The limits of energy ‘independence”
Rising fuel prices and the prospect of more pain to come has the political class falling over itself to promote energy independence and the need for more domestic energy production.
More domestic production – whether it’s more oil and gas, or more renewables – is a fine and necessary thing. But, as Jonathan Bydlak writes, “independence” can lead to a “false hope” narrative than ignores some very basic economics:
…proponents of energy independence make claims about its benefits that go well beyond its potential value in times of war. President Biden even recently suggested that energy independence will “protect our economy over the long term.” Particularly considering the level to which the US has already achieved independence, claims like this should be met with skepticism.
More broadly, just as it doesn’t make sense to grow all our oranges in Massachusetts, it also doesn’t make sense to get all our energy from within our own borders. If lawmakers were serious about reducing our exposure to future shocks, there’s plenty we could do that would help. Taking a lesson from Europe and reconsidering the role of nuclear power in our energy mix would be a good start; so would lifting or revising the wrongheaded Renewable Fuel Standard that props up less efficient domestic ethanol.
The reality is that both parties are wrong in their approach to energy. Bipartisan support for protectionist energy policies doesn’t do us any favors in normal times — and as our experience over the last month shows, it does little to shield us from worldwide turmoil when it arises.
The U.S. can produce oil at unprecedented levels…and the price would be determined based on global supply and demand. If global demand continues to race ahead of supply, prices will rise…regardless of how much we produce in the U.S.