Does “energy independence” make sense as an energy policy rationale? One of the oft-repeated themes of the presidential campaign was the idea that every U.S. president since Nixon has called for energy independence. Here’s Tufts economist Gilbert Metcalf:
A second broad rationale for government intervention in energy markets is national security concerns. In 2006, the United States imported 66 percent of the 20.6million barrels per day of the petroleum that it consumed Reducing oil imports, it is argued, will reduce our vulnerability
to unstable governments in the Middle East and other oil rich areas. The difficulty with this argument is that oil is a commodity priced on world markets. Even if the United States were to produce all the oil it consumes, it would still be vulnerable to oil price fluctuations. A supply reduction in the Middle East would raise the price of domestic oil just as readily as it raises the price of imported oil.
Even if the United States were able to reduce its consumption of oil to zero, the United States would not be fully insulated from oil price shocks elsewhere in the world. First, an oil price shock that drives up the price of oil for Europe and China would lead those countries to increase consumption of fuels that substitute for oil. Crops used to produce biofuels would be in greater demand in world markets thereby driving up the price of biofuels. Second, a slowdown in the world economy following a price shock would likely have negative spillover effects for the United States.