Posted by Rojas @ 4:16 pm on August 30th 2008

The impossibility of energy independence, part I: The world is flat

Our eight readers will know that every time a politician of either party declares the need for energy independence, I go apoplectic. Make no mistake, I recognize the political utility of the argument. It’s because the argument has so much currency with American voters that I’ve grown to despise it so much.

In continuation of the discussion we’re having in this thread, I’m going to lay out my basic reasons for opposing “energy independence” as a national policy goal, and my preferred alternatives. It’s going to take a while. So I’ll begin with some basic arguments about the nature of the global energy market and why economic isolationism is as bad an idea where energy is concerned, as it would be with any other good or service.

A quick note before I get into the meat of things: you’ll find most of these arguments in more persuasive and detailed form in Robert Bryce’s Gusher of Lies.

Energy is the basic keystone of our economy. Any good or service you’d care to purchase requires energy to produce; hence, energy prices are a major component of the purchase price of any given thing you’d care to buy. No single component is a greater driver of price inflation than energy costs. And it just so happens that at the moment, we’re in a bit of a pickle where inflation is concerned. Significant inflationary pressure has handicapped the fed in their efforts to rein in the prospect of a recession; the higher the price of energy becomes, the less leeway the fed will have. This is, in short, a bad time to be enacting inflationary policies of any kind.

The one thing about renewable energy that I would deem to be LEAST arguable is this: any transition to renewable energy is going to involve a short-term spike in energy costs. This is basic economics: if renewables were cost-competitive with fossil fuels in terms of energy generation, we would be using them. Indeed, in certain situations (such as individual domiciles isolated from the electricity grid) we already ARE using renewables, for precisely that reason.

One common argument that’s made in favor of renewables is that their lack of cost competitiveness is largely an outgrowth of federal subsidies. Indeed, federal subsidies should be repealed, but it does not follow from this that renewables would be cost-competitive in an environment in which subsidies don’t exist. Begin with the fact that most of the renewables suggested by advocates of energy independence–wind, solar, geothermal–are competing not against the heavily subsidized oil industry, but with the (relatively) independent coal and natural gas industries. Electricity generation in the United States involves virtually no oil. Those renewables that DO compete directly with oil–most notably ethanol–are massively subsidized themselves. But more on that later.

The central tenet of energy independence is that the United States ought to provide for its own energy needs. The problem with this is the same problem that applies to any attempt at similar isolationism in a globalized world: to do so would be economically inefficient, and the inefficiency would be felt directly by consumers. Oil production in Saudi Arabia may not be better than ethanol production in the US, but it is inarguably cheaper in terms of inputs. To say that the United States ought to be “energy independent” is an error for the same reason that it is an error to say that the United States ought to be “manufacturing independent”. Consider: the United States is by any standard “dependent” on clothing produced by foreign manufacturers. And clothing is, quite clearly, more important to human survival than oil.
Yet nobody is particularly interested in trying to guarantee that all the clothes purchased in the US are manufactured domestically. We recognize that the efficiencies created by a global marketplace outweigh the benefits of self-sufficiency; nor do we panic about the prospect of a clothing embargo.

Ah, you say, but we COULD meet our clothing needs, were a crisis of foreign supply to arise. To which I respond: we could do the same thing with energy. You CAN cover the midwest with wind turbines and every house roof with photovoltaic cells if you’re willing to pay enough. But why bring on precisely the crisis of cost that you’re seeking to avoid?

With demand for energy escalating almost uncontrollably, we ought to be seeking a policy of energy security–which I would define as a strategy that ensures that demand will be met in the event of disruption of supply or radical swings in price for a given commodity. This means diversifying sources of supply. There is, certainly, a role for domestically produced renewables in this equation, and I’ll advocate some specific policies towards that end in one of my later posts on this subject. But it also means we have to accept the fact that no one source of energy is as secure as many sources of energy. It means we continue to buy petroleum on the global market and attempt to establish new sources of supply domestically–including offshore drilling and development of ANWR. It means we keep mining coal domestically, and that we will continue to go after natural gas deposits domestically and to import liquified and compressed natural gas from overseas. It means we make it easier to build third and fourth generation nuclear power plants. It means, in short, recognition that, in this arena as in others, we are players in a globalized economy, and that to pretend otherwise is unwise.

3 Comments »

  1. It may be handy to create a section for longer multi-part posts entitled “Essays” or something similar. It’d help organize projects like this a bit.

    Comment by Cameron — 8/30/2008 @ 10:26 pm

  2. When are you assholes going to hire Cameron? He can have my salary.

    Comment by James — 8/31/2008 @ 1:11 am

  3. Nice post and kickoff to a interesting series.

    You’re wrong on the development of domestic oil in ANWR and offshore (barring major new finds) though. The ROI of developing those resources is minimal (unless you advocate chasing every last drop of oil and then moving on to whatever comes after) and we’d be much better off putting that investment in something more long term and sustainable.

    But the general gist of this argument is good (security vs independence).

    Comment by Jerrod — 8/31/2008 @ 8:50 am

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