The myth of energy independence

The idea of the US being independent of the US$5t-per-year energy business is ludicrous
Robert Bryce, Business Times 16 Jan 08;

WITH oil prices still flirting with US$100 a barrel, everyone in the US is talking about the need for 'energy independence'. Late last year, President Bush signed the Energy Independence and Security Act of 2007; Senator John McCain declared, 'We need energy independence'; and Senator Barack Obama called for 'serious leadership to get us started down the path of energy independence'.

This may all be good politics. But the idea that the United States, the world's single largest energy consumer, can be independent of the US$5 trillion-per-year energy business - the world's single biggest industry - is ludicrous.

The push for energy independence is based on false premises. Here are a few of the most pernicious.

1. Energy independence will reduce or eliminate terrorism.

In a speech last year, former CIA director James Woolsey told American motorists: 'The next time you pull into a gas station to fill your car with gas, bend down a little and take a glance in the side-door mirror. What you will see is a contributor to terrorism against the United States.' Mr Woolsey is known as a conservative, but plenty of liberals also eagerly adopted the mantra that America's foreign oil purchases are funding terrorism.

But the hype doesn't match reality. Remember, the two largest suppliers of crude to the US market are Canada and Mexico - neither exactly known as a belligerent terrorist haven. Moreover, terrorism is an ancient tactic that predates the oil era.

It does not depend on petrodollars. And even small amounts of money can underwrite spectacular plots; as the 9/11 Commission Report noted: 'The 9/11 plotters eventually spent somewhere between US$400,000 and US$500,000 to plan and conduct their attack.'

GI Wilson, a retired Marine Corps colonel who has fought in Iraq and written extensively on terrorism and asymmetric warfare, calls the conflation of oil and terrorism a 'contrivance'. Support for terrorism 'doesn't come from oil', he says. 'It comes from drugs, crime, human trafficking and the weapons trade.'

2. A big push for alternative fuels will break America's oil addiction.

The new energy bill requires that the country produce 36 billion gallons of biofuels per year by 2022. That sounds like a lot, but the United States uses more than 320 billion gallons of oil per year, of which nearly 200 billion gallons are imported.

So biofuels alone cannot wean the United States off oil. Let's say the country converted all the soybeans grown by American farmers into biodiesel; that would provide only about 1.5 per cent of total annual US oil needs. If the entire US corn crop was devoted to producing ethanol, it would supply only about 6 per cent of US oil needs.

What about cellulosic ethanol, the much-hyped biofuel that can be produced from grass, wood and other plant sources? Its commercial viability is a bit like the tooth fairy: Many believe in it, but no one ever actually sees it. Even with heavy federal subsidies, it took 13 years before the corn-ethanol sector was able to produce one billion gallons of fuel per year. Two and a half decades elapsed before annual corn-ethanol production reached five billion gallons, as it did in 2006. But now the US Congress is demanding that the cellulosic-ethanol business magically produce many times that volume of fuel in just 15 years. It won't happen.

3. Energy independence will let America choke off the flow of money to nasty countries.

Fans of energy independence argue that if the United States stops buying foreign energy, it will deny funds to petro-states such as Iran, Saudi Arabia and Hugo Chavez's Venezuela. But the world marketplace doesn't work like that. Oil is a global commodity. Its price is set globally, not locally. Oil buyers are always seeking the lowest-cost supplier. So any Saudi crude being loaded at the Red Sea port of Yanbu that doesn't get purchased by a refinery in Corpus Christi or Houston will instead wind up in Singapore or Shanghai.

Reforms in Muslim

world 4. Energy independence will mean reform in the Muslim world.

The most vocal proponent is New York Times columnist Thomas Friedman, who argues that the United States should build 'a wall of energy independence' around itself and thereby lower global oil prices: 'Shrink the oil revenue and they will have to open up their economies and their schools and liberate their women so that their people can compete. It is that simple.' When the petro-states are effectively bankrupt, Mr Friedman argues, we'll see 'political and economic reform from Algeria to Iran'.

If only it were that easy. Between about 1986 and 2000, oil prices generally stayed below US$20 per barrel; by the end of 1998, they were as low as US$11 per barrel. As Alan Reynolds pointed out in May 2005 in the conservative National Review Online, this prolonged period of 'cheap oil did nothing to promote economic or political liberty in Algeria, Iran, or anywhere else; this theory has been tested - and it failed completely'.

5. Energy independence will mean a more secure US energy supply.

Think back to 2005: After hurricanes ravaged the Gulf Coast, chewing up refineries as they went, several southeastern US cities were hit with petrol shortages. Thankfully, they were short-lived.

The reason? Imported petrol, from refineries in Venezuela, the Netherlands and elsewhere. Throughout the first nine months of 2005, the United States imported about one million barrels of petrol per day.

By mid-October 2005, just six weeks after Hurricane Katrina, those imports soared to 1.5 million barrels per day.

So America is woven in with the rest of the world - and going to stay that way. Today, in addition to petrol imports, the United States is buying crude oil from Angola, jet fuel from South Korea, natural gas from Trinidad, coal from Colombia and uranium from Australia. Those imports show that the global energy market is just that: global.

Anyone who argues that the United States will be more secure by going it alone on energy hasn't done the homework.

Bryce, a fellow at the Institute for Energy Research, is author of the forthcoming 'Gusher of Lies: The Dangerous Delusions of 'Energy Independence'