Opinion: Now is the time to invest in ending California's oil addiction

February 16, 2011

This opinion piece first appeared in the San Jose Mercury News.

Oil prices are spiking yet again, due in large part to the political unrest in the Middle East. We've seen this before, and we will see it again. Oil price volatility will take a toll on California until we diversify energy supplies and reduce oil demand. The time has come for us to end our addiction to imported oil.

We depend on oil for 93 percent of our transportation needs in California. This is hardly the "diversified portfolio" approach that we, as an investor and an economist, would recommend as a risk management strategy. Moreover, half of this oil comes from outside of the U.S., including a large portion from the politically volatile Persian Gulf. Securing our transportation energy future should be a priority for California.

The possible solutions to this challenge are real and exciting. We have the ability to produce ethanol from domestic biomass sources and are making rapid progress on next generation low carbon fuels. We are starting to turn waste into renewable natural gas and other clean fuels. We are building engines that burn less fuel and cars that run on electricity. With the right policies in place, we can make our overall transportation system much smarter and more efficient.

Wednesday, the California Secure Transportation Energy Partnership is releasing an action plan outlining near-term steps that California should take to build a transportation system for the 21st century. It's time for California to step up and lead by example.

The first step is to commit to enforceable petroleum reduction and alternative fuels usage targets, and to re-examine all relevant laws, regulations, taxes and other policies with this goal in mind. We should ensure that the state's technology and infrastructure investments contribute to our energy security goals rather than reinforcing the status quo. We should stay the course on vehicle and fuel standards that will reduce oil dependence. We should implement pricing policies that encourage consumers to reduce petroleum consumption.

The private sector is ready and willing to move ahead. If the state enacts bold policies that improve the long-term business case for efficiency and alternative fuels, the business and investment community will react.

These policies should be performance-driven, independent of a priori technology choices. They should also be long-term and stable to encourage investment within a predictable regulatory environment. Much of this investment and resulting job growth would be right here in Silicon Valley. Without clear signals, however, customers and investors will remain on the sidelines.

We have a choice.

We can continue with business as usual. We would remain addicted to imported oil and exposed to price shocks and supply disruptions. We would continue sending tens of millions of dollars abroad every day to quench our thirst for petroleum. While this may be the easy option in the short term, it will cost more in the long term.

Alternatively, we can make energy security a priority for California. We can minimize our risk, diversify our energy sources and increase the efficiency of our transportation system. We can move away from oil and invest in cleaner alternatives, many of which are likely to be developed and produced here in California.

Some might say we can't afford this investment, or that this is a problem for the federal government. The truth, however, is that we can't afford not to act. The federal government has failed to make progress in this area, and the problem is not going away. We need to change the rules of the game here in California if we want to secure our transportation energy future.