Science Information

New Energy Bill: Reducing Our Dependence on Foreign Oil

The U. S. economy is feeling the brunt of skyrocketing oil prices as the nation's dependence on foreign oil continues to grow. We need a responsible energy plan to reduce our reliance on foreign oil. President Bush and Senator Kerry appear to be skirting the real issues involved.

Growing transportation requirements combined with declining domestic oil production have led to burgeoning oil imports. Rising oil prices are having an adverse impact on the U.S. economy as evident from recent economic data and stock market performance. We need a responsible energy plan which will balance our transportation requirements with the necessity to reduce our dependence on foreign oil.

Rising Oil Prices.

Oil prices have been on a roll this year. As of August 10, crude oil prices have climbed over 45% since the start of 2004. A barrel of West Texas Intermediate recently recorded its all time high of $45.04 on the New York Mercantile Exchange. And this has happened despite the Organization of Petroleum Exporting Countries increasing its oil output.

Earlier in the year, the run up in oil prices was attributed to surging demand for petroleum products due to a strong global economy. Then it was the unrest in Venezuela and Nigeria.

Concerns on security of oil supplies have heightened more recently. Added to the pipeline disruptions in Iraq are kidnappings of foreign workers in the Middle East.

Yukos, the Russian oil company's tax evasion dispute has taken center stage currently. With a production rate of 1.7 million barrels a day (mmbd), Yukos is Russia's largest oil producer.

While the underlying factors behind the dramatic increase in the price of oil this year are a combination of all the above, the impact is hardly comforting.

Weakening Economy.

Higher oil prices that work like an added tax have the effect of holding down hiring, consumer spending, and corporate profits.

The July jobs report that was released by the Labor Department on August 6 was a disappointment. The U.S. economy added a mere 32,000 to the non-farm payrolls, the lowest monthly addition this year. The rate of employment growth is slowing as business confidence appears to be undermined by rising oil prices. High oil prices are also taking the bite out of consumer spending.

By some economists' estimates, every $10 rise in the price of oil knocks 0.5% off of GDP growth and adds about the same amount to inflation. The equity markets have been fixated with the trend in oil prices and have relentlessly spiraled lower since late June. On August 6, the Dow Jones Industrial Average closed at 9,815.33, its lowest level since Nov. 28 after losing more than 300 points over the last two sessions. The technology heavy Nasdaq Composite Index is down over 11% since the start of the year.

The Root Cause: Transportation Relies on Foreign Oil.

A combination of declining domestic oil production and increasing oil consumption has left the U.S. increasingly dependent on foreign oil.

The U. S. Department of Energy's Energy Information Administration states that domestic oil production in 2002 was 5.8 mmbd, about 36% lower than the 9.0 mmbd produced in 1985. The total use of petroleum products on the other hand has grown from 15.2 mmbd in 1985 to 19.3 mmbd in 2002.

The lion's share of oil consumption stems from transportation needs. In 2002, the transportation sector accounted for about 68% of total petroleum use with gasoline accounting for two-thirds of the petroleum consumed in the transportation sector.

U.S. net oil imports have grown from 4.3 mmbd in 1985 to 10.4 mmbd in 2002. Net oil imports as a percent of U. S. petroleum product use has risen from 28% in 1985 to 54% in 2002.

Based on Sandia National Laboratories and U. S. DOE/EIA forecast, an additional 7.5 mmbd of oil and petroleum products will have to be imported by 2020 to bridge the gap between growing consumption and falling domestic oil production. In 2020, U.S. oil production will supply less than 30% of U.S. oil needs.

The Energy Bill: Long-Term Plan for Energy Security.

The picture the current events paint as a preview of the future is cause for concern.

On August 6, Democratic presidential nominee John Kerry outlined a $30-billion, 10-year plan to veer the U. S. towards energy independence. The plan includes tax breaks and incentives for carmakers and buyers, coal producers and alternative fuels research. President Bush responded saying Kerry's proposals mimic much of what Bush had already proposed but is stalled in Congress.

It will not be adequate if President Bush and Senator Kerry just reignite the energy debate. To bring clarity to energy security, we need a comprehensive long-term national energy plan that will reduce our reliance on foreign oil while meeting the nation's growing transportation needs.

Both supply and demand sides of the transportation issue will have to be addressed to make a meaningful impact in reducing the dependence on foreign oil. Steps to increase the supply of domestic transportation fuels including alternatives to oil will likely be required. So too will efforts to reduce per capita transportation fuel consumption.

Based on what has been outlined to date, neither the Bush proposal nor the Kerry plan appears to fully address the critical transportation issue. The House-Senate conferees have an opportunity to deliver a responsible energy bill to the President's desk for his signature. If the dependence on foreign oil is not reduced, the course of the U. S. economy and the stock market may well be shaped more by decisions made in Moscow, Riyadh, and Vienna rather than being determined by the decisions made at home.

Notes: This report is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. This report does not have regard to the specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The information contained in this report is obtained from various sources believed to be accurate and is provided without warranties of any kind. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. Past performance is neither an indication of nor a guarantee for future results. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC.
Copyright 2004 AlphaProfit Investments, LLC. All rights reserved.

After working for the nation's leading oil and auto companies, Sam Subramanian, PhD, MBA is currently Managing Principal of AlphaProfit Investments?, LLC, an investment research firm based in Houston, TX. Sam edits the AlphaProfit Sector Investors' Newsletter?. For the 5 year period ending June 30, 2004, AlphaProfit model portfolios increased by up to 252%, a compound annual return rate of 28.6%. To learn more about AlphaProfit and to subscribe to the FREE newsletter, visit

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at

Science Magazine

Reporter's notebook: House budget hearing shows science chairman's impact on NSF peer review
Science Magazine
Representative Lamar Smith (R–TX) has repeatedly criticized the peer-review process at the National Science Foundation (NSF) in Alexandria, Virginia, since becoming chairman of the U.S. House of Representatives's science committee in 2013. It was no ...
Rep. Lamar Smith Misunderstands ScienceUnion of Concerned Scientists (blog)

all 2 news articles »


Stephen Hawking Remembered: Science Luminaries Reflect on Physics Legend
Renowned astrophysicist Stephen Hawking died on March 14 at the age of 76. Hawking awed us with his remarkable mind, which delivered revelations about black holes and other wonders of the universe, and with his defiant inability to be diminished by his ...
A Science Minister – and an Event – That Insults Indian ScienceThe Wire

all 412 news articles »

The Guardian

Scientists on brink of overcoming livestock diseases through gene editing
The Guardian
Scientists at Roslin have also identified a target gene that could confer resistance to avian flu, which is normally fatal for chickens, but which crows and ducks are fairly resilient against. “In outbreaks it's not uncommon for a farmer to close the ...

The Verge

Scolding female scientists for embracing Instagram doesn't solve the gender gap in STEM
The Verge
Yesterday, Science Magazine published an op-ed about why one woman doesn't use Instagram for science outreach. The answer, according to this writer, is that women do science communication (or scicomm) because they are forced to by sexism, and, also ...

New York Times

Kate Wilhelm, Prolific Science Fiction Writer, Dies at 89
New York Times
Kate Wilhelm, a prolific, prizewinning author of science fiction and mystery novels, died on March 8 in Eugene, Ore. She was 89. The cause was respiratory failure, her son Richard Wilhelm said. In addition to writing novels, Ms. Wilhelm and her husband ...

and more »

Hartford Courant

New Season Of 'Science On Screen' At Real Art Ways
Hartford Courant
Science on Screen, the annual series of films with various science-related themes, starts March 27 and has four screenings through June at Real Art Ways, with the films accompanied by lectures by local experts in the fields. Screenings will be at 7 p.m ...

and more »

The Durango Herald

Bidwell: Science has much to teach us about our world
The Durango Herald
Beyond these tangible examples, we believe there are a great many things we can learn from the process of scientific inquiry – about curiosity, observation, connections and innovation. Science has a lot to teach us about living in communities and how ...

and more »

CBS News

Authorities euthanize turtle amid reports it was fed sick puppy in science class
CBS News
"He is a cool teacher who really brought science to life," a former student told East Idaho News. The uproar has forced police to step up security amid threats at Preston Junior High School and other schools in the district following the incident that ...
Officials Euthanize Turtle After Idaho Science Teacher Fed It a PuppyKTLA
Officials seize turtle from Idaho science teacher who fed it a puppyFOX31 Denver
Officials seize turtle from science teacher who fed the reptile a
KIRO Seattle
all 52 news articles »

The Guardian

Who benefits from biomedical science?
The Guardian
In many areas of science, asking “who benefits?” is complicated. The links between funding and outcome are hazy. Health research is clearer, as much of the research is defined by disease area and the World Health Organisation has statistics on the ...

and more »

Science Magazine

Ousted from ESO, Brazilian astronomy will be 'strangled,' says president of the Brazilian Astronomical Society
Science Magazine
ESO's decision leaves Brazilian scientists unable to compete in “first-world astronomy,” says Reinaldo de Carvalho, president of the Brazilian Astronomical Society here. The astronomer at the Brazilian National Institute for Space Research in São José ...

Google News

home | site map | Xray Photography
© 2006