US begins to break foreign oil ‘addiction’

US begins to break foreign oil ‘addiction’

By Carola Hoyos, Chief Energy Correspondent

Published: May 19 2008 14:28 | Last updated: May 19 2008 22:13

The US is starting to break its “addiction” to foreign oil as high prices, more efficient cars, and the use of ethanol significantly cut the share of its oil imports for the first time since 1977.

The country’s foreign oil dependency is expected to fall from 60 per cent to 50 per cent in 2015, before rising again slightly to 54 per cent in 2030, according to the head of the Department of Energy’s statistical arm.

The net imports of the world’s biggest consumer are expected to fall between now and 2030, ending what has been an almost relentless 30-year climb in the use of foreign oil and a fall in domestic production. In 2006, George W. Bush said in his State of the Union speech that America was “addicted to oil” – often imported from unstable parts of the world – and said he would work to address the issue.

On Monday, oil prices hovered near record highs as China’s energy needs outweighed the reduced US demand, and Saudi Arabia output increases failed to ease supply concerns.

The US decline in foreign oil dependency is already becoming more visible, with imports making up 57.9 per cent in the first three months of this year, down from 58.2 last year.

Guy Caruso, head of the US Energy Information Administration, said that that trend was set to continue as people adjusted to high oil prices and the impact of the Energy Independence and Security Act, which became law in December 2007, was felt.

“The 1970s is the last time we saw any significant decline in net import dependency in the US. It shows that markets do work, policy changes do work, technology does work,” Mr Caruso said.

This new trend is likely to have domestic and international policy implications, making it harder to prove the case for drilling in Alaska’s Arctic National Wildlife Refuge and to reverse the ambitious biofuels production targets regardless of their impact on global food prices.

Although the reduction in oil demand growth is partly because of slower economic growth and a projected 1m-barrel-a-day rise in output from the US’s Gulf of Mexico oil fields by 2012, experts also believe that legislation will accelerate the trend. The EIA expects the energy act to help boost biofuel production from 8bn gallons this year to at least 32bn by 2030, while prompting a 40 per cent efficiency improvement in new cars from 2020.

Congress’s efficiency mandates – the first since those passed in the wake of the energy crisis of the 1970s – have already pushed carmakers to turn their attention to building more efficient diesel cars, and increasing the proportion of diesel cars in the US from 1 per cent to 15 per cent by 2030, Mr Caruso said.

The EIA has cut its forecast of overall US liquid-fuel demand in the wake of high oil prices and the energy act. It now expects demand to grow from about 20.7m b/d last year to 22.8m b/d in 2030, rather than 26.9m b/d.