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.
I think “energy independence” certainly makes sense as a policy … but not exactly for the usual reasons. Sometimes one finds a problem framing that can generate huge amounts of discussion, but the framing itself makes it difficult to get at the real issues.
1) Peal Oil dates by country can be found at TheLastOilShock.
2) The US peaked in 1970, the world will almost certainly peak within next decade, after which world production slowly falls.
3) But net *exports* can fall much faster, because oil producing countries often have growing internal needs, and often subsidize oil for various reasons. For a simple model, see Figure One in Jeffrey Brown’s post on TheOilDrum.
Sooner or later, each country from which the US imports will stop supplying us. Of our major suppliers, Mexico will probably fall off first, and I’d guess, last would be Canada, not usually viewed as a security threat, at least.
4) On some far future date Z, the US *will* be (oil&gas energy) independent, because production rates approach zero.
On some date Y<Z, the US will be independent, because other countries have some left, but won’t sell it to us.
On some date X<Y<Z, the US will be independent, because although other countries will sell it to us, we won’t be willing to pay the price.
It’s hard to see how X is any later than 2100, and it could easily be 2050. I don’t think it’s as early as 2020, but I’d have to do more work to guess at when this happens between 2020-2050. Of course, before this happens, most poorer countries will essentially be priced out of oil.
5) SO, whether we want to be energy-independent or not, we will be, sooner or later. At that point:
a) How much of the US is owned by somebody else?
b) Do we have a 22nd-century economy, or a broken 1900-one, with a landscape littered by stranded assets that we shouldn’t have bought? I.e., have we invested the one-time fossil fuel capital wisely (into sustainable sources) or stupidly?
6) Hence, the real issue isn’t reduction of dependence on *imported* oil, it’s on reduction of dependence on*oil*, although at least, for our own oil, we have more control over how long we leave it in the ground.
John,
Don’t we increase the U.S.’s Z date by buying oil from abroad from now until the X date and leaving our oil in the ground? Don’t we also gain more control over the X date by making relationships with the foreign countries whose oil determines the X date, basically the country will sell us oil for longer in the presence of viable relationship than they would with it?
Eric:
1) I’m happy to leave as much oil in the ground as long as possible, so some people’s great-grandchildren have a little. Right now, about 2/3 of the oil we use comes from abroad.
Consider the two extremes:
a) We stop buying foreign oil, drill harder and use our own up faster,i.e., knock our usage down of the 1/3 of current that we supply, and then decrease it as production continues lower.
b) We shut down all our oil wells and any drilling, thus saving more of our own oil for later. Right now, adding such demand to the world market would immediately max everybody out, prices would really rise, so we’d pay more.
My guess is that neither of these is optimal, and the better paths lie in between,even assuming we could edict such counterfactuals.
But, still, I say that the foreign-vs-domestic argument is a second-order issue compared to “use less oil and make the world supply last longer, and make sure it’s invested well.”
2) “the country will sell us oil for longer in the presence of viable relationship than they would with it?”
I think you meant “without it?”.
Yes, of course, and from what country do we import the most oil?
See EIA.
Of course, oil being fungible, sometimes relationships don’t matter so much, i.e., consider Venezuela’s position.
3) For a relevant book, I recommend Michael T. Klare’s “Rising Powers Shrinking Planet”, and for fun Palin’s Petropolitics.
John,
Thanks.
Yep, without it. I should have proof read better.
As to use less oil and make the world’s supply last longer, I am developing my company to do this as fast as I can. We have gotten out of the nervous stage and into the execute well and quickly stage. Things are getting to be fun.
Eric