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Forget Energy Independence: Producers Have America Over a Barrel

12:00 AM, Jan 21, 2012 • By IRWIN M. STELZER
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The pipeline’s promoters say they will file a new application to traverse a less sensitive route, but that will trigger a new review that former State Department officials reckon could take up to two years. Meanwhile, Canadian prime minister Stephen Harper will visit China next month with energy deals top of the agenda. China wants oil, Harper wants to “diversify Canada’s exports,” Joe Oliver (his natural resources minister) wants to reduce Canada’s reliance on the U.S. in order to strengthen its “financial security,” and Enbridge Inc. wants to build a pipeline to tanker terminals on the west coast, for shipment to Asian markets is under consideration. All part of an increasing energy interdependence: Canada has reserves, China has the capital needed to develop them, and the markets are eager for more and more oil. Earlier this month, PetroChina bought out its partner and took control of the MacKay River oil sands project.

All of this makes one thing clear: Talk of energy independence for America is just that—talk. At least for the foreseeable future. Yes, shale gas will provide an enormous increase in U.S. energy resources, assuming the environmentalists’ efforts to block development fail, but the infrastructure for making it usable in automobiles is in its infancy. And yes, America is “the Saudi Arabia of coal,” but coal is dirty, methods for cleaning it economically have yet to be developed, and it is too lumpy to put in a gasoline tank.

Although it is now clear that the “peak oil” theory has been mugged by reality, the fact of the abundance of crude oil in nature is of little significance to energy policy. Much of that oil lies under the sands of hostile nations; some of it is in Mexico, where mismanagement of the industry is producing a decline in production; some is in unstable countries such as Nigeria; and a good deal is in Venezuela, where production is also declining and anyhow is under the control of a volatile leader.

Nothing much can be done about that. But Canada, a friendly neighbor, is rich in oil, and has told U.S. environmental groups—“narrow minded and parochial,” according to Wenran Jiang, an energy expert specializing in Sino-Canadian relations at the University of Alberta—to stay south of the border while it develops plans to expand production from its huge oil sands reserves. The U.S. offshore has yet to be fully tapped. The resources of Alaska and many of the states in mainland America have not been developed to the fullest. All because of government policy that is sending Canadian oil to China, and making it difficult to obtain drilling permits in America.

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