Energy Independence Is a Military, Not Economic, Concept

Forget everything you’ve ever heard or thought of energy independence as an economic concept. As long as oil can be easily transported, with little regulatory or physical constraints, we have a one world market. No country either produces or consumes 100% of its own oil, and the Middle East has lost its grip on worldwide production. Other than an assured supply for the military, increasing US domestic oil production is meaningless economically.

Natural gas, nuclear, wind, hydro and geothermal domestic production do have an economic impact because these energy sources cannot be easily transported. While increasing production and reducing consumption of oil domestically will not impact the price of oil, switching to fuels that cannot easily be imported or exported will have a definite economic impact.

The high price of oil is actually benefiting the US. It is motivating industry and consumers to replace fungible energy with relatively non-fungible energy. Middle East natural gas does not easily replace domestic natural gas the way Middle East oil has replaced domestic oil.

In essence, energy policy should focus on increasing the supply of only those energy sources that cannot be exported, and reducing consumption of all energy sources. When Dick Cheney said many years ago that consumption doesn’t matter; he was right related to the price of oil only - not the overall cost to the economy. The non-oil energy supply-demand model is still relevant to both price and overall economic cost with the scope of the US alone.

Comments

[UncleFred:]

An issue not addressed in this analysis is the effect of shifting vast portions of American wealth to the middle east. Our dollars go to OPEC countries to purchase hundreds of millions of gallons of oil, the OPEC countries use those dollars to buy the United States, bit by bit. If we don't wean ourselves from the oil teat, we will all soon be renters in our own country, with everything owned by the OPEC countries. As for a military tie-in, if militant Islam can't defeat the United States militarily, they will simply buy it with the money we give them. This is why it is a national emergency to IMMEDIATELY invest in alternative energy, the best of which is definitely solar.

2008 Jul 01 08:45 AM

[Paul Killinger:]

Those who don't understand history are condemned to repeat it... Hitler developed many different types of alternative energies, by far the most advanced of that day. But we cut off the German and Japanese OIL SUPPLIES, and beat them with OUR OIL.

It is both a SECURITY and ECONOMIC travesty that we are not fully developing our DOMESTIC oil and gas reserves RIGHT NOW. We have the best technology in the world to do it, but the left wing Liberals and PACIFISTS in the Congress think they know better.

You Greens should do something other than attempt to REWRITE HISTORY in defense of the MORATORIA you have had your Congress institute to prevent America from becoming energy independent. Indeed, from any logical perspective, your position is COMPLETELY INDEFENSIBLE.

2008 Jul 01 12:34 PM

[cynic69:]

Paulk8756 - You are wrong about developing domestic oil. When the oil is pumped it dosen't belong to America or Americans, it belongs to the company that pumped the oil. Those companies are going to sell the oil to the highest bidder on the world market. They would be incredibly foolish to give American refineries a special discount. Do you realize that most of the oil from the north slope of Alaska is sold to Asia, not America. Estimates are that if we pumped all the oil we can find it would only amount to 2% of the 86 million barrels of oil that the world consumes everyday. A 2% increase will not effect the price of oil on the world market even a little bit.

Some knowledgable scientists are predicting that eventually oil producing countries (like Russia) are going to start hoarding their oil. If we save our offshore deposits for a possible hoarding catastrophy we will have some energy to fall back on. If we pump it now and sell it to China it will be very nasty indeed.

2008 Jul 01 11:43 PM

[Old Wizard:]

This article shows very little knowledge of macro-economics. This thesis, if that's what it is, ignores the effect of an increasing negative trend of the current account. If we continue to import 12m barrels of oil at a cost of $140/barrel, we are talking 11+b dollars a week or almost 600b dollars a year. If we purchased our own oil or others purchased our oil at this rate our balance of trade would be that much more positive. Further, those oil exporters faced with this much money are using it to make investments in our domestic enterprises which affects the other term in the current account in an increasingly negative way.This is a non-linearly increasing reducion of the U.S.'s current account or to put in more familiar terms the Unted States's cash flow. Reversing this trend by using alternative energy sources is also a good thing. It would seem reasonable, however, that a strategic imperative is to do both as qickly as possible on a crash program. It isn't logical to believe that the Chinese will come half way around the world to drill off the coast of florida, if it didn't do them any good. It is equally illogical. to conclde that it would do the U.S. no good to drill in the same oil field. It is also disengenious to assert that it will take 10 years to ge that oil. The Chinese certainly don't believe it will take that long. Wind and solar should also be used with specific large scale targets under the same stategic imperatives with stretch goals of barrels of oil saved on a specific timetale witin 5 years.

2008 Jul 01 11:50 PM

[zztop:]

Paulk8756 is wrong.

It would be of far greater strategic benefit for America to purchase oil from external sources right now while it is relatively cheaper. We should save our domestic reserves for a time in the future when world oil supply diminishes, directly resulting in an even more exponential rise in the price than we have recently experienced.

If "SECURITY" is what Paulk8756 values, then consider this: the nation with more oil reserves later in the game will have more options and more capability and derive more security. We should replace the use of petroleum where we can (private vehicles) and save it for applications that are more difficult to find substitutes (chemical manufacture, commercial transport etc).

Persons of Paulk's mentality continue to argue their position without rational regard for the sheer impetus of demographic vectors, as if there is an infinite supply of oil. We know this is not true. 6.5 billion inhabitants on track for 9 billion.

2008 Jul 02 02:57 AM

[Kunst:]

So if we use up the last of our oil and gas now, what do we do then?

2008 Jul 02 11:58 AM

[Kunst:]

"the Middle East has lost its grip on worldwide production"

"increasing production and reducing consumption of oil domestically will not impact the price of oil"

Huh?

2008 Jul 02 12:03 PM

[jjason:]

Bring down the price of oil by asking Congress to have the Commodity Futures Trading Commission do their job properly. Go to:

www.star-telegram.com/...

and

http;//commerce.senate.gov/pu...

You will discover how former Senator Phil Graham ( john McCain's economic adviser ) and Graham's wife have allowed price manipulation in the futures markets.

Then ask your US Senators to fix the laws so we do not get cheated by OPEC and the oil companies who are complicit in this outrageous price fixing scheme.

2008 Jul 04 07:41 AM