Cutting oil imports by one-third, as President Obama proposed, is a fine goal. The biggest energy security problem we face, however, is not dependence on imported oil. It’s dependence on oil, period.
Oil dependence is a strategic liability because oil is traded in a globally integrated market, where events over which the U.S. has little or no control – rising demand in Asia, civil commotion in dysfunctional petro-states – can roil the market and drive up prices.
Sure, we could import more oil from those nice Canadians and hand over our public lands and territorial seas to oil producers. For anyone who believes Doc Hastings’ rhetoric that doing so would translate automatically into lower gasoline prices and less vulnerability to OPEC machinations, we’d be happy to mail you a prospectus about buying Brooklyn Bridge time shares.
The problem is that the U.S. is not an island unto itself. Oil produced here would enter a global pool for purposes of price setting. Further, we consume 25 percent of global production – which is three times what we produce – and hold only a 2 percent share of global reserves. U.S. dependence on the world market wouldn’t go away even if Congress acceded to every item on the American Petroleum Institute’s wish list.
In the years ahead, as a 2010 research brief from Resources for the Future pointed out, the oil market will be influenced by trends with worrisome implications for energy security – rising energy demand in Asia, more production from OPEC, more control over oil by national oil companies serving political as well as economic agendas, and longer, more vulnerable supply lines bringing in oil from costly, difficult production areas in the remote Arctic and in deepwater.
In March 17 testimony before the House Natural Resources Committee, Energy Information Administration chief Richard Newell tried to insert a few facts through the ideological filters that most members of that committee have stuffed into their ears.
“Long term, we do not project additional volumes of oil that could flow from greater access to oil resources on federal lands to have a large impact on prices given the globally integrated nature of the world oil market and the more significant long-term compared to short-term responsiveness of oil demand and supply to price movements.”
There is another thing to consider, Newell told the committee. Given the outsize importance of OPEC oil in the supply-demand equation, “another key issue is how OPEC production would respond to any increase in non-OPEC supply, potentially offsetting any direct price effect.”
In other words, if the U.S. insists on speeding up depletion of its 2 percent share of global oil reserves in a vain attempt to drive down prices, the House of Saud could dial back the valves to ensure that prices stay within the Goldilocks range that serves the kingdom’s interests – not too low, so the regime has enough money to smother domestic discontent with fiscal largesse, and not too high, so that the U.S. and other addicts in the shooting gallery don’t get uppity ideas about aggressively expanding use of oil alternatives.
Getting out of the oil dependence pickle will not happen overnight, on Obama’s watch, or on that of his successor. We would start moving in the right direction, however, if Congress were less interested in partisan games and more interested in seeking out energy policy agreements that both sides could live with.
Yes, more domestic oil production without giving the store away to oil producers would help a bit, but we’ll need tighter fuel efficiency standards and adequate funding for R&D into fuel and motive technologies that could compete with oil.
Someday, Congress might be willing to have a rational discussion about a revenue-neutral carbon tax. If and when that day comes, we’ll be closer to solving the energy security riddle.