The Impossible Dream of Energy Independence

Reason ^ | February 20, 2008 | Brian Doherty

[neverdem]

Energy Analyst Robert Bryce Explains Why Trying to Make All Our Own Power is a Foolish Idea

In his forthcoming book Gusher of Lies: The Dangerous Delusions of “Energy Independence” (PublicAffairs) Robert Bryce, managing editor of Energy Tribune and author of Pipe Dreams: Greed, Ego and the Death of Enron, grapples with what he detects as a growing belief, both among policy elites and the public, in “energy independence.”

That’s the notion that America should disengage from world energy markets and seek self-sufficiency in energy production. To Bryce, this is not only impossible, but dangerous to even attempt. As he writes in the book’s introduction, the quest for energy independence “means protectionism and isolationism, both of which are in opposition to America’s long-term interests.”

Some of the myths of energy independence Bryce takes aim at are summed up in this January Washington Post op-ed. They include the false belief that U.S. energy autarky can curb terrorism; that government investment in “alternative fuels” can end our use of foreign oil; that we can starve evil petro-regimes of money by refusing to buy their oil; and that less reliance on foreign energy sources can make our energy supply more secure.

Like any decision to isolate ourselves from the free international market, the search for energy independence would, Bryce demonstrates, lead us to waste our money and, yes, our energy doing things more expensively than they can be done by taking advantage of the international division of labor and flow of capital.

reason Senior Editor Brian Doherty, author of This is Burning Man and Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement (PublicAffairs), interviewed Bryce by phone last week.

reason: While “energy independence” has soared to fresh public prominence in this era of soaring gas prices and Mideast wars, it’s not a new idea, is it?

Robert Bryce: The first president to promote the idea was [Richard] Nixon in the wake of the oil embargo in 1973. In his State of the Union address in 1974, Nixon said that he was aiming for energy independence by the end of the decade. He hoped that by 1980 the U.S. would not be importing any oil. And every president since Nixon, in one way or another, has espoused a similar idea. But if you look back at the data, the U.S. was a net crude oil importer [as early as] 1913 and ever since we’ve been a net crude importer with a handful of years [as exceptions]. It’s remarkable how much the rhetoric about “energy independence” has had no connection with reality.

reason: What do its proponents think we can get out of energy independence?

Bryce: The main talking points for those who promote energy independence are, one, that if we were just more tech-savvy we can develop lots of new jobs, and that would be great—we can build windmills, solar panels, whatever nifty new whizbang tech is going to replace oil, and that will stimulate the economy.

Second, they love biofuels. We can just grow the fuels we need to replace imported oil and it will be great for farmers and the rural economy. Third, [energy independence proponents] conflate oil and terrorism. Those arguments really came to the fore since the 9/11 attacks. We buy imported oil, some of our suppliers are Islamic petro-states, some Islamic petro-states send some dollars to support radical Islam, therefore oil equals terrorism and “energy independence” is anti-terror.

The idea is that if we could isolate the oil-exporting countries that in theory support terror we’d cut off its lifeline. The connections of Saudi Arabia to the 9/11 terror attacks are real, I’m not denying that. But you cannot, given the complexity and enormous size and interconnectedness of the global crude oil market, separate one actor from another.

S. Fred Singer [of the Science and Environmental Policy Project] came up with the best analogy. He described the global oil market like a big bathtub. All the oil production is dumped into one bathtub and all consumers have straws sucking oil out. [For all economic purposes] it’s like we’re all sucking from the same common pool. To say you are not gonna buy Saudi oil, or Algerian oil—it’s crazy. For example, the U.S. hasn’t purchased a dime of Iranian oil—except for a small amount in the early ‘90s, but for the most part no Iranian oil since 1979. And that hasn’t stopped Iran from supporting Hezbollah.

reason: Can increased energy efficiency help us achieve the goal of “energy independence”?

Bryce: To answer that, you need to understand the “Jevons paradox.” In 1865 the economist William Stanley Jevons published a book, The Coal Question, which projected that Britain was on the precipice of disaster because it was running out of coal. Sound familiar? But it still hasn’t happened. Jevons’ discovery was that energy efficiency doesn’t decrease demand—it increases it.

We’re told that if we just push more efficient technologies like fluorescent light bulbs and drive Priuses that energy use will decline. It’s just not true. There’s a graphic in my book that shows the decline in the number of BTUs consumed per dollar of GDP [from 19,000 BTUs consumed per dollar of GDP in 1950, to a projected 9,000 BTUs in 2010], but energy consumption continued to grow.

Efficiency can be a great thing for its own sake. It can mean good things for the economy and for people, but it doesn’t mean we’ll use less energy overall. We’ll use more. And not just the U.S., but the Chinese, Vietnamese, Pakistanis.

One anecdote that illustrates the principle: I had a friend who bought a Prius tell me the other day how he used to take the train to New York to see the opera. But now they have a car that gets 40 miles per gallon, so they just drive. It becomes more efficient on a mile per gallon basis, but on a total BTUs consumed basis, no.

reason: How about domestic renewables as a solution to dependence on foreign oil?

Bryce: I’m not opposed to renewables. I have 3,000 watts of solar panels on the roof of my home. I understand the economics of renewables. But an incurable problem for both solar and wind is intermittency. The sun doesn’t shine at night. I like to have lights and TV at night. Unless we come up with some incredibly efficient method of storing large amounts of electricity, it’s not a viable source because we can’t store it.

It’s the same problem with wind. I consider wind the electric-sector equivalent of the ethanol hype. At a conference recently I asked a wind guy, “Without subsidies, how many projects now under way [regarding wind] would make economic sense?” He said maybe 30 percent.

reason: You sound skeptical about ethanol as well.

Bryce: The ethanol scam is the longest running robbery of taxpayers in American history. Some recent news reports, which I don’t discuss in the book, include a report showing [that] corn-based ethanol releases [more] greenhouse gases than fossil fuels. That’s just one indictment of the inefficiency of the whole process. It’s also fiscal insanity—providing 51 cent per gallon subsides for making fuel from what’s already the most subsidized crop.

In 2005 federal corn subsidies approached $9.4 billion, which is around the entire budget of the Department of Commerce, with 39,000 employees. It also takes orders of magnitude more water to make corn ethanol than [is used for] gasoline production. Given the problems in the West and Southwest with water, it’s insane to think we’re going to be able to produce sufficient ethanol to make a dent in gasoline use when the amount of water needed is so high.

reason: What about the promise of changes in foreign policy in the Mideast if we could wean ourselves off their oil?

Bryce: People like to think that if only we bought less oil we wouldn’t need to be in the Persian Gulf. It sounds appealing. The reality is the U.S. gets 11 percent [of its oil] from the Persian Gulf. From a strategic point of view it was a big mistake assuming militarism is better than markets. The key adjustment is to make markets trump militarism when it comes to the Persian Gulf. We’re not the most reliant [on Persian Gulf oil]—it’s the Japanese, the French, the rest of Europe, China. If we want to have stability in the Persian Gulf, it’s not just for the U.S. It’s good for the whole world, so the U.S. needs to understand that it shouldn’t be its burden alone.

reason: I thought what you had to say about Saudi Arabian energy independence was interesting.

Bryce: The Saudis in 2005 imported 83,000 barrels of gasoline per day. Here is a country with the single largest oil deposits on the planet and they are importing gasoline. Iran too is importing 40 percent of its gasoline, because it doesn’t have enough refining capacity. Iran has the second largest reserves of natural gas and is importing natural gas to northern Iran because its gas reserves are in the south. Do we need better examples of energy interdependence? If even Saudi Arabia and Iran are energy interdependent, why wouldn’t we be?

It isn’t like energy is the only vital thing we aren’t “independent” in. I have a chart in the book which shows, using data from the U.S. Geologic Survey, some mineral commodities. We import 100 percent of more than a dozen—fluorspar, yttrium, strontium, vanadium, arsenic among others. These are industrial commodities we need to power our economy—yttrium in televisions, microwaves, ceramics; strontium for nuclear fuel; manganese in steel and iron. These are things we have to have, and we import 100 percent of them.

The only energy source with zero carbon emissions in electric power is nuclear. And that’s another example of interdependence. We import 83 percent of our uranium. There are other countries like Kazakhstan with much larger reserves of uranium than the U.S. which can mine it more cheaply.

“Energy independence” would dictate that if we use nuclear power we must produce our own uranium to fire those reactors. Why would we wanna do that if someone else is a lower-cost producer? If we get to [obtain a resource] for less, why wouldn’t we do that? We do it with shoes, iPods, cell phones, watches, fresh flowers, you name it. We rely on global commercial markets for all kinds of things—what’s wrong with relying on it for uranium?

reason: What did you think of the recent energy bill in the context of your book’s concerns?

Bryce: If I could tell Congress one thing, I’d tell them to forget about doing anything for the energy business. They’ve done enough damage, don’t do any more. The bill is unfortunately named the “Energy Independence and Security Act of 2007.” It’s got 300 pages of blather about ethanol and biofuels that does nothing for energy independence or security. They mandate 36 billion gallons of biofuels for every year by 2022. It’s pure fantasy, the idea that we can hit that target.

Every presidential candidate has talked about energy independence and every one conflated oil and terrorism, except for Ron Paul. Paul as far as I can tell was the only presidential candidate who dared to say something to the effect of, when it comes to energy, we need to let the market work, that supply and demand and prices should make decisions about [how and from where we get energy].

reason: Do you think the current fears about “peak oil” feed into the craze for energy independence?

Bryce: Some time the world will reach a limit in the amount of oil [produced] per day and a decline will start. But the decline is likely to be shallow, not skiing down a steep decline. As we get closer [to peak oil], prices will rise, and as prices rise a pool [of oil] that’s previously unecononomical gets worth drilling.

I consider myself a liberal mugged by the laws of thermodynamics, but all [interest in my thesis] has so far come from the [free-market] right. The left doesn’t seem to care. They just hate fossil fuels. To me, I see we had huge government support for ethanol mandates, and how has that turned out? Modern leftists [who question the value of freer markets in energy] don’t seem to know, for example, the history of the Synfuel Corporation or how the prohibition on using natural gas for electricity worked, or how price controls made for gas lines. With all those government interventions, if the market had been allowed to work, the outcomes would have been a lot better.

Discuss this article online.

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[neverdem]

(1Ratio of current account of oil exporters to current account of the United States (in percent, right axis).)
Oil exporters are close to becoming more important than Asia in the holding of net savings outside the United States (Chart 3). While Asia's current account surplus is projected to have risen to US$341 billion in 2005 (equivalent to 47 percent of the United States' current account deficit), that of oil exporters is projected to have reached US$296 billion (equivalent to 41 percent of the United States' current account deficit). Relative positions are expected to reverse in 2006. According to IMF projections, oil exporters' current account surplus would amount to 46 percent of the U.S. deficit in 2006, while the figure for Asia would drop to 41 percent.

This libertarian article seems to regard our adversaries as benign. NATO is a useless eunuch, and the European Union views us as a competitor.

[patch789]

the electric car,
is our only hope.

[familyop]

Most members of every couple and most singles are driving cars to commute to temporary jobs for importers (who require much freight fuel). If our leadership continues on the current foreign relations path, a high-intensity international war will fix that.

[jeddavis]

That ancd the idea of the neighborhood work-site. In other words, in any given metro area, there could not be more than 20% of anybody who needs to be anywhere more than a mile from their homes more than one day a week; every body else could be working four of the five days from a neighborhood site he walks to or drives less than a mile to; get rid of 70% of the commuting. THAT idea could be implemented in four months and we could tell OPEC to screw off.

[gusopol3]

S. Fred Singer [of the Science and Environmental Policy Project] came up with the best analogy. He described the global oil market like a big bathtub. All the oil production is dumped into one bathtub and all consumers have straws sucking oil out. [For all economic purposes] it’s like we’re all sucking from the same common pool. To say you are not gonna buy Saudi oil, or Algerian oil—it’s crazy

It sounds appealing. The reality is the U.S. gets 11 percent [of its oil] from the Persian Gulf

strange straws

[Free Vulcan]

Our energy policy and ending our dependence on foreign oil needs to be centered around efficiency, getting more out of what we use. We need to drill more, build nuclear, build clean coal, use new battery technologies and supercapacitors, better engine designs, etc. I think we need to look at going to a diesel economy like Europe too.

Biofuels have a place in that, primarily as oxygenates for better fuel burn. Other alt energy can fit in there too. But it won’t be our savior.

We don’t have to have complete energy independence, we just have to drop the price of oil enough that the Arabs have a harder time funding themselves and their activities.

[From many - one.]

Convert the workday to 4 ten hour days wherever possible

[PubliusMM]

“means protectionism and isolationism, both of which are in opposition to America’s long-term interests.”

Not necessarily. Being in a position to tell the folks currently exporting oil to us to go pound sand doesn’t mean that we will.
However, there is only one position of strength in this economic model, and this is to be independent of the need to import. From that position of strength, there is a much greater likelihood that crude markets will be driven more by rationality than emotion.

[PubliusMM]

“The only energy source with zero carbon emissions in electric power is nuclear. And that’s another example of interdependence.”

Sounds like that’s the place to start, eh?

[jeddavis]

One other thing which needs to be part of any reasonable American energy policy... tell the cretins living in Californicatia and Flori-duh that the oil offshore of those places belongs to America and not just to them, and that if they continue to throw up roadblocks to drilling that oil, they will be last in line, i.e. the basic policy will be that every other state gets oil and then, if there’s any left over, California and Florida might get some...

[Jeff Head]

Summation of Bryce’s entire screed in two words...Bravo Sierrra.

[mvpel]

Not necessarily. Being in a position to tell the folks currently exporting oil to us to go pound sand doesn’t mean that we will.

And if we did, it doesn't mean that they will. They'll just sell it to China (exempt from Kyoto) in exchange for the billions and billions of dollars we've been sending them all these years.

[From many - one.]

I disagree, but hear me out.

Right now we have a pressure towards oil independence, but we have those reserves essentially hidden away.

If we use them up before we get alternatives (my preferred is nuclear power), then we could be brought to our knees and have no options.

Even some “environmentalists” are admitting nuclear power could be a good option.

[quant5]

I didn’t need to read more then the headline. Energy independance and having enough supply was, is and will be the top national security priority of the 21st century for America. All I have to think of is the Apollo & Manhatten program to know that in America, where there is a will, there is a way. And the other garbage about considering energy independant as NOT being an economic windfall is garbage.

The first decade of such a massive understaking would come at a price to all Americans but it would slowly but surely decrease the cost of petroleum.

The second decade we would be an exporter creating trillions of dollars of revenue and ALL consumer durables in American would substantial decrease in cost in proportion to personal income.

I believe the numbers of my fellow investors & collective angel charter groups that are putting in billions on 10 years on hydrogen/solar play and going 5 years on coal liquification and biodiesel (forget ethanol for the LOVE OF GOD!!!).

Now if the government got it’s head out of it’s ass, we could complete this necessary project within a decade but offshore drilling, ANWR, and building a couple dozen more nuke plants would help enourmously.

Oh yeah, how about passing laws that restrict government officials and friends from investing in energy for that 10 year duration with jail time as a penalty? That would help just a teeny, weeny bit (sarc off).

[mysterio]

Sure, it’s much better to keep funding terror every time we fill our gas tanks. Guess we should just give up. Horseless carriages will never catch on, and if they did, they would never be profitable.

[NicknamedBob]

"the electric car,
is our only hope."

Gas!

I hooked up a stationary bicycle,
In the back of my compact car,
I use no fuel except vegetables,
But I still cannot get very far.

The problem, you see, is the motor,
Which frequently has to be fed,
And the filling is not problematic,
It's the emptying process instead.

NicknamedBob . . . . February 22, 2008