Set America Free analysis of President Bush’s State of the Union remarks on energy

As the President stated in last year’s State of the Union, America is addicted to oil. Today he reiterated that this addiction creates a national security risk for our country because it leaves us vulnerable to hostile regimes and to terrorists. To address the problem, the President is right to set a national goal to reduce U.S. oil consumption, specifically by announcing a target of 20% saving of gasoline in 10 years, by 2017. That is approximately equivalent to a 10% reduction of oil consumption, as gasoline accounts for almost half of oil demand. This is a reiteration of last year’s commitment to reduce oil consumption by the equivalent of three quarters of the oil we import from the Middle East. Of the 20%, 15% will be saved through increased use of alternative fuels and 5% through increased fuel economy, though the President opposes
Congress increasing CAFE standards and asks instead that this authority be transferred to the Administration.

The savings goal dovetails the DRIVE Act based on the Set America Free Coalition’s Blueprint for Energy Security which was introduced last week by a bipartisan group of 25 Senators. The House version of the bill will be introduced tomorrow (Wednesday) by a bipartisan group of 66 representatives.

The President’s plan leaves some open questions. The plan includes a new mandatory ALTERNATIVE Fuel Standard (AFS) of 35 billion gallons a year by 2017.  This goal is nearly five times the current RENEWABLE Fuel Standard (RFS) of
7.5 billion gallons a year by 2012, and includes more fuel types than the RFS, which counts only renewable liquid fuels: biofuels such as corn and sugar derived ethanol, cellulosic ethanol, and biodiesel. When it comes to alternative fuels the choice is wider. 

Open questions:
1. The Administration should clarify that the AFS includes non-petroleum fuels only, and does not include diesel made from oil. Shifting from gasoline to petroleum based diesel would give a bit of a mileage jump as diesel cars are more efficient than gasoline cars but it will keep our oil addiction intact. In order for the U.S. to gain the security benefits derived from oil saving we must ensure that alternative fuel standard includes ONLY non-petroleum fuels.
2. The Administration should also clarify whether electricity is counted as an alternative transportation fuel as part of the AFS. Since only 2% of U.S. electricity is generated from oil, a shift to electricity in the transportation sector via plug-in hybrid electric vehicles would, as the President has repeatedly emphasized, reduce our oil dependence. 
3. The White House should detail how it expects the 35 billion gallon a year goal to be met.

What about the vehicles?
While the President plan includes a substantial increase in supply of alternative fuels, it did not detail how to increase demand for such fuels. One of the elements most missing in President Bush’s energy plan is emphasis on what automakers must do so that alternative fuels are actually usable – that is, a call from the President to Congress to require that most new cars be fuel flexible. A significant increase in alternative fuels means little if there are no cars that can use them and refueling infrastructure that can serve them. The CEO’s of the “Big Three” automakers, in a November meeting with President Bush, committed to making 50% of their vehicles fuel flexible by 2012, a goal that would be codified by the DRIVE Act.

Authority to reform CAFE
The President proposed that Congress authorize a reformed and modernized fuel economy standard setting system for passenger cars that will allow the Secretary of Transportation to increase fuel economy standards (as was done for
light trucks), and by doing so, save up to 8.5 billion gallons a year of fuel. The President’s request for authority to reform and set CAFE, an authority that the Administration requested from Congress last year as well, stems from the
recognition that regional politics (eg the House Energy and Commerce Committee is chaired by Rep. Dingell (D-MI)), are likely to block CAFE increases in Congress.

The President’s call on Congress to double the current capacity of the Strategic Petroleum Reserve (SPR) to 1.5 billion gallons in order to protect against severe disruptions of our oil supply in the future is a positive step. The SPR is currently home to 770 million barrels. This barely suffices to tide the U.S. economy over if there is a severe disruption of oil supplies. In expanding the SPR the President recognizes that the future oil market will remain unstable and that the threat of supply disruptions is on the rise. To this end an increase in the SPR would help somewhat insulate the U.S. economy
and provide a necessary cushion should Iran, Nigeria, Saudi Arabia or any other major oil producing country goes offline.
For more details on the rationale for expanding the SPR click here.

The Set America Free Coalition is pleased that the President has reiterated his commitment to reduce America’s oil dependence, and that his plan is focused on doing so through increasing fuel choice and advanced technology vehicles. The President can set a tone, but at the end of the day, the key to fundamental change in our America’s energy policy is in the hands of Congress.

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