Seeking Energy Independence & Other illusions
by William O'Keefe
September 10, 2012
Children and politicians say the darndest things! Energy Independence has been a political slogan since 1973 and the history of efforts related to it demonstrate that policy based on slogans is not an effective approach to policy planning.
Since 1973, there have been at least 7 major energy policy initiatives based on illusions of scarcity, dangerous dependence, security, and environmental impacts. Hundreds of billions of dollars have been wasted chasing policy objectives that were not based on sound economics, realistic technology expectations, or energy realities and on promoting technology forcing initiatives. The outcome from these efforts was waste, failure, and crony capitalism.
In an interconnected global economy pursuing independence for any good or resource will usually be a wrong headed wasteful exercise. For energy, our goal should be abundance, affordability, and increased security of supply.
Technology, private capital, and access to private lands are creating an era of energy abundance for North America. Imports from unstable regions of the world are declining and will continue to decline if policy initiatives embrace developing North American resources, positively and not reluctantly as now is the case with the federal government. A constructive energy policy would reverse past policies that have kept off shore opportunities, the coastal plain of Alaska, and the Eastern Gulf off limits. A self imposed embargo on developing our own resources while cursing the risks of imports is irrational and hypocritical. It would also help if unnecessary, counterproductive regulatory barriers were removed and leasing under the Five Year Leasing program accelerated.
The goal of North American independence is realistic with one important caveat. High prices have made the production of oil sands, shale gas and oil economic. If oil prices collapsed below $50 or $60 for a prolonged period, as they have done in the past, some exploration and production opportunities would no longer make economic sense. As has been documented, production alone is not sufficient. The infrastructure to move crude and natural gas from where it is produced to where it is refined and consumed is also an imperative. Moving ahead with Keystone XL is an important part of infrastructure enhancement.
Whether the next Congress and Administration pursues "independence" as a goal is less important than having an energy policy that reflects the important role that fossil energy will have for decades to come and finally recognizes that technology forcing industrial policy initiatives are totally wasteful. Subsidies and mandates for fossil alternatives which are no where near commercially viable should be replaced with a long term commitment to basic research which is the best route for making sure that the US remains the leader in technology development and innovation.
Abundant and affordable energy is an essential input to our economy. If we are going to return to growth levels of 3% or more on a sustained basis, we need an investment friendly business climate, private capital investments for productivity and innovation, and competitively priced energy.