The US economy is recovering like a ballplayer just after surgery – hesitant and weary that any misstep might be career ending. Oil prices are up again and pain is already being predicted in American industry, not to mention individual’s bank accounts. There is news to be celebrated in that US oil import is down 10% this year from 2008. The reasons, though, are a mixed bag of good and bad – we drive more fuel efficient cars and live in slightly more efficient homes, but we also increased US drilling and are experiencing decreased demand because of our economic woes.
As Republican candidates continue to wax on about the glory days, one recurring topic is blaming our incumbent president for high gas prices, claiming that Obama stands in the way of our energy independence. The notion of energy independence was brought about by Nixon’s administration in 1973. Conservative and some liberal political rhetoric pushes for oil independence – the “Drill baby drill” attitude – claiming that the more oil we produce ourselves, the more we can reign in fluctuating prices.
This is basically disaster scenario thinking, which is not totally unwarranted, but the benefits are often overinflated. Oil prices are set in worldwide commodity trading markets, nicely summed up here by the British paper The Telegraph. Producing more oil will not level the prices because global conflicts will still roil the overall market. Even though we might buy our own oil, the price of that oil will be the same as oil sold across the globe.
To even reach our current demand of oil – around 18 million barrels per day – means doubling our domestic production or, in other terms, adding another Saudi Arabia or Russia to the global market when we already know the finite supply of this natural resource. To do so would mean tapping nearly ever known source in the US including up and down the Florida Gulf Coast where oil drilling is currently a no-go. Only in a global collapse of the oil markets would independence be especially helpful, but we cannot produce enough oil to possibly offset the influence of OPEC countries on oil prices.
For prices to remain permanently low and stable would require significantly decreased demand. With the US population continuing to grow around 10% every decade and other large nations like China , India and Brazil lumbering into the first-world, it’s impossible to imagine oil demand decreasing anytime soon. Putting it in perspective, the US holds 7.6% of the world’s population but consumes 22% of the world’s oil supply.
High prices don’t sting all equally. Higher gas prices are agonizing for average car-dependent Americans and for certain industries like transportation. Meanwhile higher gas prices also mean bigger returns for oil companies and increased tax revenue. There is an obvious monetary incentive for oil companies and the States where those companies are located to have more oil produced in the United States.
Meanwhile, all industries that cannot adapt to higher prices are damaged because nearly all consumer goods need to be transported and overall prices of those goods increase. In a game of finite resources and growing population, prices can only be expected to continue rising. To truly protect ourselves is to find better alternatives of transportation. In the short run, that probably means internal combustion engines running on natural gas which is mostly produced in the US and not traded in global futures markets. While helping contain price fluctuations in the short-run, this merely swaps one finite resource for another and continues to rely on the internal combustion engine, a 150 year old technology.
Unfortunately, a long-term solution does not yet exist for shipping, but many alternatives already exist for average people looking to save money on their commute. When politicians claim energy independence as a goal, ask what the environmental cost and actual monetary benefits of that independence are. Are there benefits? Could drilling more holes in the ground to subsidize a 150-year old technology not be better spent? Can we even prevent $5/gallon gasoline and should we even try? Is subsidizing highway construction preferable to subsidizing railway or bicycle infrastructure given the big picture?
Image Source Brian A Sayrs