in state clean air plans, and proposals could be fleshed out for amending the U.N. Framework Convention on Climate Change to cover thermal radiation as well as greenhouse-gas emissions. The response to urban heat has been cautious and local. A larger policy debate is needed.

William Gibson, the writer and philosopher, first made the observation that "the future is already here, it is just unevenly distributed." Heat is here -- and it is concentrated in high population areas. This is a problem unblemished by theory or politics. Perhaps heat is the bridge to somewhere we have been waiting for in the climate debate... because heat carries no ideological baggage. It is just hot.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1424806 2012-04-16T12:00:53-04:00 2012-06-16T05:12:01-04:00

David Burwell http://www.huffingtonpost.com/david-burwell/ Six wise men of Industan, of learning much inclined, went to see an elephant, though all of them were blind, that each by observation might satisfy his mind.

The debate over gas prices, what causes them to soar and crash, and who is to blame, is a parlor game played out in Washington at the start of the driving season every spring, and even more so in presidential election years. It is a redundant, blind-leading-the-blind discussion. So, let's see if we can parse the arguments made by the proponents of the various "truths" about gasoline prices to find the culprit. By analogy, we will track the arguments to the classic J. G. Saxe poem, "The Blind Men and the Elephant," with oil being the "elephant" in the room.

The first approached the elephant and happening to fall against his broad and sturdy side at once began to bawl, "This mystery of an elephant is very like a wall."

The wall of worry -- that some natural (like a hurricane) or man-made (such as a terrorist act, a war, or an embargo) disaster will cut off our access to oil and drive gasoline prices higher. This is a fear that oil exporters of any stripe diligently encourage. And it is partly true--Hurricane Katrina cut off both access to oil and caused refineries to shut down, causing a gasoline price spike.

But the United States, like all net oil importing nations, have set up strategic petroleum reserves to safeguard access to oil in times of such interruptions. The U.S. strategic reserves already have more than 200 days of U.S. oil imports safely stored in salt domes in Texas. Absent an OPEC-like coordinated embargo, which would do more damage to OPEC than to oil importers (see below), these interruptions will be short term and the price hike mild. So risk of supply interruption can't fully explain the problem.

The second, feeling of the tusk, cried "Lo what have we here, so very round and smooth and sharp? To me 'tis mighty clear, this wonder of an elephant is very like a spear."

The spear of the gas tax -- a tax that pierces the heart of every American driver. But the 18.4-cent federal gas tax is less than 5 percent of the price of a gallon of gasoline. It is also getting smaller as a percentage every day as gasoline prices rise. Add state and local gas taxes and the average is still only 12 percent of the total price per gallon -- one of the lowest in the world. It also has not risen since 1993 -- even though fully 60 percent of Americans think the gas tax rises every year.

While this tax is supposed to keep our transportation infrastructure in good shape and performing efficiently, it is so inadequate to meet present needs that the quality of U.S. infrastructure has fallen, according to the World Economic Forum, from fifth in 2001 to twenty-third place globally. So gas taxes -- while a minor contributor -- can't be the culprit either.

The third approached the elephant, and happening to take the squirming trunk within his hands, thus boldly up and spake, "I see," quoth he, the elephant, is very like a snake."

The snake of speculation -- this argument appears to have some merit, especially if one compares global daily consumption of oil (89 million barrels) to actual oil traded on public commodity markets every day (over three billion barrels). Clearly most oil traded is done by those who have no intention of ever taking possession of it. This argument is bolstered by commentators who note the existence of "dark pools" of oil traded privately between oil companies, banks, and investment companies as a kind of reserve currency.

These private trades are estimated to be many multiples higher than publicly-traded oil stocks and can lock up inventories, thus causing prices to soar even in times of low demand and high supply. A recent study by the St. Louis Federal Reserve estimates that speculation accounts for about 15 percent of the oil price rise over the last ten years. But it also says that "fundamentals (supply and demand) continue to account for the long-term trend in oil prices." This snake, if it has a bite, is not poisonous.

The fourth reached out with eager hand, and felt above the knee, "what this most wondrous beast is like is very plain" said he, "tis clear enough the elephant is very like a tree."

The ever-growing tree of demand expansion -- true, global demand for oil has risen over the last decade, from 76 million barrels per day in 2000 to 87 million in 2010, but supply has kept pace. Moreover, OECD oil consumption has peaked and is now in decline, and new, unconventional oils have expanded potential supply to meet all needs far beyond the time their carbon emissions will push global temperatures to catastrophic levels.

The simple fact is that the OPEC nations, with 77 percent of global proven oil reserves and 42 percent of production, have models that calibrate the exact amount of that oil to put on the market to secure maximum financial return. The United States, representing about 10 percent of global production but 20 percent of global consumption, cannot substantially affect the oil price -- nor can more drilling. In fact, America already has more than 50 percent of all the in-use wells in the world. Canada, which produces 50 percent more oil than it consumes, has higher gasoline prices than the United States.

The fifth, who chanced to touch the ear said, "E'en the blindest man, can tell what this resembles most -- deny the fact who can; This marvel of an elephant is very like a fan."

The fan of inflation -- the theory goes that as the U.S. continues printing money to cover its trillion-dollar deficits, inflation will rise and, with it, the price of oil, since it's priced in dollars. Nice idea. But inflation remains tame while the price of oil has doubled since the depth of the Great Recession in early 2009. Inflation may be a future culprit, but it certainly is not pushing oil and gas prices up anytime soon.

The sixth no sooner had begun about the beast to grope, than seizing on the swinging tail that fell within his scope; "I see," said he, "the elephant, is very like a rope."

The rope of the resource curse -- this is a little-understood contributor to the world oil price that may eventually hang the oil-exporting economies. These economies, primarily the OPEC countries, Norway, and Russia, are heavily dependent on export sales of their natural resources -- especially oil -- to fund their national budgets. Over 50 percent of the federal budget of the Russian Federation is from taxes on sales of exported oil, and this percentage is much higher in some Middle Eastern countries.

These revenues are then disbursed to subsidize their social contracts with their citizens -- cheap energy and low-cost housing, without which social unrest would accelerate. This requires ever-rising oil prices. Ten years ago, Russia could fund its social contract at a world barrel price of oil of $20. But by this year, Moscow's budget needs an average price of $115 a barrel to break even. The Middle Eastern states are feeling the pinch as well: Barclay's Capital recently estimated that the cost of the Arab Spring alone pushed the break-even point for Saudi Arabia's budget from $78 a barrel to $91 a barrel -- to fund the extra spending needed to prevent social unrest from threatening the regime.

So, if gas prices are the elephant, did the six wise men find their answer?

So six blind men of Industan disputed loud and long, each in his own opinion exceeding stiff and strong; though each was partly in the right, they all were in the wrong!

As it is with elephants, so it is with oil prices -- plenty of "wise men" talking about what drives oil prices and all are partly in the right -- but mostly in the wrong. For the real answer on what is driving gas prices higher, let's look into the mirror.

We all hate high gasoline prices but we love the lifestyle that gasoline supports: the freedom of the open road -- flat, straight, fast, and free (with no tolls). We buy up cheap land where you can "drive until you qualify" for a home mortgage (with interest deductible). We then expect the government to build and maintain the infrastructure that supports our 50-mile commute to work, even though we oppose the gas taxes that fund all the infrastructure that provides these very same lifestyle benefits.

Until we grasp the reality that the price of oil is directly related to how we waste it, we will continue to dedicate countless hours and endless column inches looking for a different culprit. The elephant in the room is not the price of gasoline -- it is us.

David Burwell is the director of the energy and climate program at the Carnegie Endowment for International Peace.
]]> tag:www.huffingtonpost.com,2011:/theblog//3.1150812 2011-12-15T14:45:31-05:00 2012-02-14T05:12:02-05:00

David Burwell http://www.huffingtonpost.com/david-burwell/
Keystone XL is more than a political bargaining chip. It is more than a $7 billion capital energy project. It is the Rubicon that scientists, energy analysts, and environmentalists say we must not cross if we are to keep global warming at or below 2 degrees Celsius from pre-industrial times. Build Keystone XL and we lock ourselves into reliance on "dirty" energy sources that will put us over the 2 degrees tipping point. It is "game over."

This 2 degrees limit is not a random number. It is the limit beyond which settled science says we risk a 50-50 chance of severe planetary harm. Imagine a world with 35 percent of all species going extinct; a sea level rise flooding natural and urban infrastructure alike; forced exodus of more than 500 million people from coastal areas; and a deadly migration of tropical diseases toward populations that have not built up resistance. All this within the lifetime of those we care about most deeply -- our children and grandchildren.

Energy analysts are increasingly alarmed at the rate that the world is getting "locked-in" to fossil fuels as its primary energy source. The International Energy Agency, in its annual World Energy Outlook 2011, estimates that we have only until 2017 -- just five years from now -- to fundamentally turn capital investments in energy assets away from fossil fuels if we are to stay within this limit. If not, the best we may be able to achieve is a 3.5 degrees increase. If we delay this shift until 2035, we will be on track for a 6 degrees increase, the consequences of which approach planetary suicide. If we continue to mine tar sands -- the unconventional oils Keystone XL will transport at a rate of up to 800,000 barrels a day -- the lock-in occurs even earlier.

The 2 percent limit is also a legal limit. At the UN climate change summit in Cancun one year ago conferees signed an accord to keep global temperature rise to below the 2 degrees threshold. This commitment was reconfirmed and strengthened at Durban last week. Keystone XL requires a permit from the U.S. state department -- the same agency that negotiated the Cancun and Durban agreements. Given the warnings that scientists, energy analysts, and even insurance company executives are now urgently urging policymakers to heed, the state department has a duty to assess permit issuance against its commitments.

With global consensus now consolidating around the 2 degrees limit, you would think both public and private sector leaders would act -- fast. Yet, as noted recently by Lord Nicholas Stern, former chief economist of the World Bank, major oil, gas, and coal companies proceed to extract these fossil fuels on a business as usual basis. Shareholders seem oblivious to the fact that conversion of resources into proven reserves increasingly relies on risky or destructive exploration in the Arctic, deep oceans, and sensitive ecosystems. Sir Nicholas' conclusion: "either the market has not thought hard enough about the issue or thinks that governments will not do very much."

Environmentalists, understanding that neither private markets nor the political system is capable of responding to the challenge posed by climate change, are determined to stop this pipeline using whatever legal tools are available. If markets, international accords, and public policy won't respond by developing a plan to keep fossil fuel emissions within safe limits, then these resources must simply stay in the ground until an enforceable plan is adopted. Unconventional oils are at the frontline of the fight and Keystone XL is the point of the bayonet. Environmentalists are preparing themselves for trench warfare.

Fast-tracking the Keystone XL decision may escalate campaigns to stop oil sands development entirely. Politicians should ponder hard the wisdom of Will Roger's advice.

David Burwell is the director of the climate and energy program at the Carnegie Endowment for International Peace.

]]> tag:www.huffingtonpost.com,2011:/theblog//3.1137652 2011-12-08T17:10:00-05:00 2012-02-07T05:12:01-05:00

David Burwell http://www.huffingtonpost.com/david-burwell/
In the real world, all who share this planet are not only channeling Jack Benny, we are also collectively the thief -- and it is no joke. We have put a gun to our head and it has a name: fossil fuels.

We have just five years to make a wholesale shift in capital energy investments from the production and use of carbon-intensive fuels to new, low-carbon energy. If we fail, the International Energy Agency warns that carbon levels will be "locked in," raising average global temperatures by 3.5 degrees centigrade within this century. If we wait until 2035 to restore a global energy-carbon balance, we will bring a 6 degree Celsius temperature rise. Exceeding a 2 degree Celsius rise threatens massive ecological and economic damage. 6 degrees approaches planetary suicide.

Yet, as world leaders convene in Durban, South Africa this month seeking agreement on how to hold global temperatures below the 2 degree Celsius level by 2050, progress continues to elude us. Existing economic challenges and leadership transitions in the major carbon-emitting economies, coupled with general finger pointing about who goes first, are blocking meaningful progress. Instead of acting, we will keep on "thinking."

We can't afford to wait for collective buy-in. We must act -- fast. The place to start is with the major emitting nations -- China, the United States, Russia, Europe, and India. Each country must choose its own promising emission reduction path and go for it -- flat out. This is an opportunity to both demonstrate global leadership and gain competitive advantage in a new global energy economy. In the United States, we have a clear and present opportunity to decarbonize a key sector -- transportation.

There are five good reasons the United States should exhibit climate leadership on transportation.

First, the United States is an oil sponge. America's share of global oil consumption is ten times its share of global oil reserves. As global oil demand continues to rise, from 87 million barrels per day to nearly 100 million barrels a day in 2035, fierce competition between nations will drive up oil costs. If, instead of weaning ourselves off oil, the United States turns full bore to Canadian oil sands, domestic oil shale, and other unconventional North American oils to feed our addiction, the costs to our economy, communities, and ecology will be unprecedented. The less oil we use, the better for all of us.

Second, we are about to enact a new federal transportation bill that lacks clear national goals and ignores the current transportation system's entrenched dependence on oil. Fully 94 percent of our transportation system runs on oil. To ease the transition away from oil, transportation carbon should be priced, whether it is upstream at the producers or downstream at the pump. Revenue from carbon pricing should be directed toward building a more efficient system promoting both economic competitiveness and domestic health and welfare. Carbon pricing plus strategic investment yield net benefits, not costs.

Third, we are a global technology leader on fuels and vehicles. We have identified several non-food plants that can be processed into high-performance jet fuels, and our airlines have initiated commercial flights using these biofuels. And, thanks to the new product line of clean, low-carbon cars now coming off Detroit assembly lines, car sales actually rose during the recent oil price spike, from 9 million in 2009 to 13 million in the last year. America can, and should, lead the world in vehicle and fuel innovation.

Fourth, we can give ourselves another leg up if we follow through on our commitment to passenger and commercial fleet fuel efficiency standards -- cars to 54.5 miles per gallon by 2025 and a 20 percent improvement in heavy truck efficiency by 2018. By aligning our domestic markets with world demand for energy efficient transportation we have a unique opportunity to increase our global market share while helping the world wean itself off oil.

Fifth, we must decarbonize urban transportation systems. City by city, a shift is underway. Metropolitan regions, home to 65 percent of Americans, are increasing in population and productivity. Moreover, younger residents have the lowest driver license registration in years, shifting travel away from personal autos. New ways of integrating land use and transportation planning, enhanced by new technology applications, are gearing up to transform the very fabric of urban mobility.

Taken together, the United States can significantly accelerate the decline in its demand for oil, with associated cuts in climate-forcing emissions.

While we wish our leaders success at Durban, an international climate framework is unlikely. Continued global climate inaction begs individual action. Decarbonizing transportation in the United States will bolster market leadership, reduce oil dependence, rebuild infrastructure, and support a competitive economy. In the process, we can take the gun from our head and avoid planetary suicide. Think first -- then act. No joke.]]> tag:www.huffingtonpost.com,2011:/theblog//3.866815 2011-05-26T08:58:03-04:00 2011-07-26T05:12:01-04:00

David Burwell http://www.huffingtonpost.com/david-burwell/
Green shoots prophesying accelerated declines in American oil consumption are cropping up everywhere. Even before the recession, total domestic oil consumption was in decline and the trend accelerated as the economy lagged. And, importantly, the recovery has not led to the expected increase in consumption. The Energy Information Agency reports that gasoline consumption has declined for sixteen straight weeks compared to sales a year ago. Last week, the year-over-year weekly decline was 3.7 percent. While total travel has bounced back a bit as the economy has picked up, the most important measure of what's happening, vehicle miles traveled per capita, continues to decline.

U.S. vehicle sales also portend increasing declines in oil consumption. In 2008, auto sales, in the face of $4 gas and economic troubles, crashed to nine million vehicles annually. In the first quarter of 2011 they bounced back to a new rate of 13 million vehicles annually as consumers abandoned their gas guzzlers for Detroit's new line of gas sippers. As a result, the economy is exhibiting remarkable resilience amid this new oil price spike. President Obama's directive that the entire federal vehicle fleet will be fuel efficient or rely on alternative fuels by 2015 will accelerate this transition.

Consumers are already "producing" new oil by reducing their need for it.

Oil and gas companies are also beginning to demonstrate new doubts about overreliance on oil. Even as oil prices -- and profits -- rise, windfall earnings are being re-invested more widely. ExxonMobil is only replacing 90 percent of the oil it produces through exploration or acquisition of new oil reserves, instead significantly increasing its investment in natural gas, algae, and other biofuels. BP is doing the same, announcing this week an investment in Verdezyne, maker of a yeast that converts plant sugars to biofuels. Total, the big French oil company, has just bought a 60 percent interest in Sunpower, the largest U.S. solar energy company.

Regulatory policy is also nudging the energy industry off oil. New standards for fuel efficiency and renewable fuels mean that it doesn't take a chemical engineer to understand that oil, the source of 95 percent of transportation fuel, is about to face heavy competition in the fuels market.

Perhaps the most significant incentive driving reduction in oil demand is the price of oil itself. While current prices might be a short-term trend, long-term prices will remain high due to the rapid pace of motorization in China, India, and other developing countries. High world oil prices, while painful at the pump, accelerate turnover to a low-carbon vehicle fleet which, in turn, help reduce the marginal cost of travel even at higher fuel prices.

With the progress that has already been made, the choice is easy. Transitioning to low-carbon fuels and improving vehicle and system efficiency, promises higher returns in oil independence in the short term than a focus on increasing domestic production that only drains America's reserves faster.

Consider this: if America fully exploited all its known reserves to meet 100 percent of its domestic needs we would run out of oil within four years. Yes, we have more domestic oil to discover but we are increasingly tapped out on the production side.

History, as well as basic economics, demonstrates that increased domestic oil production does not necessarily lower prices for American consumers. After several years of aggressive incentives to boost domestic production, the percentage of oil the United States imports is 15 percent lower than it was in 2005 though the price of oil has doubled to over $100 a barrel. Obviously, further increases in domestic production will have little to no impact on gasoline prices.

Washington can accelerate demand destruction by intensifying its efforts to increase fuel efficiency, establishing a low carbon fuel standard, investing in more travel choices, and ending subsidized sprawl. It could also extend an olive branch to oil companies by offering to trade oil subsidies for investment tax credits in renewables, or by encouraging pooled energy R&D efforts as it is already doing with China. The fact that oil companies are already testing the waters for alternative energy investments indicates that they may be ready to step up their efforts.

The road to oil independence is clear and straight: better to water the green shoots of demand destruction than feed our oil addiction through the chimera of "drill-baby-drill."

David Burwell is the director of the energy and climate program at the Carnegie Endowment for International Peace.]]>