THE BLOG
06/01/2010 05:12 am ET | Updated May 25, 2011

The Best of Weeks and the Worst of Weeks

Washington, DC -- That's a bad paraphrase from Dickens, but it sums up this week's twin energy announcements from the Obama administration. One of them will genuinely advance America's national security (by reducing oil demand by 1.8 billion barrels), make a huge cut in the carbon waste that is disrupting the climate, and save drivers billions of dollars. That, of course, is the final promulgation of rules that will require passenger vehicles to average 35.5 miles per gallon and emit no more than 250 grams per mile of CO2 by 2016 -- a rule that will bring America's cars, trucks, and SUVs into the 21st century.

Obama's other announcement, which became official today, was that he will offer for lease to the oil industry a huge swathe of previously intact offshore marine habitat -- the Chukchi and Beaufort seas in the Arctic, the mid and south Atlantic coast, and many new areas off Florida in the Gulf of Mexico. This was a blatantly political move by the administration. President Obama made it clear during his campaign that he fully appreciates, as oil man T. Boone Pickens puts it, that our oil addiction "is one crisis we can't drill our way out of." The administration knows that offering these leases will do nothing to reduce our oil addiction. In fact, they might provide a false sense of security that new supplies are coming once the lease process is completed.

That's not likely. Even if the estimates prove accurate, there are, for example, only a few days worth of supply off the Atlantic coast of Virginia. The Beaufort Sea has been leased previously, without success. As one oil industry analyst put it when the Bush administration first tried to offer leases in the area, "a lot of really expensive dry holes have been drilled" in the Beaufort Sea.

What about more-established oil-production marine areas, like the Gulf of Mexico? Are oil companies champing at the bit to drill down into those formations and start producing oil to help the American economy? Well, not precisely. It's not as if we haven't been leasing off the coast and in the Gulf. Only a few weeks ago the Department of the Interior announced the results of its latest lease sale in the Gulf of Mexico. They offered 6,958 tracts, but received binds on fewer than 500 of them. Worse, even the tracts that drew bids attracted very few offers -- an average of 1.37 bids per tract. And the price of oil is reasonably attractive.

What this means is that most of the offshore oil has already been produced. The oil industry wants to cherry-pick what remains, pump the most lucrative leases, and leave the rest -- and any mess -- behind.

The White House made clear, as with their earlier announcement of gold-plated subsidies for nuclear power plants, that this was part of a strategy to encourage Congress to pass comprehensive climate and energy legislation. It's bad vote counting. While I have conceded that the nuclear loan guarantees, although bad policy, are probably decent politics in Congress, offshore drilling is not. President Obama has already riled the New Jersey and Maryland delegations, which were previously safe votes. And now the thorny issue of who gets the money -- the coastal states or the Federal Treasury -- will roil the Senate vote count further. The oil industry has attacked the President for not offering even more areas -- and no new Republican votes for climate legislation popped out of the Capitol Hill woodwork.

The likely outcome of all of this is damaging leasing, little oil production, and fewer (not more) votes for climate legislation.

So the President is clearly one for tw on this week's energy announcements. He could have, and needs to, do better. He'll have a chance. Now that the 2016 auto standards are in place, and the EPA has drawn the road map to genuine energy independence, the President ought to preempt the inevitable Republican return to "drill baby drill" with a real vision for "Energy Independence Now."

Offshore drilling can't cover the oil-imports deficit -- innovation can. President Obama ought to make clear that by 2025 our vehicles will be getting far, far more miles per gallon than 35 -- and that by 2030 most of them will be plug-in hybrids or vehicles plugging into renewable electricity. We ought to give people more options for walking and biking safely -- cars shouldn't be our only transportation choice. By combining this with more investment in our railroads and mass transit, using natural gas in long-distance trucking, and eliminating transportation bottlenecks we can cut oil dependence by seven million barrels a day by 2030. We need a national transportation policy that achieves energy independence.

Just because just because we can get to energy independence by 2030 doesn't mean we will. The transportation sector will innovate sluggishly unless investors know that the U.S. won't simply keep covering the oil deficit with imports. Carrots won't be enough. There needs to be a line in the sand, drawn by the President. He ought to say, "Let there be no doubt. We will cut our demand for oil every year, starting this year. And if I have to, I will use my authority to restrict oil imports." (He doesn't need Congress to do this!)

If banks, local governments, and industry know that the President won't let imported oil flood the market, then they'll invest in electric cars, mass transit, natural gas trucks, and modernizing the railroads. Otherwise they'll wait and see -- and the opportunity, both politically and in policy terms, will slip away.