With straight faces, politicians in the US speak longingly about energy independence. Wouldn't the country be better off, they ask, if it didn't import oil, especially from the Middle East? Wouldn't life be better if all energy consumed in the US came from the US?
Well, would it? A sample of life in an energy-independent US is at hand. It is not appealing.
Any discussion about an energy-independent US is, of course, hypothetical. Large and economically vigorous, the country consumes energy at enormous rates. Oil and natural gas fill 63% of the need. Achieving energy independence at current levels of demand would require the US to replace with domestically produced energy the equivalent of 11 million b/d of oil—slightly less than the combined output of crude by Saudi Arabia and Kuwait—and roughly 10 bcfd of natural gas.
Unimaginable costs
Because US resources won't yield oil and gas at those rates, the energy needed to make the US independent would have to come from a combination of considerably reduced consumption, impossibly huge increases from renewable sources, new contributions from hydrogen, and whatever increases politics would allow from coal and nuclear power. The costs are unimaginable.
Transitional costs, moreover, are just the beginning. In embarking on this adventure in energy independence, the US would be withdrawing from international commerce because in most businesses it no longer would be able to compete. The resulting economic collapse certainly would hasten realization of the independence ideal by constricting energy consumption. But the social costs—unemployment, hunger, general discomfort, and political unrest—would be intolerable.
For these reasons alone—and there are others—energy independence will not happen. It will remain an empty promise, a high-minded political trick. But it's showing up, as it always does, in rhetoric of the US presidential campaign. The consequences of real-life energy-cost dislocation are, therefore, instructive.
The US petrochemical industry has suffered 3 years of competitive disadvantage because of rising energy costs. Its feedstocks come predominantly from natural gas and gas liquids, costs of which have zoomed because of deliverability restraints peculiar to the US. The US industry's competitors elsewhere rely more heavily on heavier petroleum intermediates, which cost less than US gas, or cheaper gas. While US companies idle or shut down ethylene capacity, therefore, companies in Asia and the Middle East build it.
The American Chemistry Council said in a statement May 7 that the US chemical industry's costs of natural gas increased in 2003 alone by $6.5 billion. In the past 5 years, the industry lost business worth $50 billion to foreign competitors. Citing Bureau of Labor Statistics data, the council said US chemical manufacturers had eliminated 90,000 jobs since 2000. Each of those jobs, it added, supported four or five jobs in supplier and service businesses.
In March 2003, Carol Dudley, then Dow Chemical Co. business vice-president for chlor-alkali assets, described to US lawmakers how her company was coping: shutting underutilized and noncompetitive plants, shifting production to facilities outside the US where energy costs were lower, attempting to raise product prices by as much as 75%, and planning to cut 3,000-4,000 jobs worldwide. Noting that chemistry is an "enabling industry for all sectors of our economy," Dudley said: "Imagine an economy in which price increases of 75% were the norm."
Yes, imagine it. It's a mild version of an energy-independent US economy—an economy with energy costs sharply higher than those of the world from which it had severed its energy ties.
Exported jobs
The US consumes vastly more energy from hydrocarbons than it does energy in other forms because hydrocarbons are cheaper and more convenient than everything else. The country can't slash its consumption of oil and gas enough to become energy-independent without incurring punishing costs. And if it were to pursue this folly, the rest of the world would still, happily and profitably, be consuming oil and gas and enjoying US exports of jobs and manufacturing capacity.
Politicians should quit trying to soothe voters with energy promises they can't keep. Energy import dependence isn't a curse; it's just trade. The US should accept and adapt to this economic reality, partly by producing as much of its own oil and gas that nature will allow.
