The Sept. 11 terrorist attacks have raised fears about U.S. dependence on Middle Eastern oil. It seems that nearly everyone believes that if the United States could reduce its dependence on foreign oil, it would reduce its vulnerability to oil shocks that arise from OPEC manipulations, political instability and war.
Although there are certain benefits to developing domestic energy supplies, energy independence, per se, is not an achievable or even desirable goal.
There is simply no way to insulate the United States from foreign supply shocks without isolating our energy markets from the rest of the world.
Events that lead to higher oil prices on world markets have the same effect on oil prices in the United States, whether we produce all or none of the oil we consume. Former President Jimmy Carter tried to protect U.S. energy consumers from the vicissitudes of world energy markets by imposing national price controls on gasoline. That act led to severe gasoline shortages and long lines at the pump.
Moreover, oil is no different than any other commodity. It simply doesn’t make sense to rely on domestic sources of energy when it can be purchased more cheaply abroad. Doing so frees up valuable economic resources, and consumers are able to spend less on energy and 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 U.S. dependence on foreign oil.
Many of these policies actually have the opposite effect. Consider the Corporate Average Fuel Economy standard, enacted in 1975, that requires automobile manufacturers to meet a fixed average fuel economy standard for their entire fleet of passenger vehicles. Its primary goal was to reduce U.S. dependence on foreign oil. Since its implementation, however, the United States has become more dependent on foreign oil, not less.
The reason is simple. Because the United States is such a large user of oil, policies that suppress energy use in this country lower the world price for oil.
Of course, environmentalists have a whole list of misguided energy policies — some designed to suppress the use of oil, others to replace it altogether — that they wish to foist upon the American people. One of the major selling points of so-called renewable energy is that it will help us develop energy independence.
Alternative energy sources such as wind and solar power have never made economic sense, however. Tens of billions of federal research dollars have already been wasted on alternative energy boondoggles that have yielded little to nothing in return.
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 U.S. Department of Energy estimates that there are as many as 16 billion barrels of oil available in ANWR. This valuable resource would greatly benefit the U.S. economy, not to mention the Alaskan economy.
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 end purchases of foreign oil would only sour our relationship with Middle Eastern allies, such as Saudi Arabia, who have sided with the United States against terrorism.
Those seeking support for sound energy policies should avoid the temptation of using the emotionally appealing, but ultimately self-defeating argument of oil independence. Doing so will only lend credibility to faulty economic reasoning. Oil independence can be argued in support of bad energy policies just as well as sensible energy policies.
This column is published in response to an AJC editorial published today.
Paul Georgia is a policy analyst with the Competitive Enterprise Institute in Washington.
Copyright © 2001 Atlanta Journal-Constitution