11.01.12 8:45 AM ET
Both Candidates Push Myth of Energy Independence
Ugh. It’s back. Politicians and pundits on both the left and the right are once again buzzing with the most hackneyed phrase in modern American politics: energy independence.
The phrase reared its ugly head in the first (three times), second (four times), and third (once) presidential debates, with each mention coming from Mitt Romney. Romney has taken to promoting “North American” energy independence as part of his five-point plan.
But Romney is not alone. President Obama and his allies have frequently used the phrase in an effort to show that the Democrats love oil and natural gas almost as much as the Republicans do. Indeed, the president’s website prominently touts his “approach to energy independence.”
Don’t get me wrong. Surging U.S. oil and natural gas production is fantastic news on numerous fronts—reducing the trade deficit, creating jobs, and bringing in government tax and royalty revenues. But the entire concept of energy independence is a foolish notion. The idea that the U.S., the world’s biggest energy producer, and biggest energy consumer, should somehow be independent of the world’s biggest market, the global energy trade, is ludicrous on its face. Nevertheless, every president since Richard Nixon has promoted the phrase, and each one has promised that the goal of independence could be achieved in just a few short years. It hasn’t happened. And it won’t.
I could provide chapter and verse as to the silliness of energy independence. (In fact, four years ago, I wrote a book on the topic, Gusher of Lies: The Dangerous Delusions of Energy Independence). But given that the last presidential debate focused on foreign policy, let’s just look at that aspect.
Before doing so, however, let me briefly explain how two technologies—long-reach horizontal drilling and hydraulic fracturing—have allowed American drillers to unlock gargantuan quantities of oil and gas. In traditional oil and gas wells, drillers use a vertical bore hole. With horizontal drilling, drillers begin with a vertical bore, then turn the drill bit at a 90 degree angle and proceed out from there for as much as 3,000 meters. That horizontal segment allows the well to have far greater exposure to the hydrocarbon reservoir. Once that horizontal segment is drilled, drillers rely on hydraulic fracturing to unlock oil and gas from rock formations that were previously thought to be uneconomic. Fracturing uses powerful high-pressure pumps (12,000 horsepower or more) to pump water, sand, and tiny amounts of chemicals (usually surfactants and biocides) to crack the shale or other rock formation.
The combination of those technologies has resulted in record amounts of natural gas production. In 2011, U.S. gas production hit an all-time record, more than 23 trillion cubic feet.
Oil production is also soaring. Last year, production was 7.8 million barrels per day, the highest level since 1998. And Bentek Energy, an energy analytics firm, expects U.S. oil production could hit 12 million barrels per day by 2022. At that level, the U.S. would be producing more oil than either Russia or Saudi Arabia. Add in America’s abundant coal resources—which total the equivalent of some 900 billion barrels of oil—and it becomes apparent that the U.S. may soon emerge as the hydrocarbon exporter of choice. (My colleague at the Manhattan Institute, Mark Mills, recently wrote a report on this topic.)
These surging oil and gas production numbers have led a number of people, including T. Boone Pickens and others, to claim that once the U.S. is self-sufficient in oil, it will no longer have to import oil from the Middle East. That may, or may not, be true. But it doesn’t really matter. Oil is a fungible commodity. Its price is set on the world market. The oil that we don’t buy from the Saudis or Kuwaitis or Iraqis will be sold to someone else.
So what will increased energy production in the U.S., Canada, and Mexico mean for U.S. foreign policy? The short answer: not much.
For decades, the U.S. has maintained a major presence in the Middle East and the Persian Gulf. That presence has been predicated on the belief that the U.S. cannot allow other countries to stop the flow of oil out of the Strait of Hormuz. Sure, other countries, particularly American allies in Western Europe as well as Japan, should be shouldering more of the burden of keeping the Strait of Hormuz safe and navigable at all times. But it is inconceivable that the U.S. would withdraw from the Persian Gulf.
In 1980, after the Soviets invaded Afghanistan, President Jimmy Carter gave a speech that concluded with a statement that became known as the Carter Doctrine: “Let our position be absolutely clear: an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”
The Carter Doctrine has not been repealed. Nor will it be, no matter how much oil the U.S. produces. Regardless of how much oil the U.S. produces or exports, the price of oil will still be determined on the world market. And if the Strait of Hormuz were to be blocked by Iran or any other country or entity, oil prices would skyrocket. The U.S. cannot, will not, allow that to happen. Even if we Americans don’t need the oil that comes out of the Persian Gulf, our allies and trading partners do.
Furthermore, the U.S. has significant military bases in Kuwait. Those bases will remain a critical part of America’s presence in the Persian Gulf for the foreseeable future. America has a long and rather difficult relationship with Saudi Arabia. And while that relationship makes many Americans uneasy, the Saudis are still the world’s most important oil producer and exporter. They are the swing supplier for OPEC, and will remain so for another decade or two. Just as the U.S. will not allow another country to take over the Strait of Hormuz, it will not allow a radical Islamist sect to stop the flow of oil from Ghawar or the other big Saudi oil fields.
And what about Israel? The chances that the U.S. will abandon the Israelis—militarily or economically—at any time in the next few decades are next to zero.
To be certain, there will be some friction in the U.S. as environmental groups like the Sierra Club and Greenpeace seek to push their climate-change agenda into trade policy. For instance, the Sierra Club is already trying to slow, or even stop, U.S. coal exports. But the trends now underway are inexorable. The shift from major oil importer to big-time energy exporter will require American policymakers to change many of their assumptions about the global energy market. The U.S. will no longer be just an energy buyer (although that will continue). It will also be a major energy supplier and that will require the U.S. to actively promote free markets in energy.
But for all of the changes underway in America with regard to energy, there will not be a major shift in U.S. foreign policy, particularly with regard to the Middle East.
Energy independence may be a handy talking point for vote-seeking candidates, but the realities of the global energy marketplace always trump cheap political rhetoric.