Since 2004, the U.S. has spent $450 billion more on oil than it otherwise would have, if it weren’t for rising costs. “This is money that couldn’t go to pay mortgages, healthcare, or education,” said John Hofmeister, CEO of Citizens for Affordable Energy and former President of Shell Oil Co.

Speaking at the Ernst & Young’s Energy Executive Insight Session held October 9 in Houston, Hofmeister said – in some of the strongest terms possible – that without a strategic, long-term energy policy, the U.S. would continually be hampered by reactive policies that were “only band aids, and no cure.”

There are three aspects to such a comprehensive energy policy, in Hofmeister’s view: 1) addressing the supply and demand equation, primarily through a comprehensive, rather than reactive, regulatory regime; 2) improved environmental stewardship; and 3) infrastructure rehabilitation.

“With energy being this country’s largest industry, other than government,” he said, “it’s incomprehensible that there is no strategy. Energy bills were passed by Congress in 2005, 2006, and 2007. The best near-term solution, increased off-shore drilling, was largely ignored. Even now, with some of those restrictions having been allowed to lapse, what investor is willing to bet that they won’t be re-imposed in the near future?”

It seems there’s more than plenty of blame to go around, in Hofmeister’s view: The president hasn’t provided leadership; the Congress is largely preoccupied with its own reelection; and the judiciary, driven by plaintiff lawyers, blocks initiatives at every turn.

Yet with Americans using 10,000 gallons of oil every second and 60 MMcf of natural gas a day, the country is still a long way from significant use of alternative energy sources as a means to supplement carbon-based energy.

“People say trust the free market, but when has there ever been a free market for energy? OPEC sets limits, and the U.S. government denies access. Utilizing wind won’t happen without incentives, and one-year extensions of such are ridiculous. Who would invest on that basis? What’s needed is comprehensive legislation to address both supply and demand issues,” said Hofmeister.

As for environmental concerns, he noted that the U.S. has done a good job when it comes to dealing with physical waste, largely through well-regulated landfills, and with liquid waste, through banning of effluent flow into rivers and lakes. “So shouldn’t we address the issue of gaseous waste? No one would want to stick their nose into a car exhaust pipe; why continue to do it at long distance?”

Finally, said Hofmeister, the U.S. is saddled with an aging infrastructure that must be updated, but there is little political will to do the work that must be done. The infrastructure needed will resemble the way the electricity distribution is accomplished and must incorporate distribution of alternative energy sources.

“We can’t get there from here the way we’re going,” concluded Hofmeister. “We’re caught in a trap between the time dimensions of energy and politics. Developing and delivering new ways to utilize energy takes years, as much as a decade. Yet politics knows only two-, four-, and six-year election cycles. What’s required is leadership that can rise above that. Either that, or our life styles and economic well-being will be sacrificed.”