Is the U.S. REALLY Closer to Energy Independence?

The U.S. does not really feel any closer to energy independence.  There is too much infighting and attacking the companies which can help that energy independence, even if some attacks are justified, for the independence on energy claim to be true.  Still, a report says that the U.S. met 81% of its total energy demand from domestic sources in the first 10 months of 2011.

This is the claim of a report by Bloomberg News. That’s the highest level of domestic production since 1992, and is based on data from the US Department of Energy.

The most startling claim is that the US could “become the world’s top energy producer by 2020.” That makes sense because the US is the world’s top energy consumer, and if we are energy independent, then the US must also be the top producer.

How does the US get there? Expanded production and more efficient consumption. US liquids production in 2011 rose to 5.7 million barrels/day and natural gas production rose to 22.4 trillion cubic feet in 2010. The US consumes about 19 million barrels/day of liquids, and will never produce that much crude, but rising natural gas and coal production could balance out the total number of BTUs produced with those consumed.

Environmental groups will raise objections to the energy independence story because the abundance of fossil fuel resources will lead to a diminished effort to replace carbon-emitting fuels with clean renewable sources.

And if the US can cut its imports of crude, the US trade balance would also get a lift. Bloomberg notes that a reduction of 4 million barrels/day would slice $145 billion from the annual US trade deficit.

The US is already a net exporter of refined products like gasoline and diesel fuel due to automobile mileage improvements and fewer miles driven. As liquids production from the shale fields increases and domestic demand decreases, US refiners could continue to grow exports.

Overall, though, US per capita consumption of crude oil is little changed since the mid-1990s. The US imports about 15.4 barrels of crude every year for every person in the country.

One political benefit of increased US production, regardless of whether or not energy independence is achieved, is the increased flexibility it gives the US in foreign policy matters. In dealing with Iran, for example, the US need worry less about the possible effects of a cut to Iranian crude exports.

One thing the Bloomberg article misses, though, is the price that consumers will pay. Right now, the abundance of natural gas has driven down domestic prices for gas dramatically. If, as seems likely, the US gets involved in exporting natural gas, the domestic price will inevitably rise. Likewise, the link between the price for Brent crude and US pump prices is not likely to be broken, which means US drivers will continue to pay high prices for gasoline.

The US may reach energy independence, or something near it, but all that really means is that what was once a domestic supply source has become internationalized and US consumers will be paying more, even as they consume less.

Paul Ausick