Slate's Bizbox
hey, wait a minute: The conventional wisdom debunked.

Tilting at WindmillsWhat's all wrong with "energy independence."

By Steve Chapman
Posted Friday, Feb. 6, 2004, at 10:39 AM ET

Out on the presidential campaign trail, you can find plenty of disagreements about the Iraq war resolution, the president's tax cut, the death penalty, and whether Snickers are better than Milky Ways. But there is no debate about one subject: energy independence. Among the Democratic candidates, it's about as controversial as women's suffrage. And the Democrats will get no argument from President Bush. In last year's State of the Union address, he made a show of endorsing the concept.

How often does a slogan unite the scourges of the oil industry with its stooges? The universal support is a clue that beneath the surface, there's something wrong with the idea. In fact, just about everything is wrong with it. No one would seriously propose that the nation attain complete self-sufficiency in any other important product—cars, steel, toys, or vegetables. It would conflict with the central premise of the international trading system, which is that you should sell what you can make cheaper (or better) than others can and buy what you can't. With domestic output dwindling and convoys of mammoth SUVs plying the roads, Americans do import lots of oil—about 63 percent of all the oil we consume, double the volume of two decades ago. We do it for the same reason we import bananas and baseballs: Foreign companies offer it at a good price.

Why are candidates preaching independence in energy and not some other vital commodity, like food or clothing? Partly because foreign oil producers have a deservedly sinister reputation, thanks to the cartel known as OPEC, and partly because so much of the world's supply lies in politically unpredictable places like Saudi Arabia, Iran, and Venezuela. Cutting back on imports, the old theory goes, will make us less vulnerable to ruinous OPEC depredations. But these days, that point is rarely mentioned. Instead, Democratic candidates use "energy independence" as a synonym for "environmental stewardship"—underlining their support for limiting greenhouse emissions, conserving finite resources, and keeping oil rigs out of pristine areas.

There's nothing wrong with those goals, but in this case a catchy slogan can subvert sound policy. After all, if your mission is to zero out oil imports, shouldn't you favor expanding production here at home, by drilling in coastal areas and the Arctic National Wildlife Refuge*? Shouldn't you favor easing pollution regulations to encourage greater use of coal, which the United States has in dizzying abundance? Shouldn't you favor building lots of nuclear reactors? And shouldn't you favor lavish subsidies to promote ethanol as a motor fuel, even if studies suggest that its creation burns more energy than the end product yields? Touting energy independence to protect the environment is like getting an aggressive dog to protect your family—sooner or later, it's bound to bite an innocent victim.

It's also an invitation for Congress to slice a lot of pork. Ethanol is just one of the boondoggles that would benefit. Joe Lieberman wants to spend $15 billion over 10 years to foster coal gasification—a wholesome notion dating back to the Carter administration that has yet to fulfill its winsome potential. John Edwards didn't lose votes in Iowa by endorsing "the creation of new biorefineries to transform agricultural wastes—like corn husks, rice straw and wood chips—into energy." What farmer wouldn't like that new source of revenue? Never mind that if there were practical ways to do that at a competitive price, agribusiness corporations wouldn't need Edwards' permission to seize the opportunity.

Renewable sources of energy hold promise, but to pretend they can free us from the clutches of the House of Saud is to invite disappointment. Wind power gets lots of approving words from the candidates, but few countries have managed to use it for more than a tiny share of their electricity. The scale of the operations needed to produce energy on a significant scale would also require filling vast stretches of nature with gigantic wind turbines—something currently being contemplated by residents of Cape Cod, Mass., who oppose a project that would adorn the marine horizon with hundreds of spinning blades 400 feet in the air.

All these options do have the advantage of helping to curb the use of fossil fuel and thus combat global warming. Likewise with measures to boost auto fuel economy. But the only truly effective tonic is to levy substantial taxes on such carbon-based energy sources as coal, oil, and natural gas, forcing consumers to pay a price that reflects the damage they do. Auto fuel economy standards and subsidies for alternative fuels are a clumsy, expensive, and only modestly effective way of achieving a worthy purpose.

But the value of cutting fossil-fuel use shouldn't be oversold. Even a substantial reduction might have little effect on our imports. Since foreigners would still be the lower-cost producers, the drop in demand might come mostly at the expense of domestic suppliers. In any case, cutting demand by a given amount won't mean an identical drop in imports. Nor would it necessarily bring relief from high prices. As Brookings Institution energy specialist Pietro Nivola notes, the United States uses only about a quarter of the world's oil, and even heroic measures that cut the figure to 20 percent could easily be overwhelmed by rising demand in the developing world, particularly China. Would OPEC suffer? "Very, very marginally," says Nivola. Reduced demand might slightly lower the cost of a barrel of oil, but for price volatility it offers no protection at all. Because oil trades in a global market, we'll see prices gyrate in response to uncontrollable events abroad whether we import 100 percent of our supplies or 0 percent. When a freeze damages the citrus crop, people pay more for orange juice in Miami as well as Milwaukee.

To combat the threat of a hotter climate, presidential candidates of both parties ought to be proposing serious steps to restrict greenhouse gas emissions. But the pretext of weaning ourselves from imported oil is more likely to divert us from that goal than to advance it, and waste a lot of money in the process. The sensible approach: billions for environmental protection, but not one cent for energy independence.

Correction, Feb. 6, 2004: The original version of this piece mistakenly referred to drilling in the Alaska National Wildlife Refuge; it's the Arctic National Wildlife Refuge. (Return to the corrected sentence.)

Print This ArticlePRINTDiscuss this in The FrayDISCUSSEmail to a FriendE-MAIL
Share on FacebookPost to MySpace!Share with MixxDigg ThisShare with RedditShare with del.icio.usShare with FurlShare with Ma.gnolia.comShare with SphereShare with Stumble Upon
Steve Chapman is a columnist for the Chicago Tribune.
Join the Fray: our reader discussion forum
What did you think of this article?
POST A MESSAGE | READ MESSAGES

Remarks from the Fray:

Eventual energy independence has little to do with enhanced local production of fossil fuels, whatever the Republicans say. That would only be a temporary solution, and one which enriches U.S. industries that keep my interests in mind about as much as the Saudis do.*

No, "independence" comes from using renewable sources of energy. Chapman mentions wind, but how can he neglect solar power? The current problem with solar power is that high efficiency devices use exotic materials and are too damn expensive. Enough engineering investment will fix that, and even now, technological solutions exist which have the potential to drop the cost of solar power generating equipment to the point that you could panel your house with it (for example). Decentralized units can power the grid, or can generate power independently of it. (Imagine the impact on the third world.) The reason this technology isn't in your house right now is because it's forever at an early development stage. The reason it's growth is stunted is that oil remains cheap.

It's one of those cases where the social good is at odds with short-term market forces. But that's one reason we have government. We can wait until the oil starts to run dry (which will be the point when market forces on their own elevate solar power), we can artificially inflate the price of oil (more than we already do), or we fund substantially fund the R&D with tax dollars. When the Democrats (or even the Republicans) propose to do this, I applaud. And vote…

--Keifus

(To reply, click here)


Chapman's proposal to tax carbon-based energy sources is an excellent demonstration of the principle that markets can't be fixed by imposing regulations, but only by creating appropriate price signals. Just as pollution reduction is best achieved by cap-and-trade schemes rather than by hard-to-verify regulatory limits, oil use is best managed by charging a fair price--which might not even require taxes, only an end to subsidies for energy producers.

European rags routinely sneer at the "God-given right" to cheap gas most Americans take for granted. I like cheap gas as much as anyone else; but subsidies for one industry effectively amount to taxes on all other industries. Subsidies for oil exploration and drilling--not to mention expensive wars to promote "stability" in oil-producing regions--may keep oil prices low, but indirectly raise the prices of *all other* consumer goods. Social engineering at its worst and most sneaky.

--post_hoc_prior

(To reply, click here)


Mr. Chapman clearly doesn't understand how the oil market works.

OPEC sets a price, and everybody else pays it. You can buy a barrel of oil from Texas for exactly the same price as the barrel you buy from Saudi Arabia.

Yes, the Saudis make more money on that barrel than the Texans do, because it costs them less to produce it. But everybody's reaping monopoly profits, thanks to the cartel.

And when Mr. Chapman talks about how energy-independence means we should be drilling in Alaska, he betrays a rather huge amount of ignorance as to what "energy-independence" means. Yes, we could, short-term cut, our imports by drilling more in Alaska, but unless we worked on the demand side of the equation, all we'd do is delay our dependence a few years.

The only true was to energy-independence is to create alternatives. Mr. Chapman wants to dismiss these with a single example, but the truth is that the technology is advancing so rapidly that new things become feasible every day. An agenda, today, for energy-independence isn't about becoming energy independent tomorrow.

It's about slowly reducing our demand over the next 10, 20 years, as new technologies make new options possible. Wind power, tidal power, and solar power all look to provide increased options over the next 10 years. Do they all have drawbacks? Sure. But those drawbacks get smaller every day.

--Ronaldinho

(To reply, click here)

(2/6)

Washington Post
The Washington Post
OPINIONS
The Great Debate
Marcus | Forget Biden. I'd like to see McCain face off against Palin.
Toles: Another McCain SurpriseStumped: Where's Palin's Baby?