The US oil and gas industry will enter 2009 needing to play hard political defense. With Democrats in charge of both Congress and the White House and the public largely unhinged about energy, the industry will fall under assault on many fronts, including taxation and access to federal land. Opportunities to take the offense will be rare. The industry must take advantage of every one that arises.
An offensive move the industry can seize now relates to energy independence. The industry should start an immediate campaign to repudiate this chimera, which has seduced the US into too many mistakes already and promises to open an entire catalog of horrors next year. Before the damage gets any worse, the US public must know that energy independence is unattainable and wasteful.
The import dragon
It’s unattainable partly because the dragon that energy independence is supposed to slay, imported oil, represents far more energy than the US can expect to displace through any combination of domestically produced commercial energy, domestically produced energy requiring government aid, and conservation.
There’s one possible exception to this quantitative reality. As is evident now, reduced economic activity cuts energy use and thus lowers oil imports. A severe economic contraction might lower imports to levels approaching true independence. But the goal doesn’t warrant such sacrifice.
Even if the US did somehow eliminate oil imports, it wouldn’t be energy-independent in the sense of being free from the influence of oil exporters. The costs it incurred to become “independent” would weaken it in competition with economies governed more sensibly. And because the trade partners it managed to retain still would import oil, the country would remain susceptible, however indirectly, to the supposed disadvantages of oil in trade.
The potential for waste in the pursuit of energy independence is limitless. Forcing individuals and businesses to use specified energy forms when cheaper forms are available creates costs. In many cases the government masks the direct costs by subsidizing the uncompetitive energy form. But that only spreads a new burden over all taxpayers. Either way, the practice is wasteful. If undertaken massively while the economy is imploding, it could be ruinous.
The blind pursuit of energy independence is wasteful, too, because it diverts money the government needs for other activities into nonproductive uses. And it would not, as popularly argued, boost employment. Jobs created by government handouts to “green” energy would be more than offset by jobs lost in parts of the economy forced to absorb the new cost.
For the US economy, futility and waste, bad as they are, don’t represent the biggest problems associated with America’s lunge for energy independence. The goal’s evident popularity bespeaks a xenophobic tendency that policy-makers should find alarming. Prosperity, American no less or more than global, depends on flourishing trade. The world is interconnected as never before–and interdependent as never before. This won’t change. Countries that turn away from essential economic engagements are doomed to waste enormous amounts of money on futile domestic enterprises–as the US acts determined to do on economically questionable forms of energy.
Independence propaganda
In the past, oil and gas companies have resorted to energy-independence propaganda when doing so suited their political needs. The argument in fact may have helped persuade Congress this year to lift restrictions on oil and gas leasing of the federal offshore. But companies must recognize that independence works far more often as an argument for energy policies grounded in anything-but-oil nonsense. It will be advanced next year, for example, when Congress proposes a windfall profit tax on oil and gas as a way to fund research and subsidies for alternative forms of energy. It also might reemerge when Congress, as it almost certainly will, introduces activity repellants that undermine newly approved offshore leasing.
Americans don’t like to be told they can’t have something they want. Someone needs to tell them they can’t have energy independence except at regrettable cost. The oil industry has nothing to lose by delivering the message.
