Is ‘energy independence’ good for the United States?
Onthe newly Trump-ified White House website, a section entitled “An America First Energy Plan” talks about howthe U.S. can supply its energy needs from what’s in the ground within our borders, to achieve “energy independence from the OPEC cartel and any nations hostile to our interests.”
That’s perhaps a wise goal, in and of itself; nobody wants U.S. foreign policy driven by desire for another country’s natural resources. But here’s the question: What does the U.S. give up if it cuts itself off from foreign sources of energy?
In its annual energy outlook, economists from the British energy giant BP predict that the U.S. can be energy “selfsufficient” by 2023. That term is used deliberately. BP, which is interested in selling oil and gas products all over the world, defines “self-sufficiency” in terms of a country’s balance of imports and exports.
It’s not as simple as just producing lots of oil, which drillers have done in recent years as drilling technologies opened new reserves in U.S. shale formations and drove U.S. oil production from an average of about 5.5 million barrels a day in 2010 to a peak of 9.4 million in 2015. Crude also needs to be processed.
“So even if wethink that the U.S. becomes a small net exporter of oil in the later years of our outlook,” said Mark Finley, BP’s manager of global energy markets, “the U.S. will still import heavy crude because there are U.S. refineries that are optimized to process heavy crude.”
Abit of explanation: U.S. oil fields produce mostly less-dense “light” crude. U.S. refiners have struggled to accommodate the increasing flow of domestic oil over the last several years because they were set upto handle heavy imported crude. Nowthat the ban on U.S. crude exports has been lifted, it maymake economic sense for refineries that still process heavy crude to keep doing so, importing it from foreign producers.
So Finley says there’s an efficiency argument for continued trade in petroleum: It could get very expensive if all refineries in the U.S. had to retrofit themselves to only process light crude. But there’s also an argument about risk management.
“You could make a strong case that this interconnected world serves the cause of energy security,” Finley says. For example, he cited the experience of Japan after a devastating nuclear accident. “Because Japan could tap into a flexible world system to afford oil, gas, and coal frankly, they could keep the lights on after Fukushima.”
You might still believe that it makes sense for the U.S. to maximize its domestic energy production because of the jobs and wealth it creates (remembering as well that there’s an environmental downside as well). But don’t believe it on the basis that the U.S. could thereby cut itself off from the rest of the world.
“You could make a strong case that this interconnected world serves the cause of energy security.” Mark Finley, BP’s manager of global energy markets