We're very addicted to oil when it comes to transportation, according to the U.S. Department of Treasury.
The U.S. consumes 21 million barrels of oil a day, far more than No. 2 China (which consumes 6.9 million barrels a day) and No. 3 Japan (at 5.4 million), said Neel Kashkari, senior advisor to Secretary of the Treasury Henry Paulson at the Cleantech Forum taking place in San Francisco.
"The vast majority goes to transportation," he said.
The reliance on oil in transportation, in fact, is particularly lopsided. Ninety-seven percent of the energy in the transportation sector comes from oil. Oil accounts for only 30 percent of the fuel used by industry and oil (in the form of diesel) is only seven percent of the fuel used in the residential sector. Oil accounts for only 3 percent of the energy used by power plants. Before the 1973 oil crisis, the oil budget for the power industry was 18 percent, he said.
To make matters worse, a lot of it comes from nations that present security risks or don't exactly love us. Saudi Arabia has the biggest supply with 262 billion barrels, and terrorists tried to attack one of the largest refineries there recently. Iran is second with 126 billion barrels. The U.S. only has 21 billion barrels in the ground.
The U.S. imports two-thirds of its oil, and the strategic oil reserves have declined from 120 days in 1985 (i.e., we had enough oil to go 120 days without imports then). It is now down to 60 days. A hike or embargo could pinch the U.S. economy hard.
"Terrorists view oil as an attractive way to hit us," he said. "We're not concerned about oil at $78 a barrel, but $100 a barrel, or $150 a barrel."
Kashkari then reiterated Bush's plan outlined in the State of the Union address. By 2017, the U.S. should reduce oil consumption by 20 percent. Fifteen percent of the total will come from alternative fuels: that will mean that 35 billion gallons of alternative fuels will have to be produced a year here. Five percent will come from better conservation.
"Alternative energy is the single most important factor in improving our energy security," he said.
Kashkari also took questions from the audience, but he sidestepped most of the prickly issues. He declined to comment on Iran and Venezuela. Another participant asked whether the administration could become beholden to giving subsidies to agribusiness if ethanol gets big. He said all alternative fuels need to be explored.
How come the administration doesn't get the U.S. automakers to start cranking out energy efficient cars? The carmakers turned on a dime to change production when World War II hit. We work with the auto industry, he said.
One conference attendee got a round of applause when he told Kashkari that the Bush plan was not nearly aggressive enough and should involve better car efficiency standards and taxes at the oil pump.