The Magazine

The 'Dependence on Foreign Oil' Canard

The worst justification yet for Obama's energy plan.

Jun 22, 2009, Vol. 14, No. 38 • By JEFF BERGNER
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As the public's enthusiasm for a major new energy tax wanes, advocates of the administration's "cap and trade" emissions proposal have found a new justification: national security. We should adopt a cap and trade energy tax, they say, because this will reduce our dependence on foreign oil and thus strengthen America's national security. It is unsurprising that national security would be the last refuge of a policy that cannot be sold on its merits. But "energy independence" is a mantra that has been around for decades, with adherents across the political spectrum. Does it really wash as a rationale for cap and trade?

The central point to be made is this: If lessening the nation's reliance on foreign sources of energy is the goal, there are cheaper, quicker, and more reliable ways to achieve it. Moving aggressively to develop proven American energy reserves is one. To be sure, it would take years to develop the Arctic National Wildlife Refuge reserves or significantly expand our offshore drilling capacity, but a national commitment to do so would be a beginning. So would removing the legal and regulatory barriers to the development of nuclear energy. As would expanding natural gas production and clean coal technology. Even a large, straightforward tax on oil or gasoline--though devastating to our economy--would offer a quicker way to diminish U.S. reliance on foreign oil than cap and trade.

But this, of course, is not the goal of cap and trade; the goal is to reduce greenhouse gas emissions by moving the American economy away from carbon-based fuels. Cap and trade is an environmentally motivated tax, pure and simple, which is being advanced for reasons which have nothing whatever to do with U.S. national security.

Might it be possible, however, that even though cap and trade is an environmental project, it would have marginal national security benefits? After all, every American president since the 1970s has paid lip service to the notion of reducing America's reliance on foreign energy. All the while, the share of oil we import has grown, decade by decade, through Democratic and Republican administrations and Congresses. If energy independence is really so important, why have we done so little for so long?

The United States imports a large share of its automobiles from Japan, its consumer goods from China, and certain specialty metals required for defense from African nations. Is there something peculiarly dangerous about importing a large share of oil? Is oil somehow different from other products or commodities? Let's examine the dangers of reliance on foreign-sourced energy one by one.

First, could foreign oil suppliers come together to raise oil prices rapidly and throw the U.S. economy into a tailspin? We had this experience twice in the 1970s, in 1973-74 and 1978-79. But today the Organization of Petroleum Exporting Countries (OPEC) is constrained in its ability to raise world oil prices and likely will remain so. OPEC countries currently produce only about 40 percent of the oil the world consumes. And OPEC has been unable to impose perfect discipline even on its own members. While the Middle East has more than 50 percent of proven reserves, oil is found in large quantities in Africa, the North Sea, Russia, South America, Mexico, and North America. The ability of oil-exporting nations in different regions, with differing governments, to cut production and raise prices has proven to be limited. Despite increasing U.S. dependence on foreign oil over the past three decades, only a small share of the ups and downs of world crude oil prices can be fairly attributed to cartel-like production decisions.

Indeed, a far more likely cause of a spike in gasoline prices would be a hurricane along the Gulf Coast disrupting domestic refining. If keeping gasoline affordable is our concern, we would be far better advised to expand refining capacity than to fret over imagined schemes of cartels that have long since lost their power to control markets.

Also unlikely is a politically motivated cutoff of crude oil imports. The United States happily is not in the precarious position of, say, Georgia or even portions of Europe, which are highly dependent on Russian energy. There, political manipulation of supplies is a genuine national security problem. Even the threat of a cutoff of Russian energy is a significant matter for nations dependent on that single source.