Energy Policy: Doing Good for America And for Developing Countries

Commentary by Pete du Pont

It is hardly a secret that America has become far too dependent on unreliable, undemocratic Middle-Eastern regimes for much of its energy needs. The U.S. imports more than 52 percent of its oil - much of that coming from OPEC countries. In the midst of the war on terrorism, it has become clear that the U.S. must find new sources of energy.

Environmentalists' propose to solve the problem through increased reliance on select renewable energy sources and increases in fuel efficiency standards for appliances and automobiles. But despite more than twenty years of generous subsidies, wind and solar power are much more expensive than conventional fuels, are less reliable and cause environmental problems of their own. Increased fuel efficiency standards reduce consumer choice, keep older, more polluting air conditioners and vehicles in use longer and place drivers lives at greater risk.

A better solution is to increase domestic production of fossil fuels by opening up some currently off limits public lands to exploration and production, and to invest in the development of more efficient fuel technologies as they become cost effective. But are there other options? Yes, another thing we can do is form mutually beneficial alliances with other countries with potentially substantial fossil fuel reserves.

Russia, for example, is becoming an increasingly important player on the world's oil market. Russia's threat to not play ball with OPEC and increase its delivery of oil has moderated OPEC's energy restrictions and helped stabilize world energy prices.

Further, recent prospects off the Siberian coast have identified reserves that one analyst believes are greater than those of Saudi Arabia. President Bush and President Putin should collaborate on policies that would further encourage American investment in Russia's energy industry. U.S. companies could replace or update Russia's outdated and inefficient energy production and delivery infrastructure and form new partnerships with Russian energy companies to jointly explore and develop new oil fields. Such development is in both countries' national interest.

Another potential source of energy for the U.S is South America. Bush desires a NAFTA-like free trade zone running from the tip of South America to the North Pole. Several South American countries have nascent oil industries that could benefit from U.S. technologies and experience. A free trade zone would reduce tariff barriers that could inhibit oil and gas development and delivery. In addition, with the offer of a free trade relationship the only OPEC country in the Americas, Venezuela might be encouraged to leave the cartel.

Africa also presents opportunities for expanding world energy supplies, and development there would benefit people in the poorest nations on earth. Oil development in much of Africa faces numerous hurdles, however. Many countries are in the midst of civil conflicts, but even in relatively stable countries, the governments are sometimes dictatorial, corrupt or simply inept. That means development is often done incorrectly, with natural resource destruction and excessive pollution, or the income generated from development never reaches the people most in need. Thus, even if a country has a stable government and wants oil exploration and production, western environmental and human rights organizations often protest it. Energy companies must take their concerns seriously or face a backlash at annual meetings and at the pump.

Yet recent developments in Chad may point the way for future development projects. The people of Chad are the fifth poorest on earth. But Chad has oil and companies want access to it. In particular, a consortium of international oil companies, led by ExxonMobil, is developing a $3.5 billion pipeline project through Chad and Cameroon.

The World Bank, in the mid-1990s, lent $93 million to the governments of Chad and Cameroon so they could participate as investors in the project. In addition the World Bank negotiated a unique agreement with Chad's President: Under a law passed by the country's parliament, 10% of the oil revenues would be held in trust for future generations, 80% would be earmarked for education, health, and rural development, and 5% would go back to the oil-producing regions. All expenditures would be under the supervision of a nine-person committee that included four non-governmental representatives. And because Chad lacked a basic system of financial control, the Bank would help the government build one from scratch.

Whether or not the experiment in Chad provides a useful guideline for future energy development in the developing world, the fact remains, unless we develop beneficial relations with oil rich nations outside of the Middle East, we will be held hostage to the interests of often-hostile governments.