Energy Independence Is Stupid (Updated)
One of the things that annoys me is the periodic nonsense about becoming energy independent. This idea that we can “wean ourselves off of oil” is just utter nonsense. The reason for this is that if there were economically viable alternatives to oil as a source of energy that source would be in use today and it would become more and more prevalent. The reality is 180 degrees in the opposite direction.
Even with oil going over $100/barrel there is no substitute to be found. Ethanol whether form switch grass or corn is a pipe dream. We couldn’t grow enough corn or switch grass to satisfy our demands for oil. While the idea moving to nuclear power is one I like, it wont do much to address our dependence on oil. After all, nuclear power is used primarily to generate electricity and most electric cars are not able to compete with cars that run on gasoline.
All other alternative/green sources of energy rely heavily on government subsidies. In short, we pay twice for these types of power. The first time we pay via taxes, then we pay again when we buy the power, and usually at a premium. Without these subsidies, we wouldn’t see these forms of power. Wind, solar, and biomass all rely on subsidies from some level of government.
Can consider this interesting point about Saudi Arabia: they import 83,000 barrels of gasoline a day. A country that sits on top of the largest know oil reserves has to import gasoline. Energy independence is simply not a realistic nor even a smart policy option.
Energy independence is like walling oneself off from trade with others. Sure your neighbor might be able to produce widgets at a lower cost than you can produce widgets and you can produce doodads cheaper than your neighbor can produce doodads, but dammit you wont trade because you might become dependent on your neighbor and he could exercise undue influence on you. Never mind that this is a double edged sword and cuts your neighbor just as much. Dammit you are going to take your lower standard of living and be happy with it because you are an American!
If any politician were really and truly serious about addressing the issue of energy independence they’d do it via a Pigouvian tax. They’d put a tax on gasoline, and at the same time reduce another tax–e.g. the payroll tax–and thus get people to substitute way from consuming gasoline. But raising a tax on gasoline isn’t popular so politicians have absolutely now spine in following such a policy. They really don’t mean it when they talk about energy independence.
Update (Dave Schuler)
Discussions of energy independence nettle me as much as they do Steve. Unless you’re entertaining the idea of adopting a policy of autarky, complete self-sufficiency and neither importing nor exporting, it’s objectively impossible to achieve energy independence. Regardless of what you do, how little you consume, or how much you produce, you will continue to be influenced by the performance of other consumers and other producers. You won’t be independent. Since the KSA is the lowest cost producer of oil and oil will be important for the foreseeable future, what happens in Saudi Arabia will continue to be important to us.
Every country that’s ever tried autarky has seen the error of its ways. It’s economic idiocy.
I think that when people say energy independence they often really mean energy self-sufficiency. A decision to be self-sufficient in energy means you consume no more than you produce. I think there’s a reasonable national interest argument to made for doing that so that emergencies in far-off places with unstable governments would be trials but not disasters. But we still wouldn’t be truly energy independent. That’s an objective that’s beyond our grasp.