What is “Energy Independence ” Anyway?

I figured that if you haven’t gotten the “economic message” I’ve been sending for the last month or two… It’s time for a break, but on a related topic. The “illusive” energy independence, or even merely the cutting off reliance on Middle Eastern and Venezuelan oil within 4 to 10 years (funding terrorists or our enemies – you pick), depending on the politician making the prediction, that has been on every Presidential agenda since I was old enough to know what a political agenda was.

First the numbers. The U.S. imports about 66% of its petroleum, and of total oil consumed in the States, about 19% is Canadian, 16% is Middle Eastern (21% if you count Algeria as the Middle East, and excluding the “commodity bump” to Iran’s oil industry) and around 10% is Venezuelan. We have somewhere above 3% of the world’s oil reserves and consume approximately 25% of the world’s oil. By the way, natural gas (and we still have a lot of that) tends to be in the same place where you find oil.

Second, oil is a commodity, with rising demand particularly from China and India that are literally adding millions of cars to the planet annually. Even if we were to triple U.S. oil production, while that would positively impact our balance of payments (the difference between the net value of our exports versus our imports), we do not set the price of oil (prices at the pump may rise anyway). The global markets do. Oil markets are down now because everyone believes that the demand for oil has and will continue to fall in the near term as the global meltdown makes people drive less, heat their homes less, etc.

But because oil is a commodity, you have to picture a giant virtual “ Oil Lake ” – the global oil market – where every drop of oil in the market is stored and drawn upon when anyone consumes oil-based products. Even assuming you reduce American oil consumption by 26% (Venezuela + Middle Eastern Oil), which represents 40% of our imports, every time you sip at Oil Lake, you create demand for a global commodity, which has a benefit to oil producing countries that don't even sell a drop to the U.S.! Every time you “fill ‘er up!” you add demand into the system that might help Iran sell its oil at a higher price.

What’s equally obvious is that we import a huge number of essentials (according to a 2005 U.S. Geological Survey, we import 100% of the bauxite from which we get aluminum, 72% of the chromium, 65% of our titanium), but our “independence” policy seems obsessed with fossil fuels as opposed to other necessary and basic imports. Understandable.

It is absolutely clear we need to reduce our energy consumption, improve our energy efficiency and find lots of new ways to generate and store energy – from nuclear to new oil fields here in the U.S. to wind, geothermal, solar, and the list goes on. I just want folks to know the truth: for the foreseeable future (many decades), “energy independence” really means “prudent energy interdependence.”

I’m Peter Dekom, and I approve this message.