Relative to other states in the region, Egypt is not a major oil exporter.  But Egypt has been a stable ally of the U.S. in a turbulent region for the last thirty years.  Egypt fought alongside U.S. forces during the Gulf War and has honored its peace treaty with Israel, thus preventing another major regional war between the Arab states and Israel—which would be calamitous for global energy prices.

Today, as it has been for the last thirty years, stability remains our core interest in Egypt.  Instability creates uncertainty and uncertainty means higher gas prices for Americans.  Four-dollar-a-gallon gasoline will slow America’s anemic economic recovery even further.  Can you imagine what six- or eight-dollar-a-gallon gasoline would mean for America’s ailing economy?

Former White House chief of staff Rahm Emanuel famously remarked, “You never want a serious crisis to go to waste.”  Washington policymakers should use the crisis in Egypt to initiate a three-step approach to ensure stable gas prices in the near-term and energy independence in the long-term.

1.       Washington must support the outcome that results in near-term stability. This means that the Obama administration should not support a hasty transition to a democratic form of government which could see the rise of belligerent forces such as the Muslim Brotherhood.  Of course there is a natural tension here for Americans who are rightly inclined to support self-determination, but this is one instance where the stability provided by a benign dictatorship (like that of former Egyptian President Hosni Mubarak) is preferable to the democratic rise of an Islamist government.  Mubarak’s civilian dictatorship provided relative stability for decades in Egypt; only time will tell whether the new military dictatorship is benign or malignant.  Washington should support a deliberate transition to increase the likelihood that the new popularly elected government is a pro-Western, democratic regime.

2.       Washington must take steps to weaken the price-fixing OPEC. It must no longer be the policy of the United States to tolerate the price-fixing Organization of the Petroleum Exporting Countries (OPEC).  For far too long the international community has allowed this cartel to set the price of oil at artificially high levels.  At its best, the interests of these countries are orthogonal to Washington’s; at its worst, as in the case of Iran and Venezuela, member countries actively work against the interests the United States.   Lest we forget that the 1973 energy crisis occurred when OPEC refused to ship oil to states that supported Israel in the Six-Day War.  The U.S. should explore the prospects of entering into exclusivity agreements with member states to fracture the cartel.  If Country X can proffer more from an exclusive arrangement with Washington than with OPEC, why remain a member?  Don’t forget that many of the OPEC members have single commodity economies; without oil exports their economies would collapse.  Washington needs to use this blunt reality as bargaining leverage.

3.       Washington must make energy independence a national security priority. It remains popular for politicians to talk about “energy independence” but the reality is that U.S. energy policy has not undergone the changes required to put this country on a path toward energy independence.  The Obama administration has declared war on the coal industry through its proposed cap-and-trade legislation (and likely forthcoming EPA regulations); the licensing process for building new nuclear power plants has not been accelerated and the administration refuses to grant additional offshore drilling permits.  What is required is an integrated energy strategy which includes the expansion of offshore drilling and a significant increase in the development of nuclear power, along with an expansion of natural gas, solar, and wind sources.   Washington should use tax policy to incentivize to automakers to make hybrid automobiles more affordable.  Nuclear power is perhaps the greatest untapped resource in the United States.  France generates more than 75% of its electricity from nuclear power while the United States generates only 20%.  Nuclear power suffered a public relations crisis during the Three Mile Island incident from which the industry has never fully recovered.  The reality is that the United States Navy has been using nuclear propulsion safely since the late 1940s and if Washington is going to cast off the yoke of energy dependence, then nuclear power must be dramatically expanded.

Energy independence is both an economic and national security issue and the situation in Egypt underscores this point.  Our dependence on foreign oil requires that we engage in a dangerous and hostile region; this reality has guided U.S. foreign policy for too long.  This trend is reversible but requires immediate action at the highest levels of the U.S. government.

It is 2025, six years after protonutrium—an affordable, clean and renewable energy source—was discovered in the United States.  “Proto,” as it is called, now fuels cars, homes and factories the same way oil and gas once did.  Gasoline now costs 25 cents a gallon.  Because of its affordability and renewability, petroleum products have been largely replaced by proto.  The dramatic expansion of nuclear power throughout the United States which began in 2013 provided a glimpse into a world of energy independence.  Realizing the potential profitability in alternative energy sources, private industry invested heavily in innovative research that eventually led to the discovery of proto in 2019 by two young graduate students. 

The discovery of proto led to a brief but intense economic downturn where unemployment briefly reached 19% as the financial markets adjusted to the introduction of proto and the phasing out of petroleum energy sources in various economic sectors.  However, after the brief downturn, the financial markets grew at unprecedented rates and unemployment dropped to 2.5% nationally.  The world descended into a global recession which lasted 12 months.  Countries heavily dependent on oil exports experienced the greatest hardship.    

The discovery of protoled to a dramatic overhaul of American foreign policy.  The United States, no longer forced maintain political bonds with oil-rich states in the Middle East, withdrew militarily from the region.  Oil-rich states with single-commodity economies such as Saudi Arabia collapsed amid violent revolution.  The United States, tired of fruitless engagements in the Middle East, denied aid to all but a few.  The monarchies of the Middle East all collapsed amid violent revolution.  Iran emerged as the regional hegemon after testing a nuclear weapon in 2011 and a long-range ballistic missile, capable of reaching the United States in 2014.  However, the Persian Revolution of 2017 led by the Iranian opposition saw the establishment of a republic in Iran which led to the subsequent normalization of relations with the United States.

This scenario isn’t too difficult to imagine.  In fact, when you think about it, it is rather odd that a viable, alternative source of energy has yet to be discovered.  Humans have split the atom and gone to space but haven’t figured out how to supplant petroleum-based energy.  Arguments that the oil lobby would never allow such a discovery are unconvincing.  The individual(s) or organization(s) that discover a cheaper, renewable source of energy will become extraordinarily wealthy.

This scenario is meant to highlight two major issues:  1) how the discovery of a cheap replacement for petroleum-based energy would impact the U.S. (and global) economy in the near- and long-terms, and 2) the dramatic reorientation that would occur in U.S. foreign policy.  Royal Dutch Shell (more commonly known as the “Shell oil company”) uses scenarios to examine the future.  These scenarios are interesting and are worth perusing.  I generated this scenario to highlight how such a discovery could impact American foreign policy. 

What is the likelihood of this scenario actually emerging?  Well, I think the science is there.  We need to leverage the science we already understand such as nuclear power by building a number of new reactors throughout the United States.  Perhaps an alternative energy future won’t even require a new discovery but a more judicious and enterprising use of existing resources and technologies.  I think our current domestic policy fails to provide adequate incentives for investors and penalizes innovation and entrepreneurship through excessive taxation.  The federal government should take steps to reduce taxes and create incentives–beyond “green tax credits”– for innovation in the area of energy independence.  This does not mean additional excessive regulation and subsidization by the federal government.  It means slashing the corporate tax rate, particularly for those corporations and taxable organizations that invest heavily in research for alternative fuel sources.  It must be shown that alternative energy sources are profitable and can help build wealth.

This administration’s priorities do not include energy independence.  They conflate all things “green” with energy independence, which simply isn’t the case.  What is more, they seem unable, or unwilling, to understand the strategic implications of their domestic policies and how energy indepdence would benefit the country.  Their primary objective, as evidenced by the health care charade and the looming cap and tax bill, is the dramatic expansion of government.