All my debate liveblogging cracks about the inanity of “energy independence” led some commenters to ask what’s really so bad about it. I never conjured up the will to answer, but if you’re still wondering, please read David Henderson:
One issue that has arisen in this campaign is the issue of “energy independence.” Both McCain and Obama believe that moving towards energy independence is a good idea. But, as I pointed out in this month’s The Freeman, it’s not. Energy independence is no more desirable than coffee independence, banana independence, or car independence. The case for free trade does not break down just because the good being exchanged is important, as oil is. It doesn’t generally make sense, if your goal is the wellbeing of country A’s citizens, for country A’s government to impose tariffs or import quotas on a product from other countries. Even if we put the moral arguments against coercion aside, and even if we nationalistically care only about Americans (I don’t care only about Americans), the gains to the domestic producers from reducing trade are less than the losses to domestic consumers. I won’t repeat that argument here because you can go to The Freeman to read it.
Read both the Freeman piece and the rest of the post.
Yes, 'energy independence' is a silly concept.
The correct way to think about oil and geopolitics is 'pricing'. High oil prices prop up the Russian, Venezuelan, Iranian and Saudi regimes. If the US were to substantially lower its oil consumption, the global price of oil would drop (we are seeing a temporary version of this thesis now due to the global economic situation). In that case, those regimes would have to make changes in order to deal with substantially lower oil revenues.
Now, I am not one that thinks we'd get a Saudi democracy with lower oil prices. Syria, Egypt and Pakstan do not have substantial oil reserves, and they're hardly models of Jeffersonian constitutionalism. But there is a respectable foreign policy school of thought that says permanent lower oil prices=reforms in Russia, Saudi Arabia, makes the Iranian mullahs look less beneficient, etc. If a cut in US oil consumption could reach that goal (assuming that Chinese/Indian growth does not overwhelm any cut in US oil consumption) then there is a foreign policy case for decreasing our oil consumption.
David Henderson presents the basic free trade/free market argument and, if all else were equal, few would argue. He does concede that trade in oil is more important than trade in bananas, but basically equates the two.
I would disagree. Without bananas, our lifestyles are little affected. Without oil, our entire culture crashes. We won't go to war for lack of bananas; we now are at war for oil resources. Oil is our lifeblood.
Henderson says we are dependent on trade for bananas and oil, but we are dependent in different ways. We are dependent on trade for bananas as a source of bananas. We are dependent on oil, independent of trade. We are dependent on oil like a drug addict is dependent on his drug suppliers just like President Bush said. Our foreign policy often turns on questions of who has the oil.
Henderson also does not mention that oil is a limited resource. Just like house prices could not rise forever, oil supplies also can not rise forever in the face of increasing demand. Someday we will be forced to look elsewhere for our energy needs just like the farmers in the high plains will need to start looking for new water resources after pumping out the Ogallala aquifier.
Henderson and you may be right that energy independence is a crazy idea. It certainly is a crazy idea anytime soon. But I do not think your free trade argument makes the case, because it ignores too much of the reality of our current oil economy. Oil is not like bananas. But we should work to make it so. We do not need to be independent of foreign oil, but it is dangerous to remain dependent on it. I believe a case can be made to aggressively pursue other energy sources now rather than to have those changes forced on us later.
If 'energy independence' means tariffs on oil, then yea, energy independence is a silly and self-defeating idea. But I don't think those pressing for energy independence equate it with oil independence ('Drill, baby, drill' tribal members, might, but they are a minority). Instead, I presume the goal is to increase the use of non-oil energy–as McCain's refrain goes: 'wind, tide, solar, natural gas, hydro…' The happy point about this diversification is presumably that it involves endogenous resources. So, energy independence is only silly if that is a silly idea. Two questions should be answered: 1) is it silly to think that, with private and/or public investment, we can become move out of oil dependence within anything like a reasonable time frame and reasonable costs; 2) if (1) is in fact plausible, what is opportunity cost? I mean, presumably we rely on oil because it is in the end the cheapest and most efficient source. Maybe we could move off of oil, but would the cost be worth it? Both of these are, I think, empirically decidable questions.
Finally, I would just throw out here that, per (1), I have it from one who works in energy security that natural gas is the source of the future, that this is probably an achievable goal, and that it would be good for the US, bad for Europe.
I basically agree with Michael's point, basically. The idea of 'energy independence' isn't feasible, but making full use of our domestic resources is. We have needless guidelines preventing oil companies from exploring our offshore oil resources; depending on the day of the week, Obama/Biden either support or oppose clean coal. Some of the time they're afraid of nuclear, some of the time they're not.
Instead of asking “can we achieve energy independence” we should just ask, “are we letting companies explore sources of energy to the fullest extent?” Right now the answer is no.
lxm: “At war for oil resources” assumes facts not in evidence. Iraq isn't all that, as far as “oil resources” go – and indeed, since the oil is now being sold on the global market just as it would have been under an un-sanctioned Hussein, there's no reason to have even had a war, if it was about oil access. (Even if we take the “it's to keep the Straits of Hormuz open” line, well, we had bases in Kuwait and the Navy could have done it just as well or poorly without invading Iraq… and of course in terms of US oil access Afghanistan is Less Than Nothing.)
Will: The only even half-plausible argument I can see for “energy independence” is non-economic (because as you point out, in terms of basic Ricardian theory, it falls flat on those grounds), but rather military-strategic.
(This is a variant of lxm's argument, the difference being that I'm not claiming that we're in Iraq or Afghanistan for access to oil.)
The US gets enough of its oil from Canada and Mexico (and domestic sources) that even a total sea blockade wouldn't destroy the Republic – especially given military fuel reserves to crush a blockade, so in practice this doesn't matter much.
But at least it's an economically and politically coherent point to make.
Basically the objection to “energy dependence” is that it creates two areas of weakness for us: political/military weakness, and sustainability. It does this, because as other commenters have pointed out, oil is not analogous to bananas as a commodity, because unlike bananas, oil is necessary for our entire economy to run. If we don't have enough oil, our economy as we know it shuts down.
This means that we are forced to take stronger measures to protect our supply of oil and that we are more sensitive to shortages. If our supply of bananas dropped precipitously because, some war started in Brazil over bananas, people would be unhappy, but fundamentally, very little would happen to our economy systemically. If a war broke out between Iran and Saudi Arabia and the Straits of Hormuz became inaccessible or some nation bombed a bunch of our refineries, we're fucked. We had gas lines this year in some parts of the country (like Atlanta) because of our low reserves as a result of hurricanes battering our refineries this year. If more of our refineries were taken out, it would be a disaster.
As a matter of sustainability, this is a weaker argument because market forces will hopefully correct for it, but not without some pain. Oil is not a renewable resource and eventually, we will have to switch to some other energy source that it currently more expensive if we want to keep living the way we do currently.
So, that is the case for reducing “energy dependence”, though the notion that we would be “energy indepedent” at face value is silly, but I think that the notion that we should diversify our energy sources is a very good one, as that will make us less susceptible to oil shocks, which are a much more real and threatening problem than banana shocks. I think the use of the phrase “energy independence” is meant to appeal to certain xenophobic and anti-trade tendencies of the electorate, but at least a subset of the policies proposed to “reach energy independence” are desirable policies, and that's the real point.
The concept of ending “energy independence,” taken literally, is obviously an empty slogan. Henderson suggests two definitions: 1. eliminating all imports and 2. enacting policies so that changes in world markets will have no effect on price.
With all due respect, these definitions are so simplistic as to be strawmen.
A more sensible defintion is here:
http://www-cta.ornl.gov/cta/Publications/Report…
“For all conceivable world market oil conditions, the cost of oil dependence to the US economy will be so small that they will have no effects on our economic, military or foreign policy.”
This author argues that this goal would be acheived if oil imports are equal to or less than 1% of GDP. Oil imports as a percentage of GDP are graphed here:
http://photos1.blogger.com/img/243/2888/640/oil…
You can draw your own conclusions. But the notion of reducing oil imports has merit. Consider first that imports are partly necessitated by excessive restrictions on drilling. If the government got out of the way in the United States, the result would presumably be lower and more stable prices worldwide, as well as greater independence. Henderson talks about the oil production in the middle east being inefficient, and notes the futility of embargos. But that misses the real problem – look at Iraq, which has scads of oil, that hasn't been, and still isn't being exported, not because of conscious policies, but because of ethnic strife, repressive governments, and international policies.
There are good reasons to dramatically cut oil imports, and good reasons to believe that substantial cuts could be accomplished without unacceptable consequences. Many of the strategies to decrease imports favor free markets. Henderson is right that nothing comes without a cost, but his simplistic definitions grossly exaggerate the costs.
You can never justify cutting off your nose to spite your face, but it is true that a cost analysis of foreign oil dependence requires an assessment of the true cost of that dependence, such as the military cost. However, that analysis can be easily actioned by a tariff on oil imports to cover the additional national costs. You can't address this at the level of sweeping statements about sustainability. The price mechanism deals with everything but the national security/foreign policy externality.
The price argument is classic economics: it assumes that political non-financial factors aren't objectively real – but they are. There is no such thing as a free market in energy, which is the reason that the original claim in the blog article is wrong
Just another thought, agreeing (I think) with Don and Meng and Steve that if energy independence has to do mainly with oil, the idea's silly. Let's say that everything comes true, that the Alaska Arctic Wildlife refuge has the upper limit predicted and we drill, that there are no restrictions on off-shore drilling, that we find cost-efficient ways to convert oil shale, etc…what happens then? I'm no expert, but my guess is that world oil prices decline, high SUV demand returns, and China, India, Latin America, etc. increase rates of car ownership at even faster rates. This is not the scenario some who call for oil independence envision: they must have in mind the idea that America produces its own oil domestically for domestic markets. Clearly that's not going to happen, and violates all known laws of the global economy. So, I reiterate my earlier comment: energy independence must mean reliance upon cheap, endogenous, nonexportable energy sources if it is to mean anything at all. That means wind, solar, tide, geothermal…and not, if I'm to going to stick to my criteria, natural gas or ethanol.
This clearly ignores that if we do have a comparative advantage and we do not use it then it in the case of Free Trade we are not exploiting our resources.
Going back to the example:
We do not need to be “Banana Independent”, Car Ind, etc. But if we are Zimbabwe and are not food independent then something is clearly wrong and there are countless other examples where restrictions are blocking the full effects of free trade.
Here in the USA, we seem to block what resources we do have from getting to market like ANWR.
Instead, I presume the goal is to increase the use of non-oil energy-
Yeah, except that for some reason “energy independence” for Sen. Obama extends to “we can't allow ourselves to become dependent on cheap Brazilian sugar ethanol.”
Agree with other posters: “Energy independence” is a political pander.
But ridiculing energy independence is, for many libertarians and so-called “conservatives,” just a way to pooh-pooh the many manifest benefits of reducing our reliance on fossil fuels.
Henderson acts as if people only make one valid argument for such a reduction: we might get cut off.
That is in fact one of the weakest arguments, one that the presidential candidates have never made, to my knowledge, and as such reveals it as Henderson's straw man and red herring.
Let him answer his opponents' strongest arguments, not their weakest ones, or the ones they rarely if ever deploy.
Energy Independence is a security issue — it is not about protectionism or blocking oil imports specifically. From the perspective of security, oil is NOT just another commodity.
“It is important to understand that energy independence does not mean closed borders or economic isolation. Energy independence will be achieved by producing abundant, clean and affordable domestic energy through new technology that will enable all countries to do the same. The path to American Energy Independence leads to global energy independence.”
http://www.AmericanEnergyIndependence.com
I'm so bummed WW that you're not liveblogging the infomercial! Obama is promising me energy independence & a tax credit to buy a new car! Yummy – zoom zoom.
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This is all important to point out but misses the point. Neither of the candidates wants an oil tarriff. What they want is government action to speed adoption of alternative energy (and, in the case of John McCain, domestic oil production) so that foreign oil will become unnecessary, or at least cost less politically and economically to the U.S.
Now, you can argue that energy independence is an impossible goal, you can argue that government intervention is the wrong way to go about it, and I'm as principled a free trader as you can get, but simply saying “Protectionism Bad. Free trade Good.” doesn't nothing to rebut their energy policy. It's like saying the candidates' education policy is bad because drugs should be legalized.
fuck all
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This is already underway. The Air Force touts its F22 and F35 as necessary systems for COIN, primarily in roles such as what it already does in Iraq and Afghanistan. That is to say, nfcu pinpoint-accuracy aerial bombing in support of ground operations and Intel-Surveillance-Recon missions are still needed, the F15 and F16 are old fighters, they need replaced. It's all lined up. I'm sure the Army's doing the same thing with Future Combat System
This is already underway. The Air Force touts its F22 and F35 as necessary systems for COIN, primarily in roles such as what it already does in Iraq and Afghanistan. That is to say, nfcu pinpoint-accuracy aerial bombing in support of ground operations and Intel-Surveillance-Recon missions are still needed, the F15 and F16 are old fighters, they need replaced. It's all lined up. I'm sure the Army's doing the same thing with Future Combat System