President’s Proposed Energy Security Trust Could Help, But Much More Needed to Address Oil Use

February 15, 2013 | 3:58 pm
David Friedman
Former contributor

During President Obama’s State of the Union address, he spoke to the importance of cutting America’s oil use. As part of that, he proposed the creation of an Energy Security Trust that would use revenues from oil and gas production to invest in research for clean vehicle technology. The goal: to “shift our cars and trucks off oil for good” and “free our families and businesses from the painful spikes in gas prices we’ve put up with for far too long.”

So, would a proposed trust help or hurt efforts to cut oil use? Or is it too soon to tell?

It’s complicated

A blueprint released by the White House outlined the research areas that may benefit from the trust. Based on that, the trust fund could help provide much-needed resources to improve technologies, like hydrogen fuel cell and battery electric vehicles and low-carbon biofuels, that can curb oil use in our cars and trucks. But I want to lay out a few key questions that need to be addressed if the concept moves forward.

Will the trust really bring new R&D money?

Funding for Energy Research and Development has been too small for too long. But some questions need to be explored before we know how much the President’s Energy Security Trust will help.*

Historically, energy research and development (R&D) has gotten much less funding compared to areas like defense, health, and space exploration—especially when it comes to R&D for renewable energy and efficiency. The American Recovery and Reinvestment Act helped deliver a temporary boost in renewables and efficiency R&D, but the challenges of climate change, volatile gas prices, and the other high costs of our oil use continue to loom large. So, more R&D money would help.

Based on a White House official cited in a  New York Times blog, the trust could raise $200 million a year for the Department of Energy. Given that the DoE’s main energy efficiency and renewable energy research office (EERE) has a potential 2013 budget of about $2 billion, the trust could represent a 10 percent increase overall, and a 25 percent boost if you look only at their transportation related budget.

A 25 percent boost in transportation R&D seems like a big step forward, but the EERE might never see that money even if the trust idea gains traction. Why? Well, in the current fiscal atmosphere, I could easily see some in Congress arguing to cut EERE appropriations by the exact same amount generated by the trust. That would be a mistake, resulting in no real benefit for clean energy/tech development.

How will the trust impact drilling?

The trust sets up an interesting paradigm: funding R&D on ways to cut oil use but using oil money to do it. Could this funding structure bring with it unintended consequences of increasing pressure for drilling?

The Administration noted that the money would come from drilling that currently occurs on public lands and waters, though the proposal does assume some increased drilling as part of business as usual. Still, there seems a real risk that the price of putting guaranteed money in for the trust could be a demand by some to increase drilling in return. For example, Senator Murkowski has also proposed a trust in her 20/20 Energy Blueprint, but the money is explicitly tied to increased drilling. That would be a mistake too.

More drilling would certainly benefit the oil companies—$33 out of every $50 you spend at the pump is taken in by oil companies—but it would not help the rest of us. Oil companies will sell what they drill to the highest bidder in the U.S. or around the world (either as oil or as a refined product like diesel or gasoline), so we won’t see any significant relief at the pump. All we’ll see is more pollution and an economy that remains vulnerable to oil and gasoline price spikes.

So what should the President do on oil?

No matter what happens with the trust proposal, I expect the President knows that it won’t be enough. We must also commit the nation to the steps that will cut our oil use in half over 20 years.

The President’s statement that he will act to protect future generations from climate change if Congress does not is key to those steps. He already has the authority to set smart and strong standards to cut emissions and oil use from cars, trucks, trains, planes, and ships, which would go a long way towards saving consumers money and truly insulating us from the high costs of oil.

This means the President will have to build on the impressive progress he’s already made on cars and trucks, while working to make even more progress on both and introducing standards for other parts of the transportation sector. He will also have to reinvigorate and expand advanced vehicle technology manufacturing grants and loans and support for better biofuels. It is not enough to do the research; we also need to get clean car and fuel technologies “Made in America” and on our roads. And all of this requires Americans to speak up and urge the President to dramatically cut oil use.

At the end of the day, the trust could contribute to progress, but many questions remain. What is clear is that more drilling will not address the problems our oil use presents to our economy, our health, our national security, or our environment. The only way to address the problems of our oil use is to use a lot less.


* Image Source: Figure 3 from Nemet, G. F. and D. M. Kammen (2007). “U.S. energy research and development: Declining investment, increasing need, and the feasibility of expansion.” Energy Policy 35(1): 746-755 at