The United States lacks effective energy policy responses in the event of a major oil crisis. This was the conclusion reached at a recent simulation by Securing America’s Future Energy. Little surprise here: We arrived at the same conclusion in three energy simulation exercises conducted at The Heritage Foundation in 2007,2008, and 2010. These exercises, in which top current and former government officials, diplomats, and experts participated, demonstrated that there are significant security and diplomatic vulnerabilities to terrorist attacks. The dangers the Heritage energy game identified included domestic and global oil producing, processing, and transportation systems.
Terrorists and other violent non-state actors, as well as protracted turmoil in principal OPEC and non-OPEC oil-producing countries, have the potential to cause a sharp drop in oil production and acute price spikes.
The latest Heritage energy simulation exercise demonstrated that selective embargoes, low price guarantees, odd-even day sales, and long-term projects have no significant effect on post-crisis oil prices in the short term. The only way for the U.S. government to reduce actual petroleum costs is to increase supply or reduce demand and to pursue policies that would moderate the negative economic impact, e.g. withdraw additional petroleum from the Strategic Petroleum Reserve. As natural gas pricing mechanisms are often tied to oil, additional measures to keep energy prices in check would include reopening of nuclear facilities in Eastern Europe or increase in piped gas volumes and Liquefied Natural Gas (LNG) sales from Russia.