Energy Independence: It Doesn't Work

Energy Independence: It Doesn't Work

October 13, 2001

The Sept. 11 attacks have raised an old idea: By reducing America's dependence on foreign oil, can we reduce America's vulnerability to oil shocks that arise from OPEC manipulations, political instability and war? There are certain benefits to developing domestic energy supplies, but energy independence, per se, is not achievable or even desirable. There is simply no way to insulate the United States from foreign oil shocks without totally isolating our energy markets from the rest of the world.

President Jimmy Carter tried to do it by imposing price controls on gasoline, but only succeeded in causing severe gasoline shortages and long lines at the pump. Events that lead to higher oil prices on world markets have the same effect on oil prices in America, whether we produce all or none of the oil we consume.

Furthermore, it simply doesn't make sense to rely on domestic oil when it can be purchased less expensively abroad. Lower energy costs allow consumers to spend more on health care, nutrition, housing, transportation and other things that enhance quality of life.

Unfortunately, every energy policy proposed these days, both good and bad, is sold on the basis of reducing our dependence on foreign oil. Yet many of these policies actually have the opposite effect.

• The Corporate Average Fuel Economy (CAFE) standard, for instance, which requires automobile manufacturers to meet a fixed average fuel economy standard, was established in 1975 to reduce U.S. dependence on foreign oil. Since then, the United States has become more dependent on foreign oil, not less.

Because America is such a large user of oil, policies that suppress U.S. energy use lower the world price for oil. And high-cost producers of oil, such as those here, are hurt more by lower prices than low cost producers, such as those in the Middle East and Latin America. Yet environmentalists and their cohorts in Congress, support raising CAFE standards even further, partly in the name of energy independence.

Of course, environmentalists have a whole list of misguided energy policies, such as the development of wind and solar power, which they wish to foist upon the American people.

Wind and solar power are not economically viable on a large scale. Tens of billions of federal research dollars have already been wasted on alternative-energy boondoggles that have yielded little to nothing in return. But the special interests that benefit from alternative energy subsidies are likely to use the fears of oil dependency sparked by the terrorist attacks to justify further subsidies.

There are a lot of sensible steps that the United States should take with regard to energy policy. The Bush administration's national energy plan provides some sound remedies for many energy problems that stem largely from lack of supply and lack of adequate infrastructure, such as transmission and refining capacity.

• Opening up the Alaska National Wildlife Refuge to oil exploration, for example, or removing the ban on offshore-oil drilling, make sense for a lot of reasons - none of them having anything to do with energy independence. The Energy Department estimates there are 16 billion barrels of oil available in ANWR. This valuable resource would greatly benefit the U.S economy by creating additional wealth.

Let's not fool ourselves, though. Opening domestic oil exploration will not end U.S. dependence on oil from the Middle East. Moreover, a crash program to achieve energy independence would sour an already tenuous relationship with Middle Eastern countries, some of which are assisting the U.S. against terrorism.

Those seeking support for sound energy policies should avoid using the emotionally appealing, but ultimately self-defeating argument of oil independence. Doing so only lends credibility to faulty economic reasoning.

Oil independence can be argued in support of bad as well as sensible energy policies. Ultimately, you end up with an energy system that has some good points and some bad, but that makes little sense in the aggregate.