California Can Become Leading ‘Patriot’ State by Kicking Oil Addiction, Report Shows

A group of national security experts, foreign relations leaders and CEOs released a report today highlighting the price California pays for being addicted to foreign oil and shows how we can reduce that dependence.

A complementary opinion piece in today’s San Jose Mercury News states that California depends on oil for 93 percent of its transportation needs, more than half of which comes from outside the state and a ‘large portion of which comes from the politically volatile Persian Gulf.’

The authors, a Stanford professor and a partner in a leading clean tech venture capital firm, get it exactly right and point out what we know intuitively: energy prices spike regularly and hurt California’s economy.

The report correctly identifies supply- and demand-side solutions. Both are needed, but it is demand-side reductions (through efficiency and diversification) that can protect consumers and businesses from inevitable energy price volatility. 

California is making great progress on these fronts. The cornerstone of California’s energy independence effort is the Global Warming Solutions Act, AB 32, which has accelerated the development of important policies including:

EDF recently completed a study with Center for Resource Solutions (CRS) and Energy Independence Now (EIN) that put a dollar value on the benefits of AB 32 in the event of a price shock. Our report, Shockproofing Society, observed that since 1973, Americans have experienced six shocks when crude oil prices rose by an average of 101% in one year and 131% in 18 months.

Our report uncovered dramatic retail benefits from AB 32 policies, which you can read about here. In short, we found that by increasing energy efficiency and providing more fuel choices, AB 32 could save California between $4.8 billion and $9.6 billion if various price shocks occur in 2020. We also found that, related to its ‘importation effects,’ or the reduction in net imports to meet California’s demand, imports would drop by 75 million barrels (a decrease of 18% from expected business as usual), and demand of natural gas would fall by 10%. This translates into less spending on oil and natural gas imports by between $18.8 billion and $29.6 billion.

Most analyses of the economic costs and benefits of energy policies do not consider the potential for energy price spikes. In this sense, these analyses do not represent real-world projections of impacts. 

Today’s report provides a timely call to action by highlighting the dangerous consequences of our continued oil addiction. Our “Shockproofing” report lays out plausible scenarios that consumers and businesses will face and demonstrates how California’s ‘patriotic’ clean energy leadership will produce numerous benefits, not the least of which is cash in consumers’ pockets when prices spike.

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One Comment

  1. Rich Naumann
    Posted February 19, 2011 at 1:22 am | Permalink

    For the last 40 years reducing dependence on foreign oil has been a national defense imperative. We have passed legislation to force carmakers to make more fuel-efficient cars, yet we claim to believe in the forces of the free market. A chart in this week’s Economist may give you an idea as to why we are failing to reduce our economic subsides to radical Islam (the mid-east oil producers).
    Let’s see we could have a prayer circle and hope that God will make our car more efficient; we could drill without restrictions or supervision until our environment is inferior to China; or we could just trust the oil companies to look out for us, what ever we do it defiantly should not involve a tax incentive like every other reasonable country in the world, no that would be unfair to the oil companies.