Most democrats and republicans agree that the U.S. needs to stop relying on foreign oil, but while the left pushes for green energy and conservation and the right pushes for increased stateside exploration and lower taxes on the oil industry, experts suggest an ecumenical approach that encompasses all of the above.

In his testimony before a Joint Economic Committee hearing on oil and the economy on May 20, researcher and expert Daniel Yergin said that the U.S. will have to diversify its energy sources in order to prevent future spikes in oil prices as well as improve energy security.

“We need to get beyond the either/or energy debate and take a more ecumenical approach,” he said in his prepared remarks for the hearing. “We have never seen anything like the embrace of energy efficiency that is taking place today all across the spectrum.”

Rep. Carolyn Maloney, D-N.Y., committee chair, said the oil price shock in 2008, when oil rose to $150 bbl, showed Americans that it’s time to reduce overall consumption of oil. Investment in intercity light rail and funding for research and advanced technology to move cars off of gasoline and onto renewable sources will reduce dependence on oil and remove the potential economic effects of higher oil prices, she said.

However, green stimulus and advances in energy efficiency are only half of the energy security puzzle. Even during a time of the lowest national oil demand since 2004, the U.S. currently uses about 46 million bpd. Fossil fuels—oil, natural gas and coal—supply more than 80 percent of the nation’s total energy, with oil providing 40 percent alone, according to Yergin’s research.

With oil still at the heart of the nation’s energy sources, policymakers like Rep. Kevin Brady, R-Texas, are seeking ways to avoid future price shocks like the country experienced in 2008.

“We need to continue making strong investments in all forms of energy, including traditional oil and gas as well as renewable energy and efficiency,” Brady said in an interview with DTN. “Yergin is right on target with that concept.”

James D. Hamilton, an economics professor for the University of California, said that due to the effects of a decline in worldwide oil production, no U.S. policy could have prevented the substantial increase in the price of oil between 2005 and 2008.

Declining production from maturing oil fields in the North Sea and Mexico combined with political instability in Nigeria and the fact that Saudi Arabian production fell by 850,000 bpd between 2005 and 2007 offset other production gains, he said.

“Although production stagnated, the demand for petroleum continued to boom,” he said. “World petroleum consumption had increased by 5 million bpd during 2004 and 2005, driven largely by a 9.4 percent increase in global GDP over the two years. The price of oil needed to rise by whatever it took to persuade us to [reduce consumption].”

Brady said the effect of declining world oil production on last year’s price spike is why developing an energy security plan is vital.

“North America holds 15 percent of known reserves and there will probably be much more found through advanced technology,” he said.

Yergin, co-founder and chairman of Cambridge Energy Research Associates, said the oil sands of Canada have become increasingly important to U.S. consumers, with Canadian oil representing about 20 percent of total imports into the U.S.

“The oil sands give Canada the world’s second largest recoverable reserve of petroleum – currently estimated at 173 billion bbl,” he said. “This is second only to Saudi Arabia.”

Investing in the oil sands will be costly, however. About 70 percent of oil sands projects that were planned last summer have been delayed because of today’s lower oil prices, as an oil price of about $60 to $85 bbl is necessary to justify investment, he said.

Even the cost of developing new stateside oil fields is too high to attract investment in some cases. Oil prices in the first half of May were 63 percent lower than their peak, but costs are only down by 9 percent, according to Yergin’s research.

“Even projects that look like winners today may not proceed – because short-term cash flow problems and tight credit markets limit the amount of capital available for investment,” Yergin said.

At a time when exploration projects are already unattractive from a cost perspective, the additional taxes on the oil industry included in the FY2010 budget will drop U.S. production rates further, Brady said.

“I think they’re going to damage production in the U.S. and we’re going to outsource a lot of American energy jobs,” he said.

Maloney said the current surplus capacity of crude oil production is large enough to prevent that for the near future.

“The current decline in global demand for oil has given us some breathing room to change course,” she said.