Abundant US oil resources made possible by new technology potentially will provide significant economic benefits to the nation, but won’t make the country energy independent by itself, a new report from Securing America’s Future Energy’s Energy Security Leadership Council concluded. “This can only be accomplished by reducing the role of oil in our economy,” it said.
“‘Energy independence’ for the United States is an admirable goal, but even if the US were to produce enough oil to meet our demand, the domestic price is still set on the global market, meaning a potential supply disruption anywhere can impact the price of oil everywhere,” said Herb Kelleher, cofounder and chairman emeritus of Southwest Airlines and a member of the ESLC, as the report was released at the Bush Institute at Southern Methodist University in Dallas on May 8.
With US oil imports down to less than 50% of total supply, more production will create jobs and help reduce the nation’s foreign trade deficit, the report said. But a dramatic increase in US oil production won’t shield consumers from the economic impacts of high, and sometimes volatile, oil prices that are set on global markets, it continued.
“In fact, in some cases, oil prices can be significantly impacted by events in countries that are neither large oil consumers nor large producers—for example, by countries that host important shipping channels or infrastructure,” it said. “The key consequence of this dynamic is that 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.”
US transportation relies heavily on oil products “that affect consumer spending in real time,” it also noted. “As oil prices increase during crises such as those that occurred in 1973-74, 1979-81, 1999-2000, 2007-08, and 2011-12—or during the course of normal market fluctuations associated with the business cycle—consumers have no choice but to pay more for their fuel,” it said. “This increased spending in the short term must come at the expense of other spending on goods and services, the negative effects of which reverberate throughout the economy.”
The report’s policy recommendations included increasing motor vehicle fuel efficiency requirements further, accelerating the transition to transportation fuel alternatives from petroleum-derived fuels, and stronger support for more US oil production.
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