New at Reason

David Weigel | May 8, 2006

Shikha Dalmia busts the hype around "energy independence."

Comments

|5.8.06 @ 3:34PM|#

This article is dumb for at least 3 reasons:
1) the US could ban oil exports as a way of making US oil cheaper than the rest of the world
2) we shouldn't rely on the rationality of an irrational regime for our national security
3) many people advocating energy independence aren't talking about oil independence, but want us to move to other forms of energy

|5.8.06 @ 3:46PM|#

RE: 1)
wouldn't they just smuggle it in? you know...over those borders we are watching with an eagle eye...

Sandy|5.8.06 @ 4:05PM|#

While energy independence wouldn't shield us from higher prices, it would lessen the impact of those prices on our economy. It also would reduce the harm of an irrational economic shock.

Also, gasoline in Qatar (can't speak to Oman) is somewhere close to 45 cents a gallon. I am pretty sure there's a subsidy going on, but nonetheless, gasoline is not totally a globally set price.

|5.8.06 @ 4:16PM|#

Jeff:

re: 1 - huh?

US Oil Companies, whatever those are in the global market, can only sell to Americans and that will help our gas prices?

|5.8.06 @ 4:23PM|#

The author argues that increasing domestic supplies of oil will not decrease domestic prices since oil is a global commodity with globally set prices. The US, if it had sufficient domestic resources, could delink itself from the global price by forbidding oil exports. This would increase the US supply and drop the price within the US.

|5.8.06 @ 4:25PM|#

Sorry, that last comment was directed as Jason. And to be clear, domestic supply has nothing to do with the identity of the company as US or foreign, just hte physical place the oil is drilled.

|5.8.06 @ 4:33PM|#

Jeff is right. We should ban oil exports and set up an Energy Independence Board to create lists of approved buyers, set prices, and impose consumption limits based on the national significance of the proposed use.

|5.8.06 @ 4:40PM|#

The mutual dependence that trade breeds fosters peace because it gives hostile trading partners an incentive to refrain from acting on their hostility.

This conclusion is a point well taken. But it is superseded by the fact that Iran 1) is suspected of currently developing nuclear weapons 2) has stated its intentions to destroy Israel and 3) has acted irrationally in the past and is likely to do so in the future

Sure, trade benefits both parties. But if one has the ultimate goal of killing the other and this goal is abetted by the two parties' mutual trade then obviously this trade can been viewed as net negative by the other party.

I think this is why we have politicians in the first place, and why, in rare circumstances, it makes sense to distort markets in the short term in order to achieve a long term goal.

|5.8.06 @ 4:42PM|#

The mutual dependence that trade breeds fosters peace because it gives hostile trading partners an incentive to refrain from acting on their hostility.

This conclusion is a point well taken. But it is superseded by the fact that Iran 1) is suspected of currently developing nuclear weapons 2) has stated its intentions to destroy Israel and 3) has acted irrationally in the past and is likely to do so in the future

Sure, trade benefits both parties. But if one has the ultimate goal of killing the other and this goal is abetted by the two parties' mutual trade then obviously this trade can been viewed as net negative by the other party.

I think this is why we have politicians in the first place, and why, in rare circumstances, it makes sense to distort markets in the short term in order to achieve a long term goal.

|5.8.06 @ 4:43PM|#

The mutual dependence that trade breeds fosters peace because it gives hostile trading partners an incentive to refrain from acting on their hostility.

This conclusion is a point well taken. But it is superseded by the fact that Iran 1) is suspected of currently developing nuclear weapons 2) has stated its intentions to destroy Israel and 3) has acted irrationally in the past and is likely to do so in the future

Sure, trade benefits both parties. But if one has the ultimate goal of killing the other and this goal is abetted by the two parties' mutual trade then obviously this trade can been viewed as net negative by the other party.

I think this is why we have politicians in the first place, and why, in rare circumstances, it makes sense to distort markets in the short term in order to achieve a long term goal.

|5.8.06 @ 4:48PM|#

Very good article.

It could have gone farther on at least 2 points:

1. If energy independence is really so bloody important for national security, then -- until there is an actual shooting war or worldwide embargo -- the US should get as much oil as it can from outside the country. Domestic reserves of oil should be left in the ground as long as they can be in order to safeguard that national security interest.

2. Those who argue that, since energy independence hurts Bush and Cheney and their oil company pals, the US will never go for it fail to recognize that Bush and Cheney's pals for the most part are involved in small-company domestic oil production. The US government's handing out (even more!) subsidies and protections for domestic oil production plays right into their pals' hands. People seeking a conspiracy behind the Iraq war should ask whether it was about blood for oil not because Bush/Cheney wanted Iraq's oil, but because Bush/Cheney knew such a war would destabilize the Middle East and make domestic oil more valuable.

Please note that I neither (1) advocate restrictions on oil markets nor (2) believe in such a conspiracy.

|5.8.06 @ 4:48PM|#

Color me a skeptic on resource nationalism. South America employs schemes like the one Jeff proposes. There is an Ecuadoran brand of gas that is something like 2/3 the price of imported gas because the government prohibits its natural oil resources from going to other countries. I'm not convinced it is a sustainable practice, and the more people who jump on board, the worse it will get.

|5.8.06 @ 4:49PM|#

FDR, yes, that is a completely fair implication from my point. Glad we're have a rational discussion.

Mike|5.8.06 @ 4:54PM|#

The US, if it had sufficient domestic resources, could delink itself from the global price by forbidding oil exports. This would increase the US supply and drop the price within the US.

Since we already export a minimal amount of oil, banning exports would be fairly useless. And since most of those exports go to Canada and Mexico -- which then re-export the stuff back to us as gasoline -- we'd probably see prices go up, not down.

|5.8.06 @ 4:57PM|#

This idea would hold up if Iran had an inexhaustable supply of oil. Once the oil is gone and the world stops supporting half of their revenue, then what? I'd rather we got off of their oil NOW while they only have parts to a nuke than be forced off of it later when they do have one (assuming we don't invade them by october)

|5.8.06 @ 4:59PM|#

Mike, yes, but we don't produce nearly enough oil to be energy independent right now either. If we increased our production and banned exports, as I suggested, prices would go down. Apparantly some other countries do this and teh laws of economics work.

|5.8.06 @ 5:02PM|#

You know, if we could come up with some way to dramatically cut our need for oil while leaving the rest of the world oil-dependent, well, the U.S. is the number three oil producer in the world. Maybe we could join OPEC.

|5.8.06 @ 5:03PM|#

Jeff, let me assert my firm belief that the only thing we have to fear is fear itself -- nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life, a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

|5.8.06 @ 5:03PM|#

1. If energy independence is really so bloody important for national security, then -- until there is an actual shooting war or worldwide embargo -- the US should get as much oil as it can from outside the country. Domestic reserves of oil should be left in the ground as long as they can be in order to safeguard that national security interest.

Mike, I disagree with your point in this case. The more oil the US gets from outside the country before shooting errupts, the more money Iran gets to build its army and develop nukes. Currently both sides are benefitting from this trade but the US government benefits more indirectly and has a much more diversified and healthy economy, and thus should be better able to withstand a disruption in this trade. So maybe it would be better to act sooner, rather than later, before the Iranian problem escalates.

|5.8.06 @ 5:18PM|#

mo $$,

If the US doesn't buy Iran's oil, someone else will. In particular, one of the current mechanisms predicted to make the sky fall is the fact that China is formulating long-term purchase contracts of Iranian oil.

|5.8.06 @ 5:21PM|#

mo$$, good point. Also, Mike, you can't just tap a new oil well in a matter of days when there is an embargo or war. These things take years to get on line all the time US prices will be through the roof. Of course, we could drill and then store the oil. we do that now, i.e. the Strategic Oil Reserve, but its unlikely ever to be big enough to make much of a difference given costs and politics.

Mike|5.8.06 @ 5:24PM|#

Mike, yes, but we don't produce nearly enough oil to be energy independent right now either.

Exactly -- which is why we don't export much now, and why banning it altogether would make little (positive) difference in prices.

If we increased our production and banned exports, as I suggested, prices would go down. Apparantly some other countries do this and teh laws of economics work.

Our production is insufficent to cover the demand because at current prices, it's cheaper to import than drill locally. Banning exports wouldn't make that drilling cheaper. The only thing that's going to increase domestic production is *higher* prices. Unless you propose the government subsidising domestic production, in which case you're just shifting the cost from the gas pump to the tax code.

|5.8.06 @ 5:27PM|#

"Our production is insufficent to cover the demand because at current prices, it's cheaper to import than drill locally."

Um, no. It's because the government has banned new drilling in all the most promising areas. If it opened the areas up they would be quite cost justified.

|5.8.06 @ 5:29PM|#

"The only thing that's going to increase domestic production is *higher* prices. Unless you propose the government subsidising domestic production, in which case you're just shifting the cost from the gas pump to the tax code."

Thus is demonstrated the wisdom and foresight of my original proposal, a proposal that will enable every American to enjoy the Fifth Freedom, Freedom from Foreign Oil.

|5.8.06 @ 5:42PM|#

I'm concerned about Iran developing nukes, but I have a hard time believing that they are suicidal. Not only would Israel annihilate Iran if Iran attacked them, but I'm sure that we have one or more nuclear armed submarines in the Persian Gulf.

Another common fear is that Iran will give a nuke to terrorists who will use it to take out a US city. I suggest that we tell Iran and the world that we will hold Iran responsible for such an act, whether or not we have any proof. Holding them responsible means that for each city we lose, Iran loses 10.

|5.8.06 @ 5:45PM|#

you can't just tap a new oil well in a matter of days when there is an embargo or war. These things take years to get on line all the time US prices will be through the roof.

The hypothesis is that there is a war or embargo that prevents the US from getting oil from anywhere, not just from Iran. Such a situation doesn't appear in a matter of days either. In the meantime all sorts of steps can be made short of actually pumping the oil if the government wanted to subsidize such a national security interest.

Or would you rather the US go through the immense cost and pain of going 100% domestic today, find that its 21 billion barrels of domestic reserves really are all there is, run through them in three years, and then face that hypothetical worldwide war or embargo?

Or does it all come down to a belief in the magic non-petroleum energy technology that will be discovered if only the US stops importing oil....

|5.8.06 @ 6:01PM|#

The idea of oil indpendence has always sounded nice, but is worse than if we were 100% oil dependent like Japan. Even casting aside the argument that trade ==> peace, which I agree with, the concept of diversification applies just as well to this situation as it does to any investment. Oil is investable capital to our economy. Becoming independent from foreign oil just shifts this risk to a more concentrated area, whether we're growing tons more corn or drilling the shit out of ANWR and the outer shelf.

A properly diversified energy portfolio will require diversification of source within our borders and outside our borders. Since the current stream of 'alternative' fuels are largely not economically viable, it only makes sense to establish relationships with as many international oil suppliers as possible. While this would not insulate us from the short-run change in world oil prices should Iran or whoever act irrationally, it is over the long-run in which diversification shows its full net benefits. I would also offer up that anyone who disagrees with this and has taken a basic investment management class should dig a hole and bury themselves in it.

|5.8.06 @ 6:04PM|#

I've never thought energy independence was about gas prices. I'd expect that, in fact, gas would get more expensive under any reasonable energy-independence scheme.

I've always thought of it as a geopolitical concept: the only reason we give a shit about the Middle East is that they have something we require. Examples in (comparatively) resource-poor nations suggest that, given no resource stake in a region, the US is happy to ignore any and all bad behavior.

So it's a potential solution to 'the Middle East crisis': make it no longer a crisis, from the US point of view, by removing our need to ever trade with them.

I think it's somewhat cynical realpolitik, but it's a lot more plausible than the idea that chasing less-available, less-convenient energy sources will somehow make gas cheaper.

|5.8.06 @ 6:06PM|#

"Since the current stream of 'alternative' fuels are largely not economically viable, it only makes sense to establish relationships with as many international oil suppliers as possible."

Why does 'alternative' always mean 'granola'? It seems to me that we'd go a long way towards energy diversification by building a shit-ton of nuclear power plants.

|5.8.06 @ 6:17PM|#

Dead straight, isildur -- and then use the energy generated to produce oil to sustain the oil-based economy forever.

(Of course, we'd have to listen to the envirocommies bedwetting complaints for the next thousand years or so...)

|5.8.06 @ 6:35PM|#

Why does 'alternative' always mean 'granola'? It seems to me that we'd go a long way towards energy diversification by building a shit-ton of nuclear power plants

I'm all for nukes everywhere; it's easily the best combo of clean/safe/productive/cost effective energy there is (and part of the master diversification plan). I guess I should clarify that 'alternative' refers to all the new, generally renewable-only, energy solutions that are en vogue. However, until we can figure out how to put a nuke under the hood of my Pathfinder, i'm gonna need lots of petroleum product.

|5.8.06 @ 6:48PM|#

Spending vast sums on "energy independence" would effectively pump billions of dollars out the US economy and into the economies of countries that didn't try the same thing. The oil we didn't import would be cheaper for other nations while we paid for the more expensive alternatives. In effect, we would subsidize their oil imports.

I am sure that China, India and others would greatly appreciate the subsidy but I am not sure that it makes for good national policy.

|5.8.06 @ 6:57PM|#

By the way, I want to again stress that I do not believe that the government should do anything to restrict or subsidize either imported or domestic oil production.

I am merely pointing out that the argument that, because oil is so important, the US should move toward energy independence is very much like the argument that, because blood is so important, doctors should treat illnesses with leeches.

|5.8.06 @ 8:08PM|#

until we can figure out how to put a nuke under the hood of my Pathfinder, i'm gonna need lots of petroleum product.

Electric car recharged by nuke power anyone?

|5.8.06 @ 8:11PM|#

Maybe someone said already but I have to get it out:

If we send more money to Saudi Arabia, they'll stop funding terrorism. What do you think?

I don't think those regimes hell-bent on western destruction are rational enough to think about mutual dependence with the U.S. esp. now that they have other customers such as China and India.

They'll just buy our country piece by piece and then all oil production will be "domestic" by default. That's the other way to do it.

|5.8.06 @ 8:13PM|#

Electric car recharged by nuke power anyone?

How are electric cars in term of horsepower? we know the technology is too expensive in a relative sense.

|5.8.06 @ 8:23PM|#

Maybe Im missing something. Increasing supply (albeit domestically) still reduces prices globally. Right?

Increasing demand raises prices, right? albeit temporarily until supply goes up too.

|5.8.06 @ 8:34PM|#

Click to see non-granola hybrids here.

|5.8.06 @ 9:41PM|#

How are electric cars in term of horsepower? we know the technology is too expensive in a relative sense.

roadrunner is slow by comparison

|5.8.06 @ 10:25PM|#

"If we increased our production and banned exports, as I suggested, prices would go down."

Who would bother to increase production if prices went down? Would you mandate that too? Banning trade is the never the answer.

|5.8.06 @ 10:48PM|#

We import more oil than we export, therefore banning exports would have no effect on price.

If we somehow found ourselves in a position where we were producing more oil than we consumed, then banning exports would instantly end all new domestic exploration for new oil fields. This would in the long run increase prices.

Government coercion against non-predators is a truly horrible idea.

|5.9.06 @ 12:38AM|#

This article is dumb for at least 3 reasons:
1) the US could ban oil exports as a way of making US oil cheaper than the rest of the world

How would that work? The US banned the sale of drugs, yet drugs are nowhere cheap. I believe your logic is faulty.


2) we shouldn't rely on the rationality of an irrational regime for our national security

Why "irrational"? Has Iran invaded any countries lately??


3) many people advocating energy independence aren't talking about oil independence, but want us to move to other forms of energy

Why is this a reason for the dumbness of the article? I missed that part...

|5.9.06 @ 1:07AM|#

Gas in Oman is 0.11 Riyals/litre, which translates to about $1/gallon.

Whenever possible, Emiratis drive over to buy their gas there, because it costs about $1.60/gallon here.

|5.9.06 @ 5:25AM|#

SO! thats were they are spending the oil money they get from us...on cheapening their own.

Anyway my thought is that it is not so important to become 'Energy Indepenedent�' as it is to better insulate ourselves from chaotic price spikes and chasms. This is why even granola alternative fuels are important, especially biodiesel...works in almost any diesel, and blends nicely with diesel fuel; good energy density and power density; keeps the engines clean; safe to handle, and very low in pollutants. Only real problems are gels more when cold, flocks a little more when under high pressure, a bit more NO2 pollution (which can be resolved with additives and/or scrubbing); finding the land for the right plant will be the hardest part. I figure that some combination of Palm trees in California, and the hedge Jatropha Curcas most everywhere else would be best. The right plant will NOT be Soy, no matter what the Soy lobby tells you. All complaints about how much water and fertilizer biodiesel needs, and soil erosion etc., revolve around mostly Soy (but they don't tell you that). Jatropha is Native to the Amerricas, and needs little water, or fertilizer, or pesticides; it requires no tilling and replanting, and helps to fix soil, being a hedge/tree; it grows just about anywhere. Palm trees are a bit finicky about soil types and climate but do well in califonria and elsewhere,, they produce more gallons per acre/year than just about any other plant. There is also the outside possibilkity of being able to grow and harvest the necessary veggie oil using ponds of algae. The necessary ethanol used in making biodieselcan easily come from another native american plant, Switchgrass (which also requires no tilling and replanting; needs little water, fertilizer, pesticides etc; and it also fixes the soil). To get the land...well, more marginal than normal land could be used with the plants described; otherwise, they would be in competition with land used to make food to feed animals made for meat, driving up the costs of meat, until they balance their respective demand.

To get all this happening, basically we'd just need deregulation on and an end of subsidies/tax breaks to the fossil fuels industry and agricultural products.

|5.9.06 @ 7:59AM|#

Sam, growing fuel is no better an option than stealing it from the ground. It's replacing one bad thing with another bad thing. What we need is an engine that does not have to run on fossil fuels AT ALL.

JMJ

|5.9.06 @ 10:15AM|#

I'm concerned about Iran developing nukes, but I have a hard time believing that they are suicidal.

Real Bill,
Rest assured there is plenty of evidence that fanatical islamists commit suicide to advance their irrational agendas. Try: Google + "suicide bomb"
In all seriousness, if Iran is in fact the manifestation of the jihadist islamic ideology in the state, as it appears to be, then it is a threat magnitudes greater than al Qaeda and Saddam. It is a real threat to our way of life, which is overcome not by our economy, or our democratic government, but by pulling together as a nation WWII-style.
Forget the price of gas for a moment. What will we be talking about 5 years from now when Iran has nukes, is extremely pissed at the US (and the rest of the world) and has a poor and angry populace just looking for some action?? One Bin Laden doesn't scare me that much, but 30 million do.

|5.9.06 @ 10:19AM|#

Correction: replace 30 million with 68.7 million (courtesy of the CIA's World Factbook - hey, we know they are never wrong)

Now I'm really scared - I'll be under my desk if you need me...

|5.9.06 @ 10:56AM|#

"Sam, growing fuel is no better an option than stealing it from the ground. It's replacing one bad thing with another bad thing. What we need is an engine that does not have to run on fossil fuels AT ALL."

JMJ,
The thrust of my comment was that instead of total energy independence, we needed to insulate ourselves from price spikes. And you provide no support as to why growing fuel is bad. After all the food we eat is essential just that, fuel. How can that be bad? Especially since the fuel I describe works in existing engines NOW, not years and a bazillion tax dollars later.

As far as future energy for personal vehicles not fossil or farmed fuel, and also not the oft mentioned battery/hybrid vehicles, I have heard of powdered metals as a possibility.