He described the vulnerabilities of a resource located far from our shores, highlighting how consumer habits could have dramatic geopolitical consequences. He then offered a solution to the crisis by suggesting a way to remove oil as a strategic commodity.
Woolsey's assessment of the problem is similar to what we have heard from T. Boone Pickens, the oil businessman-turned wind power advocate. We spend in the range of $350 - $700 billion per year for oil, depending on the price per barrel. The reality is that the U.S. and other oil importers like China and India are engaging in the biggest transfer of wealth in history.
The result is that the U.S. is either directly or indirectly providing funds to support countries that may not have our best interests at heart.
"Oil tends to be produced by countries that are either run by autocrats or dictators. (One exception: Norway). So, one of the things we are doing with this money is contributing to the support of dictators. Putin [Russia] and Chavez [Venezuela] are a bit quieter with oil at $65 per barrel," said Woolsey. "[However], a national energy policy that depends on oil is probably one of the stupider policies ever done. Even at $65 per barrel, we still have one of the biggest transfers of wealth the world has ever seen."
Woolsey believes that the answer is electricity derived from sources such as coal, nuclear, wind or geothermal, which can also be cheaper to produce. But, there are issues.
"The energy system we have to produce electricity in the U.S. is stressed. It's the sort of highway system we would have had if Eisenhower had never built the interstate highway system," said Woolsey.
Reflecting on how people view power plants being built near them, Woolsey said, "We've gone well beyond NIMBE (Not In My Backyard Ever) to BANANA (Build Absolutely Nothing Anywhere Near Anything (or Anyone)."
The electric grid is also exposed. Woolsey pointed out that terrorists are using the Internet and geospatial tools to locate and map the vulnerable spots. And when they find those exposed assets, it's not too difficult to target the critical links, especially when the important assets are sometimes marked with large signs that read "TRANSFORMER."
In explaining how a small, random incident can have a ripple effect across our national electric grid system, Woolsey recounted the story of a tree branch falling during an ice storm in Cleveland a few years ago, which brought down the entire system across the eastern U.S. and Canada.
Woolsey said that the Federal Energy Regulatory Commission (FERC) is responsible for the reliability of the system but nobody is responsible for the security of the electrical grid.
"[What's] the heart of the problem with respect to the electric grid? Terrorists are a heck of a lot smarter than a tree branch," he said. "But in spite of its exposure to terrorism, it is a system to which we have access. Unlike oil, which is controlled by other countries, the U.S. has control of it."
What can we do about the problem? Woolsey sees electricity produced from coal as the answer, as long as we can sequester the CO2 and make improvements in the efficiency of renewable energy resources. "But those are problems we can work on here . We have to lead an international effort to make changes, [do it] relatively quickly and improve CO2 emissions," he said.
But he also admitted that it's difficult to replace oil, which operates in a pricing system that encourages Saudi Arabia and others to turn on the pumps and drive the price down when demand drops.
"This has left people with the feeling that we can't do anything about this because it gets trashed with low oil prices," said Woolsey.
There are some developments now that could spell change and he offered the analogy of salt.
"For thousands of years, salt was a strategic commodity. If you had a salt mine, you were important. Today, are we salt dependent? Nobody cares! Salt, with the coming of the electric grid, was destroyed as a strategic commodity. It ended because refrigeration and freezing was a better way. We need to do that to oil. We need to move as quickly as possible to destroy oil as a strategic commodity. We need to do to it like we did it to salt."
Woolsey owns a Prius that he converted to run entirely on batteries, and he is a firm believer in improvements being made in lithium ion battery technology.
"Anything you heard three or four months ago is out of date," he said. Money is pouring into battery development even by car manufacturers. "You can plug in overnight for about 50 cents."
He solved the charging challenge for his car by going to Home Depot and buying a 50-foot power cord. "How difficult is that?" he asked.
We have, he believes, all the necessary technology to do many things now. Woolsey says he plugs in his car overnight when there is excess capacity on the electric grid, thus reducing some of the stress that occurs during peak hours.
"If we can get ourselves organized and utilize things that have already been developed, we can do something quite remarkable and relatively quickly to replace oil . We have the opportunity.... We don't need an Apollo project; no Manhattan project is needed... to break oil's monopoly."
Woolsey shared with his audience the fact that he had made these same comments at an international conference. Afterward, one individual from an oil-producing nation came up to him and said, "Jim, you're going to destroy my country." Woolsey replied, "We don't want to destroy you; we just think you should get real work."