Saturday, June 30, 2012

Energy Independence Is a Farce

By John Hudson
Jun 30 2012, 3:16 PM ET 5

It's a nice-sounding goal but it makes little sense in a global economy.

Much has been made of the need for the U.S. to wean itself off foreign sources of energy but what would energy independence actually do for the United States? In a lengthy Wall Street Journal article this week, the newspaper hyped the declining U.S. reliance on Middle East oil.
By 2020, nearly half of the crude oil America consumes will be produced at home, while 82% will come from this side of the Atlantic, according to the U.S. Energy Information Administration. By 2035, oil shipments from the Middle East to North America "could almost be nonexistent," the Organization of Petroleum Exporting Countries recently predicted, partly because more efficient car engines and a growing supply of renewable fuel will help curb demand.

The article suggested dramatic ramifications for U.S. diplomacy as the change "achieves a long-sought goal of U.S. policy-making: to draw more oil from nearby, stable sources and less from a volatile region half a world away." However, while depending less on unsavory regimes like Saudi Arabia is a satisfying concept, it doesn't dissolve America's fealty to global crude prices. (Theoretically, even if all of U.S. oil came from North America, disruptions in Iraq or Iran would still ramp up global prices and damage the U.S. economy.) That means U.S. energy security is still very tied to the Middle East regardless of where the U.S. is getting its oil--an undesirable reality that will keep the U.S. militarily invested in the Middle East for decades to come. But besides the limitations on foreign policy, there's also the question of whether energy independence is a worthwhile goal in the first place -- a query expanded on during a panel discussion at the Aspen Ideas Festival in Colorado Saturday.
"We're not moving towards a world of energy independence, nor should we," said Peter Orszag, President Obama's former budget director and vice chairman of global banking at Citigroup. "It doesn't make any sense."
Orszag admitted that the fact that the U.S. became a net exporter of refined crude oil for the first time in 60 years in December was "shocking" but emphasized that rather than energy independence, the U.S. should be focusing on a "diversification of sources" (i.e. natural gas and renewables) so the economy can withstand shocks in energy prices. If the U.S. were to reduce its sources of energy based on where it comes from, he argued, it would make the U.S. economy less secure. At the panel, attendees such as Mitch Landrieu, the Democratic mayor of New Orleans and a major booster of natural gas, nodded vigorously. Given the vested interests in alternative energies, it won't be surprising if the national mantra of "energy independence" morphs into something along the lines of "energy security," which endorses an everything-but-the-kitchen-sink approach.

  • vkg123 3 hours ago
    This misses the point. If global supply disruptions cause the price of oil to skyrocket, the government can always institute price controls on domestic supply as long as there is a surplus. For example, the citizens of Saudi Arabia don't feel the pain at the pump no matter how high the crude price goes.
    Whether this is worthy is another matter, but with domestic energy independence it becomes a possibility.
  • you cannot do that, as soon as oil go out of the oil pipeline, it becomes a global commodity and world market price. Second, oil company control oil price, not the White House surplus.   Third, Wall Street speculator control oil price too, you can release surplus, but what happen if they kept betting for price increase. As result, increase vehicle fuel efficient is important for U.S to become energy independent, since 70% of our oil consumption goes into gas tank.  Why is Mitt Romney and Republican vs.  fuel efficient vehicle?
  • c_laird478 3 hours ago
    Energy security, as opposed to energy independence, could be achieved in a variety of ways. One way to achieve energy security is through energy independence; producing ALL of our energy from domestic sources. Another way is through invading and occupying the middle east or any other foreign source of oil, and thus SECURING those sources of oil for ourselves.
    Since commodities like oil, coal, natural gas, etc. are by their nature finite on the Earth, and not being replenished at anywhere near the rate that we are consuming them, eventually we will run out of them. And as we run low on them, our energy security will decrease to the degree that other countries will want those fuels for themselves too.
    On the other hand, the sun, that giant nuclear fusion reactor in the sky, will continue providing abundant, non-polluting energy for the next 4 billion years, give or take a few million. The choice is ours. We can continue promoting our energy infrastructure based on polluting, finite energy fuels, spoiling our environment and setting future generations up for a world war over their dwindling supplies, or we can invest in non-polluting renewables that will be, for all practical purposes, inexhaustible, freeing future generations from those concerns.
  • S_Deemer 2 hours ago
    Orszag is right about focusing on diversification of energy resources. Although "energy independence" may be illusory, there are some benefits to increasing local production, including a reduction of our trade imbalance, and the potential for industrial growth fueled by lower energy costs and less expensive feedstocks for petrochemicals, both of which should make the U.S.A. more competitive in the world economy. Overall, I'm pretty bullish on the American economy for the next decade or so.
    On the other hand, we shouldn't expect Middle Eastern political and social stability to increase as oil revenues shrink. Saudi Arabia and the gulf states are welfare states propped up by oil dollars, and (especially in the case of Saudi Arabia) have bred themselves into unsustainable population levels that far exceed local resources. When petroleum revenues plateau or start to shrink, many of these societies are going to destabilize very quickly. I left Saudi Arabia in 1985, in part because I was convinced that the House of Saud couldn't maintain control indefinitely; I've been wrong in the intervening 32 years, which is a tribute to a well run police state, but I still expect Saudi royal heads to roll — literally, not figuratively.
  • rdl114 1 hour ago
    As of 2009, proven natural gas reserves in the US were 283.9 TRILLION cubic feet, good roughly for 250 years of supply. We have 22.5 BILLION barrels of crude oil plus condensate. As others have already and sure will continue to mention, we also have the sun, the wind, and water.

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