Home > Uncategorized > “Energy Independence” or “The Trouble With Obama”

“Energy Independence” or “The Trouble With Obama”

Note: Pollution is a separate issue which I have discussed in previous posts, my intention here is to deal only with the notion of energy independence.

The idea of “energy independence” is stupid.  It’s a political scheme to get conservatives on board with “green energy.”  The reasons for concern about our “dependence” are vague and almost never explained but I can think of two. 

1. We are worried that countries will somehow cut us off abruptly, possibly for some hostile strategic purpose.

2.  We wish certain countries that are not technically enemies but whom we don’t really like were poorer.

Similarly there seem to be two basic strategies being advocated for the remedy of these.

A. Do more domestic drilling.

B. Convert the economy to “alternative fuels.”

Let’s examine the first “problem.”  To see the difficulty involved in applying a global embargo on a country, just look at Iran and North Korea.  The world cutting off our oil supply, would require the coordinated effort of nearly every other nation.  This seems very far-fetched to me on its face.  If somehow this did happen, the nation would not collapse, we would simply be forced into the position that we are trying to force ourselves into now.  The only reason this should be even remotely worrisome is that it could temporarily disable our military apparatus which may leave us relatively defenseless.  But even if Saudi Arabia managed overnight to stop all oil flowing into the US, I suspect we would still have enough domestic supply to fend off a Saudi invasion…  By the way, this is why we have a strategic oil reserve, it isn’t there to keep gasoline prices low in an election year.  If we are scared of this happening make the reserve bigger, don’t take over the whole energy sector. 

Finally, the first solution (A) is directly counterproductive to this end.  This is because the oil in the ground under America is a reserve.  The more we deplete it, the more we are dependent on other countries for future oil.  If we really wanted to alleviate this threat, we should outlaw all domestic drilling and buy as much oil from Saudi Arabia as possible.  The second solution would in fact mitigate this problem but now let’s consider what it would entail.

One of my least favorite things to see on TV are those commercials by oil companies where they get some random person off the street talking about energy policy and they say something like “Someday oil is going to run out, we have to prepare.”  The market does this naturally.  The expectations about demand and supply for oil in the future are priced into the market for oil today.  This price should rise roughly at the rate of interest (see previous post) and our consumption of it would fall gradually (other things being equal.  Note that if we didn’t hold interest rates artificially low, we would consume less fossil fuel.  When it became expensive enough, other energy sources would become profitable.  The most efficient ones would become profitable and come online first.  There would be large profits possible for people who could develope cheaper energy sources and there would be no lack of motivation for people to do this if it were possible.  But these people act like one day the well is just going to suddeny run dry and the world will be thrown into a panic for lack of oil.  There is simply no reason to expect this to happen in a free market.

Now what the green energy people want to do is to use the government to manipulate this market to force us into less efficient energy sources before they are necessary.  This doesn’t make us richer.  It doesn’t “create jobs” (see “The Job Creation Myth“).  It is true that it would hurt countries that produce a lot of oil but there are several things we have to notice about this. 

 First, the magnitude of this harm is likely to be somewhat slight.  They act as if every dollar worth of oil we buy from Saudi Arabia is another dollar they can spend on rocket launchers for Hammas.  But this isn’t true.  If we don’t buy a barrel of oil, they will sell it to someone else.  The only harm done to them would be via a lowering of world oil prices due to our decrease in demand.  But the US subsidizing windmills is not going to cut the world oil prices in half.  I don’t have any estimations of this to cite here but my guess is that this effect would be small.

Second, it would hurt us just as much as (probably more than) it would hurt them.  Trade is mutually beneficial (see comparative advantage). 

Third, this lowering of world oil prices would be a benefit to other countries we have equally rocky relationships with who import oil.  China, India, North Korea etc. would be able to get oil cheaper, putting us at even more of a competitive disadvantage than we are now.

So argument number 2 boils down to this: There are some countries in the world we don’t like for some reason but we don’t not like them enough to openly embargo them or otherwise confront them directly.  We want to hurt these countries and we are willing to hurt ourselves as well in order to do it so instead of implementing such an embargo, we are going to have government try to artificially restructure our entire economy in order to slightly reduce world demand for the main export of these countries (also while we do this we will continually whine about how we have so few “partners in their region”).  Doing this will help other countries that we also don’t like but that’s ok because….(I don’t know why that’s ok but apparently it is).

Now listen to Obama discussing the issue particularly the following language (nearly every sentence in this speech is profoundly confused but I will resist the temptation to deal with them all).

I’m happy to look at other ideas and approaches from either party as long as they seriously tackle our addiction to fossil fuels. [Then some examples of different possible forms of government intervention]… But the one approach I will not accept is inaction.  The one answer I will not settle for is the idea that this challenge is somehow too big and too difficult to meet.  [Talks about WWII and the moon landing]….what has defined us as a nation since our founding is the capacity to shape our destiny, our determination to fight for the America we want for our children.  Even if we’re unsure exactly what that looks like, even if we don’t yet know precisely how we’re going to get there, we know that we’re going to get there.

Translation: Imagine what you wish the world were like and then trust government planning and control to create that world, even though nobody really knows how to get there and I’m not really telling you what I’m going to do.  But whatever you do, don’t consider the possibility that the right thing for government to do about energy might be nothing. 

He doesn’t have any idea what we should do about energy.  The only thing he does know is that somehow it has to involve more government intervention.  He is willing to consider any ideas as long as they require some sort of government power grab.  The only option he is explicitly taking off the table is the only correct one which is for government to do what it was established to do (protect freedom and property rights) and stop involving itself in our consumption decisions, including where we get our energy.  Is it possible that energy independence isn’t really the goal that these people have in mind?

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