The Folly of Energy Independence
The United States stands on the cusp of a global strategic advantage of huge significance. It is now within our grasp to cut the Gordian knot of energy policy, transforming our economic prospects in a fairly short period. Seizing this advantage does not require or depend on an esoteric technological breakthrough. It does not require allied assistance. It does not require a great deal of citizen sacrifice, discipline or patience. It does not require new taxes or convoluted cap-and-trade schemes. It merely requires that the Administration and the U.S. Congress get their collective head straight for once about a policy area in which politically ecumenical futility has been the norm for nearly forty years.
It has been an article of faith at least since the Nixon Administration that, in order to strengthen its energy security and, through that, its international position generally, the United States should reduce its dependence on imported oil, particularly from the Middle East. The only significant difference between Republicans and Democrats on this point has been their choice of methods: Republicans have generally preferred supply-side solutions (“Drill, baby, drill!”), while Democrats have generally preferred demand-side responses such as greater conservation and efficiency, and higher energy taxes to encourage both. Withal, imports grew by leaps and bounds both in relative and absolute terms from 36 percent of consumption in 1973 to 60 percent in 2005.
Leaving aside for the moment the actual reasons that successive U.S. Administrations failed to achieve what all professed to be a critical national security goal, the fact of the matter is that the goal of import reduction was misguided. Typical Americans throughout the years have labored under a series of misconceptions about how the international oil business works, the most common of which is that exporters have the ability to fine-tune the destination of their oil exports for political or commercial purposes. This is simply not true. Think of the oil market as a swimming pool: Producers pour oil in, consumers take oil out. The oil itself is totally fungible, and everybody faces essentially the same price. While individual producing countries may have contracts with consuming countries, most oil is purchased on the spot market for an international price. This arrangement is enabled by the fact that the international oil companies determine what happens to the oil once it enters the global market. With rare exceptions, the governments of oil-exporting countries are simply unable to control where their oil goes.