I recently responded to a question on the National Journal blog, “How close is the United States to reaching the elusive goal of energy independence?”
You can read more on the original blog post and other responses here.
Here is my response:
Reducing our dependence on oil is a vital goal. Our transportation system is 90-percent dependent on oil, and although imports have declined, they are still around 40 percent of our total supply. Vehicles powered by petroleum-based fuels are responsible for a large fraction of conventional air pollution in the United States and total oil consumption in transportation and industry is responsible for one-third of U.S. greenhouse gas emissions.
What’s more, oil – including what we produce at home – is traded on a global market dominated by a cartel of oil-producing countries that drives prices higher than they would be in an openly competitive market. Cartel influences and state control of oil reserves in geopolitically unstable countries like Iran also generate prices shocks that have repeatedly sent our economy into recession. Consequently, oil dependence has cost the United States more than $5 trillion in lost productivity since 1970.
Clearly, breaking our oil dependency would have very large benefits, including a more stable economy, a better balance of payments, cleaner air and better health, and the long-term benefit of climate protection. But doing away with oil is not the goal of “energy independence” as currently used in political rhetoric. Rather, it is used to suggest that we can and should produce enough of oil at home that we can stop importing foreign oil, while continuing to rely on domestic oil as the backbone of our economically vital transportation system. But that won’t protect us from economic losses.
Even if we could get by entirely on domestic oil, the price we pay would still be determined by the global market. Why? Because domestic producers would simply export their product whenever a better return on investment was available elsewhere. The only way to insulate our economy from the vagaries of the global oil market is to break the monopoly that oil holds over our transportation system, not just to stop importing foreign oil.
The notion of energy independence is illusory for a more basic reason: There is no sustainable energy future in which we go it alone. The technologies and supply chains that replace oil and other fossil fuels will be globalized, as is already the case for major technologies, like cars, smartphones, and personal computers. As we innovate new ways to get off oil, we will use these markets to sell new energy technologies overseas and to import it when it is more cost effective to do so. By severing ties to global markets, we severely limit our ability to compete and to find pathways to a more secure energy system.
Rather than “energy independence,” a more meaningful concept is “energy security” – ensuring that we balance demand with supplies that are adequate, reliable, healthy, environmentally sustainable, and affordable. Energy security bolsters national security, so supplies must also be “geopolitically reliable and physically secure.” Those who argue for energy independence tend to focus solely only on these last two attributes, but the others are equally important to stabilizing the economy and maintaining a high standard of living. Oil will never meet this full list of criteria regardless of where it is produced.
To paraphrase the late energy economist Charles Lave, America’s biggest oil reserve is in our empty car seats. Reducing oil demand – and energy demand in general – makes our economy less vulnerable to price volatility and shocks. New U.S. fuel economy and greenhouse gas standards finalized last month will help ensure that the significant decline in oil imports during the recent economic downturn will continue even as our economy recovers in the years to come. Longer-term strategies include diversification of clean energy sources for both transportation and power generation, redundancy of supply chains, and increased domestic production of energy sources that meet the criteria of energy security.
Achieving energy security will not be easy, but to have a shot at it we must think clearly about what it means, what our goals should be, and what is – and is not – achievable. We need a serious energy policy that emphasizes all of the attributes of energy security rather than independence from foreign resources. Such a policy would not only make America’s energy future more secure, but would drive innovation, foster economic growth, improve health, and protect local environments and the global climate.