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Oil Wars and the Near Future

Critics of President Bush contend he has led us into a quagmire in Iraq. They forget one thing: America has been quagmired in the politics of Middle Eastern oil for three decades. With the presidential race heating up, it’s time to reconsider this past, and ask about our options and the near future.

Since the first oil embargo, national debate about oil has stalled between two extreme positions. On one side are environmentalists, who demand fewer imports and reductions in domestic drilling and production of oil. On the other side are old oil giants and related energy infrastructure providers, who insist on the need for more imports as well as greater production from the world over.

These two opposing views have not changed in a generation. Today, however, the danger inherent in this stalemate has increased dramatically. Students of history wonder how many oil wars the nation can endure. Economists wonder how much transformation our economy can sustain in the name of environmental protection. Might there a third option besides the two extremes that have paralyzed policymaking for far too long?

During World War II, Winston Churchill called on his country for their “blood, sweat and tears.” He also unknowingly set the stage for America to do something similar now. After all, it was Churchill and his advisors who shaped the current Middle East by drawing the arbitrary lines that define Iraq’s borders.

Today Americans need not sacrifice “blood, sweat and tears” -- they just need foresight and imagination. We need to diversify energy supplies, government choices and consumer habits in the products we buy -- from cars to computers.

The federal Energy Information Administration says we consume nearly 20 million barrels of crude oil daily. On average, the U.S. consumed an average of 20MMBD of oil per day in 2003, up from 19.8 MMBD in 2002. Domestic production covers less than half that amount. Worse yet, dependence on foreign oil is not decreasing, but on the rise. Total 2004 petroleum demand is projected to grow about 420,000 barrels per day, or roughly 2.1 percent to an average of 20.4MMBD.

Current reliance upon imports amounts to over many thousands of tankers entering American ports annually. Some see a year -- soon--where over 10,000 tankers enter America. The more tankers that go in and out of our ports, the greater the probability of spills.

Environmentalists oppose drilling for more oil in places such as Alaska and other domestic supply regions. They say the answer to our dilemma is simple: stop drilling; reduce imports; phase-out exploration. Many oppose the Iraq war as a delay of an inevitable shift to a sustainable energy future.

Environmentalists seem naïve to many corporate leaders. Yet many business leaders underestimate what frugality, diversifying our energy mix, and liberating more oil-conserving products (in cars, computers and home appliances) can do in stretching existing critical near-term oil supplies. The business-as-usual “corporate” petrochemical worldview is -- in practice--as simplistic as the environmentalists. Both lack the nuance needed to get to a safe and sustainable energy future.

The political debates between these extremes miss the real opportunities that innovative entrepreneurs anticipating the near future have been creating. There is a third way.

The threat of global climate change, and development restraints on access to oil and natural gas reserves from Africa to Latin America, already have the attention of some of the world’s most powerful corporations. One example is Toyota, one of the top three automakers in the world. Among the reasons for Toyota’s success are products such as electric-gasoline hybrids that represent the third way. With excellent gas mileage, less pollution, and comfort levels similar to traditional cars, Toyota is demonstrating how measures based on “an intelligent hedge for efficiency” generate progress quicker than all-or-nothing approaches.

The hybrid approach is one example of the “third way” to solve key global challenges on mobility, energy supply and product design. Our next president needs to coordinate this third way -- by enhancing domestic oil supplies, increasing energy efficiency as well as renewable energy resources, and developing the hydrogen infrastructure. Our fossil fuel addictions are proving too costly to our pocketbooks, our national security, and our environment.

Perhaps the war in Iraq helps usher in an era when both CEOs and policymakers find this middle ground and recognize that sustainability – both economic and environmental -- can bridge existing gaps in perceptions and that will create better products for a better world.

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Dr. Bruce Piasecki is the president and founder of the American Hazard Control Group, a management consulting firm specializing in energy, materials, and environmental corporate matters since 1981. Dr. Piasecki is the author of five books on business strategy, valuation, and corporate change, including the Nature Society's book of the year, "In Search of Environmental Excellence: Moving Beyond Blame." This column has been excerpted from his upcoming book, "Better Products, Better World."

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