NCPA - National Center for Policy Analysis

Is Energy Independence Realistic?

February 7, 2011

This week's uprising in Egypt that occurred in concert with a minor spike in the price of oil unsurprisingly led to renewed commentary suggesting the United States must achieve "energy independence."  But looked at with a more reasoned eye, the events in Egypt exposed the sheer absurdity of the charitably false notion of energy independence, says Real Clear Markets.

For one, the not so notable increase in oil prices was to be expected either way.  On the other hand, assuming some of the oil price increase was related to fears of supply shortfalls given the shipping lanes under Egypt's purview, what becomes apparent is that even if the United States were totally oil sufficient, our being that way would in no way shield us from global events that might reduce supply while increasing costs.  

  • Oil is oil is oil, and it's a commodity whose priceisdiscovered in deep world markets.
  • Much as we might like tonaively fantasize about walling ourselves off from international market realities, we'll never be immune to the activities around the world that impact oil's price.

Of course assuming a major uprising in the Middle East that does include a major reduction of shipments from that part of the world, the United States is poised to weather such an occurrence better than most countries.  Not only is the United States the world's third largest producer of oil, it's 11th in the world in terms of proven reserves (Canada is 12th), plus the three countries we import the most oil from -- Canada, Mexico and Venezuela -- are far from the Middle East.

The false god of independence will not wall us off from supply-driven increases, and more important, the waste of human and financial capital necessary to achieve the silly notion would be far more economically crippling than any presumed supply shock could ever hope to be.

Source: John Tamny, "T. Boone Pickens Unwittingly Reveals the Absurdity of 'Energy Independence,'" Real Clear Markets, February 3, 2011.

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