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Depending on Energy, Not Energy Independent

Monday, December 17, 2012

When considering energy independence, one has to strive for clear thinking and consider all of the potential tradeoffs and potential unintended consequences involved.

'Energy independence' has... become a prized bit of meaningful-sounding rhetoric that can be tossed out by candidates and political operatives eager to appeal to the broadest cross-section of voters. When the U.S. achieves energy independence... America will be a self-sufficient Valhalla, with lots of well-paying manufacturing jobs that will come from producing new energy technologies.... When America arrives at the promised land of milk, honey, and super-cheap motor fuel, then U.S. soldiers will never again need visit the Persian Gulf, except, perhaps, on vacation.—Robert Bryce

Energy independence. It has a nice ring to it, doesn’t it? If you think so, you’re not alone, because energy independence has been the dream of American presidents for decades, and never more so than in the past few years, when the most recent oil price shock has been partly implicated in kicking off the great recession.

As energy expert Robert Bryce notes, “Every U.S. president since Richard Nixon has extolled the need for energy independence. In 1974 Nixon promised it could be achieved within six years. In 1975, Gerald Ford promised it in 10. In 1977 Jimmy Carter warned Americans that the world’s supply of oil would begin running out within a decade or so, and that the energy crisis that was then facing America was ‘the moral equivalent of war.’”

“Energy independence” and its rhetorical companion “energy security” are, however, slippery concepts that are rarely thought through. What is it we want independence from, exactly?

Most people would probably say that they want to be independent from imported oil. And indeed, the United States imports quite a bit of oil. According to the U.S. Energy Information Administration, we import about 11 million barrels of crude oil a day. But there are reasons that we buy all that oil from elsewhere.

The first reason is that we need it to keep our economy running. There is no meaningful substitute for petroleum products used in transportation. As Bryce observes, “Regardless of the ongoing fears about oil shortages, global warming, conflict in the Persian Gulf, and terrorism, the plain, unavoidable truth is that the U.S., along with nearly every other country on the planet, is married to fossil fuels. And that fact will not change in the foreseeable future.” Yes, there is a trickle of biofuel available, and more may become available, but most biofuels are a Faustian bargain, causing economic waste and environmental destruction. Yes, we can improve fuel conservation, drive less, drive smaller cars, and live closer to work, but all of these options have costs along with benefits. There is no free lunch.

TABLE 1: TOTAL CRUDE OIL AND PETROLEUM PRODUCT IMPORTS BY COUNTRY OF ORIGIN, JUNE 2010

GREEN_1214_1

Second, Americans have basically decided that they don’t really want to produce all their own oil. For about 40 years now, the American people, working through their politicians, have decided that they value the environmental quality they preserve over their oil imports from abroad. Vast areas of the United States — both on and offshore — are off-limits to oil exploration and production in the name of environmental protection. We could certainly reduce our petroleum imports by drilling offshore, drilling in the Arctic, and producing oil from all of the oil-rich shale formations that are plentiful here, but at what cost? To what extent are Americans really willing to endure the environmental impacts of domestic energy production in order to curtail imports?

Third, there are benefits to trade, and we trade in fossil fuels with about 90 different countries, including some that are our largest trading partners and nearest neighbors. Trade allows for economic efficiency, and when we buy things from places that have lower production costs than we do, we benefit. In fact, our leading source of imported crude oil is Canada, which sells us 82 million barrels of crude oil per month. Mexico sells us about 36 million barrels per month, just slightly less than Saudi Arabia. And although you don’t read about this much, the United States is also a large exporter of oil products, selling about 2 million barrels of petroleum products per day to about 90 countries. Again, the top two customers for our exports are Canada and Mexico. Tables 1 and 2 show our top 15 sources of imported oil, as well as the top 15 destinations for our oil and petroleum product exports.

TABLE 2: TOTAL CRUDE OIL AND PETROLEUM PRODUCT EXPORTS BY COUNTRY OF ORIGIN, JUNE 2010

GREEN_1214_2

There is no question that the United States imports a great deal of energy and, in fact, relies on that steady flow to maintain its economy. When that flow is interrupted, we feel the pain in short supplies and higher prices. It is also true that some of our money does go to those who wish to do us harm and to prop up governments that we may well find heinous. At the same time, we derive massive economic benefits when we buy the most affordable energy on the world market and when we engage in energy trade around the world.

When considering things such as energy “security” or energy independence, one has to strive for clear thinking and consider all of the potential tradeoffs and potential unintended consequences involved.

Editor’s note: this is the final essay in a six-part series on energy system dynamics and energy policy.

Kenneth P. Green is a senior fellow with Canada’s Fraser Institute and a former resident scholar at the American Enterprise Institute. This essay is derived from the introduction of Abundant Energy: The Fuel of Human Flourishing, a supplementary text for college students, published by AEI Press.

FURTHER READING: Green also writes “The Impossibility of Rapid Energy Transitions,” “Why Growth Is the Environment’s Best Friend,” and “Energy Is Everywhere” as part of this series. Arthur Herman thinks “America's Future Is Oil.” Mark J. Perry contributes “3 Charts of America’s Bright Energy Future” and Desmond Lachman offers his take in “Gushing about America’s Energy Future.”

Image by Dianna Ingram / Bergman Group

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