We’re not back to the energy glory days, when oceans of east Texas crude fueled the ships, aircraft, and tanks on which the Allies rode to victory in World War II.
U.S. imports of crude oil and petroleum products, however, have dropped a hair below 50 percent. And on Tuesday, the Wall Street Journal reported that the U.S. is exporting more refined petroleum products than it imports, the first time we’ve been in the black with refined fuels since the Truman administration.
America’s improving energy security position is rooted in greater fuel efficiency—which should draw applause from every conservative who loves to make a penny squeal—and new technology that has opened up previously inaccessible conventional oil reserves in deep shale formations.
Do these developments mean that the energy security problems associated with oil dependence are over? No.
Oil is still traded in a global market, where events over which we have little control—surging demand in China or supply cutoffs in this or that turbulent petro-state—can send prices scurrying upward. There isn’t a practical way to avoid an oil price surge. If beef prices get too high for your taste, you can quickly substitute chicken or fish. Not so with oil, which holds a monopolistic grip on the transportation energy market.
The International Energy Agency said in its 2011 World Energy Outlook that rising demand in the developing world will put strong upward pressure on prices in the years ahead, as more Chinese, Indians, and Middle Easterners take a fancy to having a car of their own. The global auto fleet is projected to double by 2035, to 1.7 billion cars.
Serving that demand and replacing played-out fields will force oil companies to head for high-rent districts, such as ultra deepwater. According to The Economist, Brazil’s state oil company, Petrobras, has budgeted $224 billion between now and 2015 to develop oilfields buried under deep salt layers thousands of feet below the ocean floor. Such technologically demanding production requires high enough prices to offset the costs and earn a return.
Despite the good news coming out of North Dakota’s Bakken field and other domestic shale oil fields, the U.S. achieving complete self-sufficiency in domestic crude oil production is not realistically foreseeable. Even an anything-goes policy to make oil production the dominant use on all public lands and offshore waters would not zero out crude oil imports, which would require a near tripling of domestic oil output.
And what if rising domestic output amps up political pressure to ease restrictions on crude oil exports? The shale gas boom has sparked interest in exporting U.S. gas to Asian and European markets. There is no reason to believe that market-chasing oil producers wouldn’t put the arm on Congress to ease up on crude oil export rules if economic opportunities beckoned. U.S. exports of refined oil products have more than doubled since 2005 as a result of changing market conditions. In 2010, the U.S. shipped out the equivalent of nearly 1 million barrels of gasoline and diesel per day. The upward trend of gasoline and diesel exports has continued this year.
More domestic oil production in suitable places such as the Bakken employs Americans, slows the flood of dollars going into the cashboxes of petro-states, and tops up supplies. That’s good. More domestic production, however, won’t cut the apron strings that tie us to the global oil market and the economic upheaval it’s capable of inflicting on the U.S.