The following excerpts are from Richard Lugar's keynote address at the Aug. 29 conference entitled "Summit on Energy Security" at Purdue University.
I will describe our energy dilemma as a six-pronged threat to national security.
Second, as large industrializing nations such as China and India seek new energy supplies, oil and natural gas will become more expensive. In the long run we will face the prospect that the world's supply of oil may not be abundant and accessible enough to support continued economic growth in both the industrialized West and in large rapidly growing economies. As we approach the point where the world's oil-hungry economies are competing for insufficient supplies of energy, oil will become an even stronger magnet for conflict.
Third, adversarial regimes from Venezuela, to Iran, to Russia are using energy supplies as leverage against their neighbors. We are used to thinking in terms of conventional warfare between nations, but energy is becoming a weapon of choice for those who possess it. Nations experiencing a cutoff of energy supplies, or even the threat of a cutoff, may become desperate, increasing the chances of armed conflict, terrorism, and economic collapse.
Fourth, the revenues flowing to authoritarian regimes often increase corruption in those countries and allow them to insulate themselves from international pressure and the democratic aspirations of their own peoples. We are transferring hundreds of billions of dollars each year to some of the least accountable regimes in the world. Some are using this money to invest abroad in terrorism, instability, or demagogic appeals to populism.
Each of these six threats from energy dependence is becoming more acute as time passes. Any of them could be a source of catastrophe for the United States and the world.
The vulnerability of the United States rests on some basic factors. With less than 5 percent of the world's population, our nation consumes 25 percent of its oil. World demand for oil and other forms of energy is rapidly increasing. Within 25 years, the world will need 50 percent more energy than it does now. If oil prices average $60 a barrel through 2006 — a figure that we are currently well above — we will spend about $320 billion on oil imports this year. This is roughly the same amount that the United States has spent on the war and reconstruction effort in Iraq during the first three years of conflict.
These conditions might be negotiable in the short and medium terms if oil resided with responsible, secure producers who maximize production during periods of elevated demand. But just the opposite is true. According to PFC Energy, about 79 percent of the world's oil supply is controlled by state-run oil companies. These governments profoundly affect prices through politicized investment and production decisions. The vast majority of these oil assets are afflicted by at least one of three problems: lack of investment, political manipulation, or the threat of instability and terrorism.
Our current dependence on imported oil has put the United States in a position that no great power should tolerate. Our economic health is subject to forces far beyond our control, including the decisions of hostile countries. We maintain a massive military presence overseas, partly to preserve our oil lifeline. One conservative estimate puts U.S. oil-dedicated military expenditures in the Middle East at $50 billion per year. But there is no guarantee that even our unrivaled military forces can prevent an energy disaster. We have lost leverage on the international stage and are daily exacerbating the problem by participating in an enormous wealth transfer to authoritarian nations that happen to possess the commodity that our economy can least do without.