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An Analysis of U.S. “Energy Independence”

Viewed 10371 times 2013-4-17 09:26 |System category:News| its, net, revolution, products, recently

Zhao Hongtu

“Energy independence” has been an age-old dream of the U.S. administration, and recently reemerged as a hot topic in the United States with the welcome news of the shale gas revolution and its net exports of oil products. However, the current decline of U.S. dependence on foreign energy is mainly caused by its economic downturn rather than genuine energy independence. In fact, the U.S. still needs to import large quantities of crude oil. The “Energy independence” issue is to some extent an observation window of the United States, from which we can see the American public’s mentality and the rise of U.S. protectionism and isolationism in line with the relative decline of U.S. comprehensive strength.

Historical Origins

The concept of U.S. “energy independence” was initially proposed by President Nixon after the first oil crisis in 1973, when he said that the United States should “meet our own energy needs without relying on any foreign resources”. In the following year, Nixon stressed that the U.S. should achieve this goal within six years. In 1975, President Ford proposed that the U.S. should realize “energy independence” within ten years. Since then, several U.S. presidents including Jimmy Carter and George H.W. Bush have respectively put forward their goal for U.S. “energy independence”.

Entering the 21st century, with the growth in energy demand and oil prices, in particular the exaggerated link between oil and terrorism after the “9 • 11 events”, more importance has been attached to “energy independence” in the United States. Reports referencing the term “energy independence” in the Factiva news database soared from 449 in 2000 to 1,118 in 2001 and 8,069 in 2006.Books such as Winning Our Energy Independence: an Energy Insider Shows How, by David Freeman, and Get Away with Oil: How Will the Next President End America’s Oil Addiction, published by David Sandro, have become very popular.

The George W. Bush administration also repeatedly warned the American people to rid themselves of their “oil addiction”, and took active measures to reduce U.S. dependence on foreign oil. In the State of the Union and national security report published in January 2006, the Bush Administration stressed that the primary task of the U.S. energy policy was to reduce its foreign energy dependence on Middle Eastern oil, and set a specific goal of reducing 75% of its dependence on the oil of the Middle East by 2025. In 2007, George W. Bush signed the Energy Independence and Security Act which stressed the need to make fundamental changes to the way in which energy is used and contained plans to substantially increase renewable energy production before 2022.

In 2009, President Obama, who came to power in the shadow of the global financial crisis, linked the development of new and renewable energies and reducing foreign energy dependence with a reviving U.S. economy, increasing domestic employment, and improving American industry competitiveness. This attracted more attention from the American people who were anxious to rid themselves of the economic crisis. On March 31, 2010, Obama announced a partial lifting of the ban on offshore oil and gas mining, stressing that the move was aimed to remove dependence on external energy and increase domestic employment. On March 30, 2011, Obama proposed a new target to increase U.S. energy independence, and announced that the United States would seek to reduce 1/3 of its oil imports by 2025 in order to further “increase U.S. energy independence”. Obama also stressed that clean energy is both a high ground of global economic competition in the 21st century and an important way of achieving “energy independence”.

Inspired by impending exports of U.S. natural gas, as well as other good news, there has been a lot of optimism about the U.S. “ushering in energy independence” since the end of 2011. American Petroleum Institute President Jack Gerard said that with the policy gradually tilted to the oil and gas industry, “the U.S. will no longer need to import energy”. Adam Sieminski, who has been nominated by President Barack Obama to head the U.S. Energy Information Administration, said that U.S. energy independence “now doesn’t seem such an outlandish idea”. The former U.S. CIA director, John Deutch, also pointed out that the days of the United States failing to import oil from those political unstable and unfriendly countries are gone for good.

Causes and Background of Current Debate

The current U.S. hot debate on “energy independence” is mainly based on the fact that the United States has significantly increased energy production and declined in external dependence in recent years. Technological breakthroughs and high prices have prompted a significant increase in American shale gas production and exports, and this, coupled with the increase in bio-fuels and shale oil production and declining domestic consumption, has seen the United States become a net exporter of refined oil for the first time in many years. U.S. dependence on foreign energy, and in particular its dependence on Middle Eastern oil, has obviously decreased. Firstly, as the “shale gas revolution” has improved the U.S. energy supply situation, so the United States is expected to become a “major gas-exporting country”. This has not only encouraged the American public in unprecedented ways, but also caused many Americans to hope that the U.S. can realize “energy independence” through this new channel. Shale gas development first started in the United States and entered the stage of large-scale commercial development in the late 1970s. Into the 21st century, technological breakthroughs have enabled the U.S. to substantially increase its shale gas production from 11 billion cubic meters in 2000 to 137.9 billion cubic meters in 2010, accounting for 23% of U.S. total natural gas productionIn 2009, the United States surpassed Russia for the first time to become the world’s largest producer of natural gas and resources. In 2010, U.S. liquefied natural gas imports decreased by 1/4 in comparison with that of 2006. According to the 2011 Energy Outlook issued by the U.S. Energy Information Administration, U.S. shale gas production in 2009- 2035 is expected to increase nearly fourfold. By 2030, U.S. dependence on foreign natural gas should be reduced from the formerly-anticipated 65% to 6%.

Secondly, the Obama administration has incorporated the development of clean energy into its energy policy priorities, and his has led to hope among the American people that their dependency on imported oil will become a thing of the past. According to the Economic Recovery Act adopted in February 2009, the U.S. administration plans to invest over 23 billion U.S. dollars in supporting R & D as well as the promotion of clean alternative energies. President Barack Obama proposed in the 2011 “State of the Union” to seek to realize the goal of 80 percent of U.S. electricity deriving from clean energy by 2035. In the field of renewable energy development, the U.S. administration stipulates that the total generating capacity of solar energy, wind energy and geothermal energy in 2012 should be increased twofold on 2009. In his speech on March 30, 2011, Obama also stressed that substitute bio-fuel should account for half of the oil consumed by the U.S. Air Force aircrafts by 2016. According to estimates of the U.S. Energy Information Administration, the proportion of the U.S. total electricity production generated by renewable energy sources is expected to increase to 10 percent by 2012 from 8 percent in 2009. Moreover, Obama has also proposed that the U.S. should achieve the goal of maintaining as much as a million electric vehicles by 2015. This will reduce oil consumption of about 3.6 million barrels per day. According to estimates made by the Baker Institute of Rice University, if use of electric vehicles in 2050 can amount to 30% of total vehicle numbers (note that the U.S. Bureau of Transportation Statistics announced that US-registered cars reached 250 million in 2008), then daily oil consumption in the U.S. between 2030 and 2050 can be expected to be reduced by 100 million barrels and 2.5 million barrels respectively.

Thirdly, because of the fact that the U.S. has become a “net oil exporting country”, the American people feel they have taken a step closer to the goal of “energy independence”. Since 2005, the gap between the import and export of oil products in the U.S. has been steadily declining. In 2010, the United States imported 2.6 million barrels of oil products and exported 2.3 million barrels per day.According to statistics published by the U.S. Energy Information Administration in early December 2011, in the previous three quarters, the U.S. exported 753.4 million barrels of gasoline and other oil products and imported 689.4 million barrels, thus becoming a net oil exporting country for the first time in 60 years. This is mainly because of reduced oil demand in the United States, as well as a substantial increase in shale-oil production and corn-based ethanol production, which has helped to meet part of the oil demand. The U.S. National Petroleum Council (NPC) reported that if technological and environmental conditions are met, U.S. daily output of shale oil may reach 2 to 3 million barrels by 2035.

Fourthly, U.S. dependence on foreign oil, in particular the oil of the Middle East, has been significantly reduced, and this has further strengthened the American illusion of “energy independence”. In 2010, U.S. oil production reached its highest value since 2003, while its oil imports fell from 510 million tons in 2000 to 444 million tons in 2009, and its dependence on imported oil fell from 63.7% to 57.7% over the same period. The past two decades have seen an ever-increasing trend of U.S. dependence on foreign oil. According to statistics of the U.S. Department of Energy, in the first ten months of 2011, the U.S. energy self-sufficiency rate reached 81 percent, its highest level since 1992. In particular, the United States had further reduced oil imports from the Middle East: the proportion of total U.S. oil imports dropped from 23.6% in 1989 to 15.38% in 2009. In 2010, U.S. net oil imports from OPEC dropped from 70% in 1977 to about 50 % in 2010.

As “energy independence” is a deep-rooted concept in the American consciousness, so it has formed the social background for its resurgence as a hot topic. In the United States, “energy independence” is popular vocabulary and it represents a strong sense of political correctness: most people—from oil industry insiders to energy experts and economists, from government officials to ordinary people—are enthusiastic on the topic. Many enterprises and social groups, including those oil interest groups that actively advocate for offshore development and increasing domestic oil and gas production, and those environmentally-conscious groups and organizations that advocate developing clean energies, can make good use of it in order to serve their own interests. Americans have embraced too many expectations and mixed feelings on the subject of “Energy Independence”, resulting in a situation that is “just like a boat that has held all Americans’ disappointments and hopes for the future”.There are various reasons behind this:

1. “Energy independence” is a tempting target for the United States. In respect of energy security, the United States takes quite a different approach with many of the countries that provide it with a reliable and continuous energy supply. It is principally concerned with the impact and constraints of the energy issue on its national security and diplomatic strategy. The U.S. goal of seeking to end its dependence on foreign oil is borne principally out of consideration to avoid or reduce blackmail and threats from hostile resource-rich states. Many Americans believe that “energy independence” will be conducive to U.S. economic independence and growth, contribute to U.S. national security, and enhance the flexibility of the U.S. response to the Middle East turmoil. Amy Jaffe, energy expert at Baker Institute of Rice University, has pointed out that the growth of U.S. energy production has reduced the possibility of Iran or Russia exploiting “energy diplomacy” and influence.

2. “Energy independence” has great appeal to American people. In the U.S. presidential and parliamentary elections, “energy independence” has often been an important aspect in vote-winning. Ever since the first oil crisis, almost all U.S. presidential candidates have place “energy independence” high up in their list of priorities during election campaigns. The opinion polls also show that the vast majority of Americans have expressed their concern over the import of foreign oil. In March 2007, the Yale University Environmental Law Survey Center found that 93% of respondents said that imported oil was a “serious problem”, and that 70% of people said that it was “very serious”. In April of the same year, the “Zogby International poll” revealed that 74% of Americans believed that reducing oil imports should be the top priority of the federal administration. Most respondents expressed their support for the expansion of domestic production of alternative fuels. Most policy-makers and American people believe that “energy independence” is a goal that should be and can be achieved. Nine out of ten voters say that the U.S. is too dependent on foreign crude oil.

3. “Energy independence” is also one of the important areas that the two U.S. major political parties find it easier to reach consensus on. In the United States, both liberals and conservatives like to say that as long as the United States or its neighbors such as Mexico and Canada can produce enough oil, gas and other energy products, then the United States can say “goodbye” to the volatile Middle East.U.S. Democrats and Republicans have showed a rare consensus on the issue of whether or not to fight for “energy independence”. However, the two parties hold different views on how to realize “energy independence” and ways to reduce U.S. dependence on external energy:  the Republican Party strongly advocates the lifting of the ban on exploring offshore oil/ gas resources and increasing domestic oil production, while the Democratic Party is emphasizes the development of new energy, renewable energy and other alternative energy sources, and improving efficiency and energy-saving.

4. “Energy independence” is also an excuse that has been widely adopted by various interest groups to seek policy support from the federal administration. Those who support traditional energy development often stress that if all as yet unexplored lands and even polar wildlife protected areas are developed for oil drilling, the U.S will be able to realize “energy independence”. As such, “energy independence” has to some extent become a synonym for “let’s drill the land”. In early 2012, the American Petroleum Institute (API) launched a national publicity campaign on behalf of over 400 oil and gas companies in the United States to support “energy independence”. It claimed that increasing oil and gas exploration will help to create a large number of jobs and that with the right supporting policies, the United States will be able to rely entirely on domestic and Canadian oil supplies in the next 15 years. In this way the U.S. will be able to rid itself of price fluctuations in the international crude oil market and effectively strengthen its energy security. Those who support the development of clean energies and environmental organizations stress that wind and solar energy can replace fossil energy sources and that the electricity generated by such clean energies will be big enough to meet U.S. National demand. When bio-ethanol producers lobby Congress for huge subsidies and power-generating enterprises and coal companies promote the development of clean coal and nuclear power, they all wave the flag of “energy independence”.

A Realistic Assessment

“Energy independence”, which has been debated so heatedly by Americans in the context of elections, is in essence a decline of U.S. dependence on foreign energy rather than true energy independence. Besides, the improvement of the U.S. energy self-sufficiency rate is due principally to the U.S. economic recession that has led to the decline in oil consumption demand. It has also been caused in part by the growth in recent years of American domestic oil/gas production, energy efficiency improvements, and other factors. Natural gas exports and net oil exports are likely to drive a further decline in U.S. dependence on foreign energy, but they can not change the fact that the U.S. is still heavily dependent on imports of crude oil.

Firstly, from the perspective of demand, while the daily output of U.S. crude oil between 2006 and 2009 increased by 430,000 barrels, its daily demand over the same period decreased by 1.916 million barrels and its primary energy consumption decreased by 128.6 million tons of oil equivalence. The decline in U.S. energy demand has been caused by various factors. In addition to the upgrading of the U.S. economic structure, the improvement of fuel economy, the increased use of bio-fuels, and other factors, fundamentally speaking it is a result of the 2008 financial crisis, which led to a significant decline in energy demands. Because of the economic downturn and rising oil prices, overall driving mileage declined significantly and per capita oil and energy consumption was significantly reduced. In 2008-2009, U.S. primary energy consumption was down by the equivalent of 116.1 million tons of oil, and oil consumption decreased by 727,000 barrels per day. However, as the economy recovered, signs of a rebound in oil and energy consumption appeared in 2010: U.S. primary energy and oil consumption, increased by the equivalent of 81.6 million tons of oil and 377,000 barrels / day respectively, as compared with 2009.

Secondly, because of the low substitutability of oil, other energies cannot really substitute for oil. Also because of the limited size of U.S. offshore-oil and shale oil production, the outlook for substantial increases in their output in near future is not optimistic. Due to differences in use and performance, natural gas also cannot substitute large scale for oil. Currently it only substitutes partially for coal in power generation. As for wind and solar energy, their substitution for oil will require first a replacement of fuel vehicles by electric vehicles as well as changes in the oil-based industrial system. At the present time, alternative fuels have yet to be found for aviation fuel, gasoline and diesel. As such, oil will remain the dominant fuel for some time to come. Moreover, as the mining of unconventional oil and gas resources such as shale gas and shale oil, and bio-ethanol, wind and solar energy development continue to face technical, environmental and cost constraints, big leaps in their production remain to be realized.

Thirdly, U.S. “energy independence” is measured predominantly by the ratio of its dependence on foreign crude oil. U.S. crude oil imports have been growing steadily since the mid-20th century. Because of slower economic growth, energy efficiency improvements and energy conservation, its oil imports decreased in 1979- 1985. But imports resumed an upward trend after 1985 and reached a peak of 1010 million barrels per day in 2005. In 2010, U.S. daily oil consumption was 19.188 million barrels (about 21% of the world total), and daily oil net imports decreased from 11.723 million barrels in 2007 to 9.535 million barrels, securing its position as the world’s largest oil consumer and importer.According to Energy Outlook 2012, published by the U.S. Energy Information Administration, U.S. crude oil imports increased from of 19,700 trillion Btu (British thermal units) in 2009 to 20,140 trillion Btu in 2010. After that, they were expected to gradually decrease but to remain at between 16,000 and17,000 trillion Btu over 2020- 2035.

Fourthly, the close ties between the United States and the world energy market are dictated by the market and economic law, and such ties can not be severed in the short term. For comparative advantages, the cost and varying quality and standards, as well as other considerations, almost no country can truly achieve energy independence. In fact, no country is in possession of all forms of energy. Even in Iran, imported natural gas and gasoline account for 40% of its total demand. In 2005, Saudi Arabia also imported 83,000 barrels of gasoline and other refined oil products daily. Kuwait and the UAE are also in shortage of natural gas. Similarly,the U.S., while importing large quantities of crude oil, also exports part of its oil products and crude oil. For example, because of economic considerations, the U.S. Mexico-Gulf refineries export part of their gasoline to Mexico rather than to the U.S. eastern coast, as the eastern region is in a position to buy cheaper European gasoline. Moreover, the United States also exports about 15.2 million barrels of crude oil to Canada every year. Even if the U.S. becomes a net exporter of energy and oil in the future, this does not mean that it will not import any energy from the international market. As such, “energy independence” does not exist in practice.

As the world oil market is an organic system, no single country can be isolated from fluctuations in the price of and demand for world oil. So long as the United States continues to import oil and oil products from abroad or even from Canada, supply disruptions in rest of the world and any signs of trouble in the international market will inevitably affect the United States. International geopolitical events will continue to affect oil prices, and ordinary American consumers will still have to pay the price caused by such incidents. The U.S. State Department’s special envoy and coordinator for international energy affairs, Ambassador Carlos Pascual, has said: “As prices are driven by a global marketplace, we can’t delink ourselves from these global markets.” Pascual has also stressed that “the U.S. has been increasing domestic production of both oil and gas and it’s important for the nation to look at the sustainable development of energy resources. But growing demand from other countries still is going to affect prices.”

In short, “energy independence” for the United States is a beautiful but unrealistic dream and goal. With the in-depth development of economic globalization and global energy integration, economic and energy interdependence between the various countries of the world has been ever deepening, and “energy independence” is not at all in line with this historical trend. Jack Rubin, Public Relations Officer of the American Gas Association, points out that “‘energy independence’ sounds like an admirable goal, but that kind of isolationism could have a negative effect on energy prices, consumers and our economy. What we should strive for is energy security: developing clean, low-cost energy here at home while working to secure fruitful, strong trade partnerships in energy and other goods with our global neighbors”.

Additional Remarks

As “energy independence” has become a deep-rooted concept in the minds of the American people, so U.S. leaders and various interests groups, out of consideration for domestic politics and their own interests, repeatedly emphasize this target, one that is so very difficult to achieve even over an extended period. Ultimately, “energy independence” is neither achievable nor worthy as a goal. Instead, all countries should vigorously strengthen their economic and energy interdependence, and seek common development and energy security.

Firstly, the reduction in U.S. dependence on foreign energy to some extent indicates the gradual weakening of its economic vitality and the relative decline of its overall strength. In the world, Myanmar and North Korea are the two countries that can best achieve energy self-sufficiency, but they cannot shake off poverty. On the contrary, South Korea, Japan, Singapore and other countries that lack the energy resources have chosen a road of mutual dependence and in doing so have greatly promoted their economic prosperity; Dubai is another example of a region that might have achieved energy self-sufficiency but has chosen to open up to trade, and its economy has experienced explosive growth over the past few decades. By contrast, Iran’s economy has been stagnating. As far as the United States is concerned, over the past century America’s energy consumption has grown in tandem with its economic growth. From 1913 to 2005, while U.S. oil imports increased by 300 times, so its economic output also increased by 300 times.The weakening of its ties with the world’s energy providers may help to limit U.S. diplomatic constraints, but could also mean that the link between the United States and the world economy weakens, leading to a decrease in the interdependence between the U.S. and world economy. To some extent this may help to enhance the security of energy supply in the United States, but the U.S. economy and its national security may find that they encounter more risks and threats.

Secondly, the fact that many Americans are fond of “energy independence” also highlights the rise of U.S. isolationism and protectionism in the process of its relative decline. Since 9/11, “energy independence” has become a synonym for getting rid of the authoritarian regimes of the Middle East and fighting terrorism, both initiatives that have been widely supported by the majority of Americans. President Obama has repeatedly said, “We must seize back the fate of the United States from the hands of the dictators and authoritarian rulers ......and seek to end our long-term dependence on foreign oil”. While the U.S. economy has to deal with the impact of the emerging markets and in foreign affairs it has from time to time had to face the challenge of “rogue states”, “energy independence”, which has brought together a variety of complex feelings and expectations, has naturally become the spiritual sustenance of many Americans. On the diplomatic front, those who advocate for an isolationist foreign policy have also made use of “energy independence” to provide political cover for the gradual rise of trade protectionism in the United States. Facing various challenges, the United States has recently proposed a variety of economic recovery strategies, such as promoting re-industrialization, etc. But if the U.S. really slid from a free-trade advocator into isolationism and protectionism, it would be questionable as to whether or not it could revive its economy.

Thirdly, “energy independence” becoming an increasingly hot topic and a decline in U.S. dependence on Middle Eastern oil does not mean that the United States will strategically withdraw from the Middle East and Central Asia. In fact, the U.S. remains interested in the Middle East primarily because of the importance of the Persian Gulf region for the world economy rather than its interests in the imports of oil and energy investment there. Robert Bryce has pointed out that “the world’s economic health is more important than the U.S. domestic oil industry. If a military coup in which the Saudi royal family is expelled causes a flow stagnation of Saudi oil, then the entire world economy would fall into chaos.” Carlos Pascual also stressed that “We need to continue a kind of diplomacy with key producers like Saudi Arabia and Russia, because they will always keep affecting those markets, even if we have greater supplies here in the United States.”The Middle East not only affects the stability of the international energy market and America’s energy and economic interests, but is also related to U.S. foreign and global security interests. As such, even if the United States does not import oil from the Middle East, it is unlikely to sever contact with relevant countries in the region, let alone ignore the turmoil there.

Lastly, China and other countries with rapidly-growing economies and energy consumption can draw some experience and lessons from the decline of U.S. dependence on foreign energy, namely accelerating the development of clean energy and making full use of shale gas and other unconventional oil and gas resources. At the same time, we should also clearly see that the United States is entering a post-industrial society whose economy has a lower dependence on energy. Thus its oil demand will grow slowly or even tend to decline. By contrast, the economic development and energy demand of emerging countries such as China is still on the upswing. These countries, while following the market and economic laws, and taking into comprehensive consideration the costs and benefits and the protection of the environment, should fully exploit the potential of the various types of domestic energy resources. They should never blindly pursue an unrealistic strategy of “energy independence”, or set a so-called “red line” for their dependence on foreign energy, but rather strive to secure a comprehensive and dynamic energy security. At the same time, they should follow the trend of globalization, and continue to strengthen energy and economic interdependence with related countries, including enhancing multilateral dialogue and cooperation in order to seek common energy security.

(translated by Hong Jianjun)

(Opinions of the writer in this blog don't represent those of China Daily.)




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