Obama's surprising unilateralism on oil

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Barack Obama’s response to the BP oil spill – but for all the wrong reasons. In comparing the spill’s devastation to that of 9/11, he hoped to make the crisis the turning point for US energy policy just as terrorist attacks transformed the country’s approach to national security. Critics focus on Obama’s lack of specifics and a relative absence of compelling rhetoric we have come to expect from this president.

The bigger problem, however, isn’t style, but substance: Obama’s surprising unilateralism during an address to the American people and in comments since misses a key opportunity to reassert American global leadership. Obama accurately outlined the immediacy, scale and scope of the energy challenge. Security for the US, indeed the globe, requires a future largely free of dependence on fossil fuels. The world has known this since the oil shocks of the 1970s.

But problems caused by fossil-fuel extraction, transport and consumption are much larger than the geopolitical vulnerabilities recognized but ignored for four decades. From the devastation of the BP oil spill to the expanding oceans that, thanks to global warming, continue to erode coastlines around the planet, the mounting environmental costs of the developed world’s ongoing carbon bonfires threaten prosperity and stability on an extraordinary scale. The people who live and work near the world’s coal and oil deposits often suffer most cruelly, not just from poisoned lands and waters but also from rapacious abuses of governments corrupted by the easy money.

Such problems cannot be resolved by unilateral action. Yet Obama framed his remarks around the call for energy independence. Energy “independence” is politically useful language, but dreadful policy. Real independence, in which the US would neither buy nor sell energy sources or services, is unattainable and unwise. It is unattainable at a minimum for however long it takes for the nation to transition to a transport system that does not need much in the way of petroleum products. And in a world where prosperity needs trade and cross-border investment, it makes little sense to set independence as a goal.

With regard to energy, a focus on “independence” undermines chances for enormous potential gains via cooperation.

Energy goods and services, like food, clothing, computers and all elements of modern life, not to mention the investments needed to produce them, cross borders. That trade, if governed by well-designed rules that serve public interests, can lead to big gains in efficiency and choices for consumers. Even a clean-technology US energy system will depend on trade in energy technology components and services. US clean-energy firms will need global-scale markets, not merely national ones. If those US companies are to compete in a truly free market that serves the public interest, global rules must ensure that any subsidies support public interests, as in clean technology, not private ones – and that such subsidies allow appropriate competition.

Rules and institutions currently governing international energy investment, production, service delivery, trade and consumption are a mess. Governments everywhere subsidize dirty fuels at the expense of clean ones. Cross-border investments that would put capital to use on fostering clean-energy transactions are hobbled by inadequate rules that fail to protect public interests. Wild surges in oil prices have discouraged businesses from investing in clean-energy alternatives not economically competitive when oil prices are low. And the absence of international mechanisms pricing fossil fuels at the true costs of their environmentally dirty production and consumption makes it difficult to challenge the dominance of oil and coal.
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