The Reckoning

Energy Independence? From Reality, Perhaps, but Not From the Rest of the World

Romney and coal miners
Shill, baby, shill! Mitt Romney with coal miners in Beallsville, Ohio

Photo by Saul Loeb/AFP/Getty Images.

He’s an advocate for restarting the construction of nuclear power plants in America. He wants to see more oil flowing from Alaska’s North Slope. He’s done battle with environmentalists to ensure oil companies quickly resumed drilling in the Gulf of Mexico after the BP spill. He avoids talking about climate change on the campaign trail, and if he’s elected, I have been assured by people close to him that he will approve the construction of the Keystone oil sands pipeline before the cherry blossoms bloom in Washington.

Who is this mystery man?

Mitt Obamney. Or is Barack O’Romney.

When it comes to U.S. energy policy, you could barely slide a solar panel between the two presidential rivals. Of course, a visit to either man’s campaign website will say something very different: Words are cheap, after all, and there’s no more finely honed American political tradition than attacking your rival for something he hasn’t yet done.

Romney’s energy plan was “written by Big Oil,” we’re told by Obama’s site, and will open up drilling off Virginia and North Carolina that will threaten the beaches of important swing voters … ah, I mean, Americans.

Obama has “sent billions of taxpayer dollars to green energy projects run by political cronies,” Romney retorts, and is hell-bent on bankrupting the coal industry. (Did you hear that, Pennsylvania? How about you, Ohio?)

Blah blah blah … blah blah.

There are important differences between these two men, primarily on environmental as opposed to energy issues. Climate change—suddenly of interest again both to the U.S. electorate and to politicians in Sandy-battered Atlantic seaboard—is probably the most important one. Obama’s a believer, Romney the unbeliever. (How’s that for a world upside down?)

But climate change isn’t going to sway this election, and it would be a great mischaracterization of Obama to claim that he has crusaded on behalf of the changes that most scientists see as necessary to make any difference in that regard.

In fact, while Mitt has gone around making fun of the notion that climate change will cause problems for us humans, Obama kept away from the issue, too, until Sandy blew in. He was probably heeding the feckless pollsters and political strategists who have decided that an electorate still reeling from the worst recession since the Great Depression doesn’t give a damn about melting ice caps.

Just take a peek at the headline the Obama campaign site has on its environment section: Environment section? “Investing in clean, American-made energy.”

Smart politics, I’m sure. But high-minded? Visionary? Worthy of Rachel Carson? You be the judge.

In many ways, this made-in-America fetish on energy is the biggest lie of the many, many lies that have been tossed around during this electoral cycle. It’s big because it can be disproven by simple math. But there are also market forces at work.

Energy is made in the Earth, folks, not “in America.” Unless we adopt a centrally planned economy like the one that served the Soviet Union so well, energy prices will be set on world markets by supply and demand. We may reduce our demand for imports, but growth elsewhere will shape up the surplus. We’re in an age with a severe lack of excess oil capacity, and that means high prices, volatile price swings, and very little scope by any single producer to affect prices.

Now, some commodities are cheaper nearer to the source: You can buy a 3 1/2 pound lobster off a Maine dock for about $10, for instance. There are a lot of reasons for this—one of which is that it is very difficult to buy that same live lobster in South Korea. It takes jet fuel, cargo handlers, customs agents—and a whole lot of ice (one hopes).

Energy is not like that, and especially oil. Natural gas at last is hard to move around; oil is relatively simple, and the logistical challenges have been solved for decades. So this is one reason I cringe every time I hear the “energy independence” line.

Obama’s position on this debate has been more typically nuanced. He avoids the term “energy independence” and speaks of becoming “more independent” or, as the Democratic Party’s website says, moving to “reduce our dependence on foreign oil sources.” This is honest as far as it goes.

Romney’s campaign is as fervent in promising a world without energy imports as it is in denying climate change. But even here, math has forced changes. After years of demanding “U.S. energy independence,” as he did during his failed 2008 presidential bid, Romney’s advisers have manufactured a fudge to make the energy independence lie a bit more palatable.

Rather than talk about U.S. energy independence, which is patently absurd (at least until we figure out how to heat our homes with delusions), he now talks of “hemispheric energy independence.”

The irony of the Republican Party essentially proposing an energy version of NAFTA is fairly rich. Will we drill holes in the border fence for the pipelines?

Here’s what his campaign site say about the topic on its Energy Policy page – at least when the page finally finishes a long attack on “Obama’s Failure:”

“Mitt will make America an energy superpower, rapidly and responsibly increasing our own production and partnering with our allies Canada and Mexico to achieve energy independence on this continent by 2020.”

Is Romney using the p.c. version of “America,” by which everyone from the Inuits of Baffin Island to Argentine fishermen on Tierra del Fuego can lay claim to being an American? If so, this is yet another Republican first—and it still fails to meet the mathematical challenge of hemispheric independence. Nigeria, Angola and our friends in the Gulf can breathe a sigh of relief.

Like most of Mitt’s numbers, these just don’t add up. The U.S. Energy Information Administration, the most widely regarded source of energy projections in the world, estimates that even with optimistic assumptions, U.S. imports of oil will fall from 8.9 million barrels a day today to about 7.5 million p/d in 2035.  That’s a long way from Tipperary.

This week, the Economic Intelligence Unit, the consultancy arm of the storied British magazine, released a report on the topic that demonstrates beyond a doubt the fallacy at the heart of this slogan.

In “Independence Day: A special report on North America’s oil and gas boom,” the EIU hails the technological innovations that have definitely changed the game for the US. Shale gas and tight oil are real, and assuming neither poisons a major US aquifer (a very real threat, I think), they will mean that the US imports less oil and broadly pays a bit less for gas, too.

But energy independence by 2020? In the polite words of the EIU, “This excitement is not justified … and over-simplistic.”

There will be benefits from the oil and gas boom going on in the US. Employment is one obvious benefit—and industry that booms will create jobs. It also creates a revenue flow for those letting their land for drilling, for the scientists and engineers seeking to improve current techniques, and of course profits for the companies exploiting the resources.

In a macro sense, as the EIU notes, “[r]educing oil exports could help shrink the trade deficit. There would be an ever greater benefit to the trade balance if, meanwhile, gushing US oil output led to more exports of higher-value refined petroleum products (the US became a net exporter of refined products in 2011, partly because of sluggish domestic demand). Improvements in the current account position would reduce US borrowing needs and lead—all else equal—to a stronger dollar. Yet this is a more modest assessment of the usefulness of increased self-sufficiency in oil than what is commonly purveyed.”

Translation: You (the voter) are being sold (purveyed) a line of bullshit (usefulness of self-sufficiency).

The value of the North American oil and gas boom is real. But it should be understood in context, weighed against the risks, and pursued because it makes economic sense, not because Americans once again embrace a political slogan like “drill baby drill” as though it was chiseled into the tablets brought down from Mt. Sinai.

One does get weary …