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Monday, Nov 9, 2009
Contrary to Bush, enviros and Thomas Friedman, America will never be energy independent. The sooner we accept this, the sooner we'll be able to change our gas-guzzling ways.
May 4, 2005 | It would be easy to blame it on Richard Nixon. He started blathering about "energy independence" shortly after the Arab oil producers raised prices and launched an embargo against the U.S. in October of 1973. Within weeks, oil prices quintupled and the American economy went into seizures.
The crusade for energy independence reached another crescendo last week, when the House voted to approve some $8.1 billion in tax breaks for the mightily struggling energy industry. Let's see, during the first quarter of this year, Exxon Mobil's profits jumped 44 percent. Royal Dutch/Shell's profits were up 42 percent while Marathon Oil's profits were up a measly 26 percent. And there's this news: According to John S. Herold Inc., a research-only firm, five of the country's biggest oil and gas companies had a total of some $51.4 billion in cash on hand at the end of 2004.
Never mind the absurdity of tax breaks for a sector that's printing money. The main problem with the energy bill is that it's being sold as a magic potion that will help America wean itself from foreign sources of energy. When that "energy independence" moment occurs, goes the reasoning, America will be a self-sufficient Valhalla with lots of good-paying manufacturing jobs. Farmers will make big profits by growing acre upon acre of corn and other plants that will be turned into oil-replacing, clean-burning ethanol. And American GIs will never again need to visit the Persian Gulf, except, perhaps, on vacation.
If you believe in that vision, stop reading here. That vision will not happen. America will never -- repeat, never -- be energy independent. America is such a major energy user and the energy market is so complex that we can never be independent. America simply sucks up too much oil (25 percent of world production), too much natural gas, and too much coal to ever cut itself off from the global market. The price for these commodities is set by global market forces like booming economies in China and India, and by the ever-increasing energy needs of citizens everywhere to power their cars, fax machines, computers and air conditioners.
In short, there's no silver bullet when it comes to energy. Pretending that there is only obscures the magnitude of the problem. And that problem is enormous. Hydrocarbons of all types are becoming harder to find and more expensive to produce. And more people are vying for the resources that remain. Domestic oil production has been falling since the early 1970s and no matter how large the subsidy or tax break to domestic drillers, that trend cannot be reversed. Given our current energy consumption, the idea that we can mine enough domestic crude to meet our demand is simply fallacious. You'd be hard-pressed to find any diner at the Houston Petroleum Club to say otherwise.
If we continue pretending that we can somehow be independent of these hard truths, it will be that much harder to make the difficult changes that must be made: a strong embrace of efficiency and conservation (particularly in the transportation sector) and a bolder, more comprehensive program to develop renewable and alternative sources of energy.
I'll explain more in a moment why we can't be independent. But first, a short review of recent comments from the right, the left and the center that use the "I" word:
Then there's New York Times columnist Thomas Friedman, who has begun calling himself a "geo-green." Last December, he called for a Manhattan Projectlike "initiative for alternative energy and conservation to make America energy-independent in 10 years." On Jan. 30, Friedman repeated his battle cry, proclaiming that if only Americans were more energy efficient, the Arab OPEC members' oil revenues will shrink and "they will have to open up their economies and their schools and liberate their women ... It is that simple."
Oh, Tom, if only it were.
Numerous factors keep America from ever becoming energy independent. First is our enormous auto fleet. Amory Lovins and the other energy efficiency gurus keep saying that we can quit buying foreign crude oil if only we all drove more fuel-efficient cars. Their argument goes like this: Two-thirds of the oil the U.S. consumes is used for transportation. In fact, our transportation consumption nearly equals our oil imports. Thus, if we make transportation more efficient, then the need for that imported oil goes away.
Alas, even dramatic increases in America's automobile fuel efficiency will only slow the growth rate of our oil imports. According to the National Commission on Energy Policy, if automakers increased the efficiency of their fleets from the current 24 miles per gallon to 44 mpg, America's motor fuel consumption will still increase by 3.7 million barrels per day by 2025. That trend reflects two facts: Americans are driving more miles each year, and Americans own more than 200 million vehicles, each of which has a life span of about 15 years. Converting that gigantic fleet to one that is more fuel efficient will take decades and cost tens of billions, perhaps even hundreds of billion of dollars. In the meantime, people still need to commute to work. And they are not going to spend $25,000 on a Prius just to save $25 every time they fill up their gas tanks.
Second, even if the U.S. did manage to reduce its overall oil consumption, it is unlikely to have a major effect on oil prices or oil supply. Oil is so fungible and demand so high that crude being loaded at Yanbu, Saudia Arabia, that isn't bought by a refiner in Texas, will be shipped instead to Singapore or Shanghai.
The booming economies of China and India are creating enormous demand for petroleum. The Chinese economy grew by almost 10 percent during the first quarter of 2005. Decreasing consumption in America "won't have a global impact on major oil exporters," says Scott Tinker, the director of the University of Texas Bureau of Economic Geology. "In fact, quite the opposite. The big oil-exporting countries are recognizing that the future market for them is in the mid- and Far East, in countries like India and China. Increased demand in those regions will overshadow decreased consumption in the U.S., keeping global demand above global supply." That's bad news for all those Hummer drivers who will be paying yet higher prices at the pump.
