US must stop gas guzzling to beat Gulf oil addiction
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By Simon Webb - Analysis
LONDON (Reuters) - The United States must put more energy efficient cars on the highway and raise taxes on gasoline if it wants to kick its addiction to oil from the volatile Middle East, analysts said on Thursday.
President George W. Bush mentioned neither energy efficiency nor tax in his State of the Union address on Tuesday, when he said "America is addicted to oil" from the Middle East and needs to slash imports from there by more than 75 percent by 2025.
A cut in imports of that magnitude would require a major change of tack from the world's largest energy consumer, now on course to increase rather than decrease dependency on the Middle East, home to 60 percent of the world's oil reserves.
"It's a question of reducing one's economic vulnerability to a particular source of energy," said William Ramsay, Deputy Executive Director at the International Energy Agency, adviser on energy to 26 industrialised nations.
"And he (Bush) has focused rightly on transportation where the vulnerability is the greatest. So far the principle (political) will has been to resist these higher standards of efficiency, but it's time to get on with them."
The technology exists and is being used in Europe and Japan, but U.S. manufacturers have lobbied hard to stop the government forcing them to improve their vehicles' miles per gallon.
That is not just leading to higher gasoline consumption, but harming the competitiveness of U.S. carmakers that are struggling as consumers increasingly demand more efficient cars.
SUPPLY, SUPPLY, SUPPLY
Analysts said rather than promote better efficiency, the U.S. administration is increasing funding aimed at developing technologies for hydrogen-powered cars and raising biofuels such as ethanol in gasoline.
Experts say competitive hydrogen power is decades away and biofuels can only substitute for a small percentage of gasoline consumption.
They also note that Bush was silent fuel taxes in his address to the nation.
Taxes in the U.S. account for about 23 percent of the price of gasoline, whereas in Europe taxes -- and prices -- are much higher. British consumers pay nearly 68 percent tax on gasoline.
"In the short-term there is relatively little that the U.S. can do to reduce its dependence on oil short of raising taxes and fuel economy standards, neither of which the current administration has shown any inclination to do," said Kevin Norrish in a report for Barclays Capital.
"Even over the long-term, reducing the dependence of the U.S. on oil, especially in the transport sector, promises to be a major challenge."
Afraid of upsetting U.S. consumers, the government focuses its attention on supply rather than demand when it looks at its growing oil addiction, analysts said.
"It is always supply, supply, supply," said Frederic Lasserre, head of commodities research at SG CIB Commodities.
"Bush's statement, and the previous statements on long-term energy, is more about foreign policy than energy policy. He's not saying the U.S. should cut dependency on oil, but that it should cut dependency on one region."
ALTERNATIVE SUPPLIERS
Attempts to increase oil supplies from alternative producers outside the Middle East would do little to help the U.S. in a global oil market, analysts say.
"The U.S. can't isolate itself from global markets so whether it buys its oil from the Middle East or not it will be exposed to the same supply conditions of the market and the same price conditions of any other importer," said Ramsay.
Alternative suppliers such as West African countries are not necessarily more reliable than the Middle East. The biggest West African producer Nigeria has recently seen output cut after militants took hostages in the Niger Delta oil region.
It is also unclear how the U.S. government could encourage refiners to buy oil from one region rather than another.
Refiners will buy the cheapest crude that suits their needs regardless of its origin unless forbidden by trade sanctions.
The U.S. Energy Information Administration, the statistical arm of the Department of Energy, forecasts that the North America region will double imports from the Gulf region to 5.78 million barrels per day in 2025, up from 2.84 million bpd in 2002.
North American energy demand will rise from 23.8 million bpd in 2002 to 32.9 million bpd in 2025, according to the EIA.
By Simon Webb - Analysis
LONDON (Reuters) - The United States must put more energy efficient cars on the highway and raise taxes on gasoline if it wants to kick its addiction to oil from the volatile Middle East, analysts said on Thursday.
President George W. Bush mentioned neither energy efficiency nor tax in his State of the Union address on Tuesday, when he said "America is addicted to oil" from the Middle East and needs to slash imports from there by more than 75 percent by 2025.
A cut in imports of that magnitude would require a major change of tack from the world's largest energy consumer, now on course to increase rather than decrease dependency on the Middle East, home to 60 percent of the world's oil reserves.
"It's a question of reducing one's economic vulnerability to a particular source of energy," said William Ramsay, Deputy Executive Director at the International Energy Agency, adviser on energy to 26 industrialised nations.
"And he (Bush) has focused rightly on transportation where the vulnerability is the greatest. So far the principle (political) will has been to resist these higher standards of efficiency, but it's time to get on with them."
The technology exists and is being used in Europe and Japan, but U.S. manufacturers have lobbied hard to stop the government forcing them to improve their vehicles' miles per gallon.
That is not just leading to higher gasoline consumption, but harming the competitiveness of U.S. carmakers that are struggling as consumers increasingly demand more efficient cars.
SUPPLY, SUPPLY, SUPPLY
Analysts said rather than promote better efficiency, the U.S. administration is increasing funding aimed at developing technologies for hydrogen-powered cars and raising biofuels such as ethanol in gasoline.
Experts say competitive hydrogen power is decades away and biofuels can only substitute for a small percentage of gasoline consumption.
They also note that Bush was silent fuel taxes in his address to the nation.
Taxes in the U.S. account for about 23 percent of the price of gasoline, whereas in Europe taxes -- and prices -- are much higher. British consumers pay nearly 68 percent tax on gasoline.
"In the short-term there is relatively little that the U.S. can do to reduce its dependence on oil short of raising taxes and fuel economy standards, neither of which the current administration has shown any inclination to do," said Kevin Norrish in a report for Barclays Capital.
"Even over the long-term, reducing the dependence of the U.S. on oil, especially in the transport sector, promises to be a major challenge."
Afraid of upsetting U.S. consumers, the government focuses its attention on supply rather than demand when it looks at its growing oil addiction, analysts said.
"It is always supply, supply, supply," said Frederic Lasserre, head of commodities research at SG CIB Commodities.
"Bush's statement, and the previous statements on long-term energy, is more about foreign policy than energy policy. He's not saying the U.S. should cut dependency on oil, but that it should cut dependency on one region."
ALTERNATIVE SUPPLIERS
Attempts to increase oil supplies from alternative producers outside the Middle East would do little to help the U.S. in a global oil market, analysts say.
"The U.S. can't isolate itself from global markets so whether it buys its oil from the Middle East or not it will be exposed to the same supply conditions of the market and the same price conditions of any other importer," said Ramsay.
Alternative suppliers such as West African countries are not necessarily more reliable than the Middle East. The biggest West African producer Nigeria has recently seen output cut after militants took hostages in the Niger Delta oil region.
It is also unclear how the U.S. government could encourage refiners to buy oil from one region rather than another.
Refiners will buy the cheapest crude that suits their needs regardless of its origin unless forbidden by trade sanctions.
The U.S. Energy Information Administration, the statistical arm of the Department of Energy, forecasts that the North America region will double imports from the Gulf region to 5.78 million barrels per day in 2025, up from 2.84 million bpd in 2002.
North American energy demand will rise from 23.8 million bpd in 2002 to 32.9 million bpd in 2025, according to the EIA.
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