Oil Independence: Broken Promise

Mitch Morrison, Vice President of Retailer Relations

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“I don’t know what’s happening, but my price has gone up 15 cents in the last two weeks, and my manager says it might go up another 15 cents by end of this week.”

 It’s early January and the gas attendant says his patrons are getting itchy about daily escalations at the pump, with fears of gas once again topping $4 a gallon. Don’t worry about $4. Think about $5 or more.

As the year began, the Iranian government was threatening to block the Strait of Hormuz, a critical corridor between the Gulf of Oman and the Persian Gulf, where more than 15 million barrels of crude oil, or 35% of the world’s seaborne shipments, pass daily.

“If the Straits of Hormuz close, oil will rise above $200 per barrel,” says Chris Faulkner, CEO of Breitling Oil & Gas. “It’s the one bottleneck that allows Iran to choke the West’s oil supply.”

The saber-rattling alone, coupled with legitimate fears of an emerging nuclear Iran, is more than enough to turn Ron Paul isolationists into national security globalists.

The news of Iran is not surprising, and one should expect such bellicosity to intensify. Iran is well aware that the United States is embroiled in a presidential election, and any instability it can incite is pure glee for the Mullahs who maul their own people. But what about us? For years we’ve given lip service to a national energy policy. George W. Bush tasked VP Dick Cheney in his first term to draft a solution to steer us from foreign reliance. Then Obama waxed poetic about energy independence, citing wind, solar, banana peels and just about any other non-fossil-fuel opportunity.

And yet, in the throes of a critical national election, in which the presidency and both legislative houses are there for the taking, there is no talk about our country’s energy policy, arguably our most important foreign policy concern.

In the debates from Iowa and New Hampshire, much babble bubbled up about gays, abortion, ObamaCare and Mitt Romney’s supposed “job-killing” years at Bain Capital. But there was nary a word on energy.

I’m not dismissing the importance of social issues, nor do I care today to discuss my thoughts on Romney. It’s energy we need to talk about. If America cannot steer its way toward a more stable, comprehensive energy policy, our strength as the world’s leading democracy is immeasurably weakened. That is why today’s cover story by senior editor Samantha Oller is remarkable and wide-reaching—not for the government’s achievement, but rather its failed promise and bipartisan incompetence. Samantha’s story focuses on one piece of the complex puzzle and illustrates the risks—and foolhardiness—of looking at some trees instead of the forest.

The issue is ethanol. I’ll let you read the story for the specifics (see p. 36). The short of it is that the federal 45-cent-pergallon credit to blenders and marketers of ethanol-blended gasoline—a component of the 2004 American Jobs Creation Act— ended with the onset of the new year. And without the subsidy, ethanol-based markets cannot compete on price and efficiency against traditional unleaded.

 Leaving the merits of the program aside, the cutoff of this alternative-fuel funding source underscores a much bigger problem: how lack of a consensusbuilt, national energy strategy is throwing operators into a Kansas-style tornado.

Matt Bjornson is a living example of what happens when Washington fails the 50 states it purports to represent. As Samantha reports, Bjornson, president of Bjornson Oil Co. in North Dakota, invested in E85. Aided by various tax incentives, he poured significant dollars into updating his retail infrastructure to dispense the ethanol blend.

Now Bjornson is stuck with a government- backed investment that without the tax credit will yield few users and cause his equipment to lie fallow. “It’s really frustrating. … You had a whole program a lot of people took advantage of, and unfortunately it looks like all for naught.”

So next time you fill up your car, ask yourself who you would rather trust for your next gallon of gas: Iran’s tyrannical government or Matt Bjornson. 

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