Sobering Up: Why Cutting Overdependence, Not Oil Imports, is the Right Goal
Posted May 11, 2012
The transportation and energy debate has suffered this past year. Analysts and industry types from Dan Yergin to the National Petroleum Council, and many others, have pointed breathlessly to methods developed by the industry (horizontal drilling, hydraulic fracturing) and consequent increases in recoverable oil and gas pockets. NRDC has long urged caution due to the harmful effects on communities and the environment from such aggressive drilling and extraction techniques. Colleagues such as Amy Mall do an especially good job of that in their blogs on this site.
The debate has, however, missed a crucial point: Oil is a commodity that is traded in a massive 1,000-barrel-per-second market. Unless we plan to withdraw from the global marketplace, squeezing our imports with ever-increasing production won’t insulate us from the price volatility that threatens our economy time and again. Oil import reduction may offer some solace when it means we aren’t sending money to an unstable or hostile regime but it is merely a distraction if real energy security is the goal.
Three credible publications hit the mainstream this week, and I hope they will function like cold water and coffee, injecting some sobriety into a debate intoxicated by overweening enthusiasm for domestic production.
First, in the heart of oil country the Energy Security Leadership Council issued a report on the domestic "oil boom." It was released in Houston by some of the industry and military leaders that make up that group, and makes bold (and correct) assertions including:
- “…changes in oil supply or demand anywhere tend to affect prices everywhere. The impact on the United States—or any other consuming country—is a function of the amount of oil consumed and is not related to the amount of oil imported.”
- “In recent months, a number of political commentators have suggested that, as the United States produces more oil domestically, it will achieve sharply lower prices in much the same way that natural gas prices have fallen during the surge in U.S. shale gas production. This simply is not credible. While the United States does have a large degree of autonomy in natural gas pricing, this is because the oil and natural gas markets are vastly different: There is no global market for gas”
- “Vehicle fuel-economy standards are the most important energy security accomplishment in decades. They must be supported and continuously improved.”
Michael Levi of the Council on Foreign Relations published a remarkable blog entry earlier this week too, straightforwardly entitled “Oil and Gas Euphoria Is Getting Out of Hand.” He cites some recent overblown inferences about a golden age of fossil fuels that is upon us thanks to increasing domestic production, then pens the following paragraphs:
Yet I cannot for the life of me figure out the foundation of these claims. How does a shift from 52 to 22 percent import dependence translate into a fundamental reversal in vulnerability? After all, in 1973 itself, only 15 percent of U.S. oil and gas consumption (and only 26 percent of oil) came from imports. If 1973 ushered in a new age of energy insecurity, it is tough to see how a fall in imports to a level still higher than the 1973 one would reverse that...
What would happen if the United States were to produce all the oil and gas it consumed? Set aside whether this is realistic; it still wouldn’t do the trick. Unless we were prepared to abandon the WTO and NAFTA, shutting the United States oil and gas sectors off from the rest of the world with all the consequences that would entail, we’d still be exposed (though less so than before) to price shocks stemming from Middle East and elsewhere, and would still be competing with China and others to buy resources on the world market, even if those were produced from underneath our own soil.
Levi writes perceptively that one of the problems with policymaker obsession with “the holy grail of energy independence” is that community and environmental costs and damage get severely discounted; analyst Sam Ori also covers the “fixation on energy independence” problem in this interview yesterday.
The last of the three laudable publications this week is from the Congressional Budget Office or CBO, which is a nice change of pace compared to their recent misleading analysis of fuel economy standards and their effects on the highway trust fund. In their analysis, they compare the transportation and electricity sectors (my colleague Max Baumhefner did the same about a week ago) and conclude that while “when the price of one commodity used to generate electricity rises, another commodity can be substituted, keeping electricity prices relatively stable…” transportation on the other hand offers “no alternatives that can be readily substituted in large quantities for oil in providing fuel…”
Interestingly, CBO recommends more than just higher fuel-efficiency standards as effective countermeasures, plugging policies that enable reduced vehicle use by consumers and citing specific examples such as public transportation, location-efficient housing and telecommuting. This is exactly the aim of the Mobility Choice coalition as described in our publication Taking the Wheel. And it is very timely, since it underscores that energy security leadership is needed in hammering out policies being actively developed by both the Obama Administration and Congress.
The Administration is doing its part by raising the bar on fuel economy performance for cars and trucks ever higher. Congress needs to shape transportation law such that it delivers more transportation choices to consumers. Then in response to price changes more of us can opt to either drive a more fuel-efficient car, or not to drive at all, to meet our daily needs.
More vehicle and mobility choices – not more drilling – is the real key to energy security. Time for policymakers to get serious about delivering both of them to consumers.
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