How to Wean the U.S. Off Oil

Three principal issues will face the new U.S. administration in 2009.

The first will be the economy. The second will be national security. And the third issue will be energy. As it happens, energy is the only one that Washington will be able to take on unilaterally, the only one where action will have a direct and immediate impact. It is also the only issue that will have an impact on the other two. My view is that the energy problem can be solved by focusing on natural gas.

In order to come up with a new national energy strategy, the biggest problem President Obama will have to confront is cheap oil. What defines "cheap" has changed in recent days. Two years ago, when oil was well below $50 per barrel, few of us would have called current prices "cheap." After a run-up to nearly $150 per barrel in 2008, America's drivers are thrilled to be paying lower prices at the pump.

Yet getting America to address its oil problem requires the kind of motivation that only high prices can provide. The "green" movement got real traction only when gasoline crossed the $4-per-gallon threshold. I think the recent fall in oil prices is temporary and that costs will increase again in the long term, as the world's economies improve and demand cranks up again. As Thomas Friedman lays out in his latest book, "Hot, Flat and Crowded," the middle classes in Eastern Europe, Central and South America and Asia (including both China and India) will continue to grow rapidly and will continue to demand, as Friedman puts it, "an American lifestyle." That will require a lot more energy.

America itself currently imports 70 percent of its oil. That costs anywhere from $350 billion to $700 billion a year, depending on the per-barrel price. An administration that is trying to jump-start the U.S. economy before the 2010 midterm elections will have to look long and hard at energy expenditures that are likely to total between $700 billion and $1.4 trillion in the next two years.

The United States can't become energy-independent in that period. But the administration could set goals for reducing oil imports over the first 6, 12, 18 and 24 months.