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Kicking the U.S. Oil Habit

As gas prices skyrocketed this past week, President Bush urged lawmakers to do more to alleviate what he has called “America’s oil addiction” and cut its dependence on petroleum imports.

Oil prices hit record highs on the world market in the past week, climbing to more than $75 per barrel. In some parts of the United States, motorists are paying more than 80 cents per liter for gasoline. And some analysts expect higher costs this summer, despite several measures announced by President Bush to boost supply and curb price gouging.

The United States consumes around 25 percent of the world’s oil. It uses nearly 21 million barrels of oil per day, out of which about 60 percent is imported. Nigeria, Canada, Venezuela and Mexico supply the U.S. with up to 11 million barrels of oil per day, or about half of its needs. Roughly 15 percent of America’s oil requirements, or about 2.5 million barrels per day, comes from the Middle East.

Hard to Cut Back

Many analysts argue that President Bush’s call to slash U.S. petroleum imports, especially from the Middle East, will be difficult because demand is outpacing supply on the global market and because the world’s top oil exporter is the Middle Eastern nation of Saudi Arabia.

But Jason Mark, an energy analyst at the California-based Union of Concerned Scientists, counters that it is both realistic and imperative that the United States wean itself off foreign oil imports that place a tremendous burden on its economy.

He says the country spends nearly $24 billion a month on oil imports, accounting for half of its foreign trade deficit. “We send nearly $500,000 a minute overseas to buy foreign oil. That impacts our trade balance. American drivers are being pinched at the pump. It’s having dramatic implications for the airline industry, for freight. Everywhere our economy uses oil, we’re at risk from increasingly high oil prices,” says Mark.

A Small Price to Pay

But some analysts say the U.S. is not unique in its dependence on foreign oil, certainly no more so than Japan or Europe, for example.

Moreover, Michelle Foss, Chief Energy Economist at the Center for Energy Economics at the University of Texas, argues that oil imports are only a small part of a very diverse U.S. economy.

“We have a $10 trillion economy, and it is really a very small part of that economy. That’s what everybody keeps forgetting. It’s a small part of disposable income for a typical household. For certain industries, for example aviation, fuel costs are a larger percentage of the overall cost structure for the industry. But for a lot of other industries, fuel cost is less expensive than say labor or other capital costs,” says Foss.

The Transportation Sector

At the same time, economist Michelle Foss concedes that the United States could curb its consumption of imported petroleum, although it will be difficult to do so in the transportation sector - - the country’s biggest oil consumer.

“Our particular problem is very much a reflection of how we tend to manage the transportation sector in this country. It’s a big country with a lot of interstate commerce, large distances to travel and a very large, active economy. Because of patterns that have developed over time, with lots of transport access and safe vehicles that people drive, people can afford to live where they want to live and commute to work. And that’s a pattern that has become well established here. And it’s difficult to reduce individual transportation in a way that would yield a significant difference with regards to barrels of oil consumed,” says economist Foss.

Some analysts point out that, apart from the transportation sector, most American industries have become less reliant on foreign oil, especially Middle Eastern imports, since the early 1970s when Arab producers cut oil shipments to western countries during the 1973 Arab-Israeli War. Today, more than half of America’s electricity, for example, is produced by burning domestic coal.

Geoffrey Kemp, Regional Programs Director at the Nixon Center in Washington, says reducing U.S. reliance on foreign oil means addressing transportation problems and slashing the number of large, inefficient vehicles that run on gasoline and diesel fuel.

“No one expects Americans to give up their cars. But there are alternative technologies that could become available relatively quickly if there were the correct incentives. And I think most Americans now are rethinking their love affair with these huge, sports utility vehicles, which have been clogging our roads for the last ten years,” says Kemp.

What Will it Take?

In order for that shift to take place and enable the U.S. to reduce its reliance on imported oil, Geoffrey Kemp argues that two things need to happen. He says, “First, a dramatic increase in the price of oil. Secondly, a dramatic increase in government intervention in the marketplace, particularly government incentives to make alternative fuels more cost-effective and to provide tax relief for companies and individuals to seek alternative fuels.”

In an effort to curb America’s reliance on foreign oil, two U.S. Senators - - Republican Richard Lugar and Democrat Barak Obama - - recently introduced the American Fuels Act of 2006, which calls for increased production of alternative fuels, such as ethanol, and offers tax credits to consumers who use more efficient fuels.

Previous energy legislation passed by Congress offers incentives to encourage the use of alternative fuels in the transportation sector. But critics argue that the legislation also provides oil and gas companies with billions of dollars in subsidies and tax credits that benefit manufacturers and owners of gas-guzzling vehicles.

Despite efforts to develop energy alternatives, most experts agree that petroleum will continue to be the main source of energy for the U.S. economy for many years to come.

This story was first broadcast on the English news program,VOA News Now. For other Focus reports click here.