How to Wean the U.S. Off Oil

Three principal issues will face the new U.S. administration in 2009.

The first will be the economy. The second will be national security. And the third issue will be energy. As it happens, energy is the only one that Washington will be able to take on unilaterally, the only one where action will have a direct and immediate impact. It is also the only issue that will have an impact on the other two. My view is that the energy problem can be solved by focusing on natural gas. (Story continued below...)

In order to come up with a new national energy strategy, the biggest problem President Obama will have to confront is cheap oil. What defines "cheap" has changed in recent days. Two years ago, when oil was well below $50 per barrel, few of us would have called current prices "cheap." After a run-up to nearly $150 per barrel in 2008, America's drivers are thrilled to be paying lower prices at the pump.

Yet getting America to address its oil problem requires the kind of motivation that only high prices can provide. The "green" movement got real traction only when gasoline crossed the $4-per-gallon threshold. I think the recent fall in oil prices is temporary and that costs will increase again in the long term, as the world's economies improve and demand cranks up again. As Thomas Friedman lays out in his latest book, "Hot, Flat and Crowded," the middle classes in Eastern Europe, Central and South America and Asia (including both China and India) will continue to grow rapidly and will continue to demand, as Friedman puts it, "an American lifestyle." That will require a lot more energy.

America itself currently imports 70 percent of its oil. That costs anywhere from $350 billion to $700 billion a year, depending on the per-barrel price. An administration that is trying to jump-start the U.S. economy before the 2010 midterm elections will have to look long and hard at energy expenditures that are likely to total between $700 billion and $1.4 trillion in the next two years.

The United States can't become energy-independent in that period. But the administration could set goals for reducing oil imports over the first 6, 12, 18 and 24 months.

They'll likely be reached in only one way: by switching commercial vehicles from gasoline and diesel to natural gas.

Additional oil drilling will not get us there. The easy oil has already been recovered. The amount of oil left to be drilled in Alaska and off all the coasts of the United States will not make a dent in America's energy needs, which are about 21 million barrels per day.

But thanks to new technologies for natural-gas recovery, the United States has a supply that should last more than 100 years. Add Canada's reserves, and the number goes higher. Domestic oil supplies may be decreasing, but North America enjoys an increasing abundance of natural gas.

The trick is figuring out how to capitalize on it.

The first question I am asked when I give speeches on using natural gas to replace America's need for foreign oil is, what kind of infrastructure will be required to provide fuel to the country's tens of millions of automobiles?

Fortunately, there's a ready answer. Natural gas already comes into many Americans' homes for heating and cooking purposes. Add a simple compressor, and they could start using it to refill their cars overnight in their garages. Of course, that would require having a car that can run on natural gas. And that points to the big job ahead for the country: creating such a fleet, especially for mass transport.

Seventy percent of the oil used in the United States is for transportation, and a large percentage of that is used in moving goods via 18-wheelers on interstate highways. If major trucking companies were to replace vehicles using diesel with trucks using liquefied natural gas, it would provide an immediate and dramatic impact on America's oil imports. One million trucks running on natural gas would reduce oil imports by about 25 percent. In fact, any fleet—municipal vehicles, buses, express-delivery vehicles, garbage trucks, regional-hub operations—that goes to the same barn every night could easily be upgraded to natural gas with a relatively minuscule investment in fueling infrastructure.

The new administration should show leadership by ordering that all new U.S. government vehicles must use natural gas instead of gasoline or diesel. Such a move would send a clear signal to all the major manufacturers of cars and trucks that Washington is serious about natural gas. Look what happened when President George W. Bush declared a bias toward ethanol. Ethanol plants sprang up like toadstools after a rainstorm all over the American Breadbasket.

Using natural gas for urban vehicles has the additional advantage of being much cleaner for the environment than either gasoline or diesel. Whether you are a believer in man-made global warming or not, it makes sense to start putting fewer particulates into the atmosphere.

Finally, natural gas is between a third and a half less expensive than gasoline or diesel fuel. When oil prices spiked last summer, trucking companies started starving on $5-a-gallon diesel fuel. Natural gas has the following advantages: it is cleaner, cheaper, abundant, available right now and a 100 percent domestic energy source.

Making the changes outlined above won't be easy. Washington lobbyists will work hard to preserve the status quo. But America can't afford to continue paying the economic and security costs imposed by its reliance on foreign oil. It's time for a change.