Using Federal Oil Revenues to Cut America’s Oil Use

Source: Mathew Wald, New York Times • Posted: Thursday, February 14, 2013

President Obama called for increased research to wean the country from oil dependence in his State of the Union address on Tuesday night.

European Pressphoto AgencyPresident Obama called for increased research to wean the country from oil dependence in his State of the Union address on Tuesday night.

In his State of the Union message on Tuesday night, President Obama proposed the creation of an “Energy Security Trust” to find alternatives to dependence on oil for the nation’s transportation needs. The trust would be financed from revenue from oil and gas royalties that the federal government collects from companies that drill on federal land.

As is customary in State of the Union speeches, Mr. Obama did not give much detail, but plenty of other voices were happy to fill in the blanks on Wednesday morning. The idea has obvious political appeal – using oil revenues to wean the country from oil – but it has a way to go before reaching fruition.

Securing America’s Future Energy, or SAFE, a group comprising retired admirals and generals and chief executives of major American companies, pointed out that it had recommended such a fund in December. Finding a stable long-term source of revenue would help address the need for funds for research and development, the group said.

Among the details unmentioned in Mr. Obama’s speech was money. SAFE said that $500 million would be a nice number but that it would settle for anywhere from $200 million to $500 million a year. Royalty revenues last year were around $5 billion, the group said.

But nobody seems clear on how much is spent on research on transportation alternatives now. Last year the government spent about $2.9 billion on energy research and development, SAFE said, but that sum includes nontransportation uses.

4:13 p.m. | Updated

A White House official, speaking on condition of anonymity, said Wednesday that the administration would ask Congress to direct $200 million a year to the fund for 10 years. That would be added to a existing research and development program at the Energy Department; in recent years the administration has been asking for $300 million for that program. While the money would be raised from oil and gas revenues and be spent to reduce oil use, the official said, some of it would be spent to increase natural gas use in vehicles

To some extent, money alone is not the challenge. A variety of companies have spent tens of millions of dollars on factories to make car and truck fuel from alternative sources in recent years but have not made much headway in getting those fuels to take hold.

Still, the Energy Department reported last year in a technology review that it was “underinvested” in the transportation sector by comparison with the “stationary sector,” meaning energy efficiency, the grid and electric power.

Oil dependence “is the greatest immediate threat to U.S. economic and national security, and also contributes to the long-term threat of climate change,” the department said.

In a conference call on Wednesday morning. Robbie Diamond, the president and chief executive of the group, suggested that no new taxes on oil would be required to finance the energy trust. But the trust would obviously dedicate money to research that could have been used for other purposes, and that will require action by Congress, always uncertain.

Certainly the impetus is there, though. SAFE said that spending per household on oil in the United States is now at a peak: more than $3,000 annually, representing a transfer of wealth overseas as well as a national security vulnerability.