Uncle Sam brand petroleum?

By James Aaron Cooke, Contributing Editor -- Logistics Management, 8/1/2006

As members of Congress head home for their August break and and drive around their districts, let’s hope they take a good look at the price of fuel at the pump. The sticker shock they’re likely to experience might make them recognize that they need to get to work on a key piece of business when they return to Washington in September: a national energy policy.

With international tensions causing diesel and gasoline prices to soar to new heights, the United States desperately needs a cohesive energy policy. Before their recess, federal lawmakers had started work on one piece of that policy: a bill to expedite the building of new refineries. The House had approved legislation that would streamline the permitting process for companies that want to build or expand oil refineries. But as of this writing, its passage in the Senate appears doubtful.

Yet constraints on refinery capacity have contributed to the high price of fuel. The current capacity shortage stems from the fact that no new refineries have been built in the United States for the past 30 years, in part because of onerous environmental regulations. That prompts me to make this radical suggestion: Let the federal government build itself a refinery to produce oil and gasoline.

This refinery could be located on a closed military base—a suggestion that President Bush made a couple of years ago. Since it would be on federal property, one can assume that Uncle Sam could get the necessary federal and state permits more quickly than a commercial operator could.

How would the construction of a federally operated refinery help shippers and carriers? The U.S. military is one of the largest consumers of petroleum in the country. The New York Times recently reported that the U.S. Air Force consumed 3.2 billion gallons of aviation fuel in fiscal year 2005, which represented 52.5 percent of all fossil fuel used by the government. In fact, the total Air Force bill for jet fuel last year topped $4.7 billion.

If the federal government produced gasoline, diesel, and jet fuel to meet its own needs, then more commercially refined product would be available for air, rail, and motor carriers as well as for shippers and consumers. It would also depress demand, leading to slightly lower prices—and these days a couple of pennies per gallon means a lot. Moreover, the government would be in a better position to supply the nation with petroleum in an emergency.

Make no mistake—the establishment of a federally owned refinery should be only a small part of a national plan to achieve energy independence. Along with streamlined construction of new refineries, such a policy must also promote energy conservation and, yes, more domestic energy production—which means drilling for oil off our shores and in the Alaska National Wildlife Refuge (ANWR). As President Bush noted in a recent speech, if oil production had been allowed in ANWR a decade ago, America would be producing about one million additional barrels of oil a day than we are now, increasing our current level of domestic supply by some 20 percent. Given the current price and supply situation, we can no longer afford to leave domestic oil untapped.

None of this will happen, however, unless Congress gets its act together. On this issue, shippers, carriers, and anyone else involved in freight transportation and distribution must call their congressmen. It’s time to put aside partisan differences and get this country on the road toward energy independence before higher energy costs bankrupt us.