Some analysts argue that the shale oil/U.S. energy independence narrative is a myth. The United States cannot become energy independent even under the best of circumstances. Yet others argue that energy independence is a certainty, perhaps sooner than expected. That's because energy independence is a story that extends beyond oil and gas. Perhaps half of the credit for independence will belong to conservation and renewable energy sources.
U.S. energy independence: an inevitability or a fairy tale fantasy?
The views of seventeen noted thinkers.
JAMES R. SCHLESINGER
Chairman, MITRE Corporation, former U.S. Secretary of Energy, and former Director, Central Intelligence Agency
Energy independence? That has been the alluring cry heard for forty years. It sells well politically--despite a dearth of evidence in its support.
Shale oil production has moved the United States to production levels well beyond those of 1970. Nonetheless, we now import twice as much crude oil as we did when President Nixon announced "energy independence" in 1973. Indeed, the percentage of oil imports far exceeds the 12 percent limit that President Eisenhower set in 1958.
To be sure, the sting of oil vulnerability has been substantially alleviated by the revival of U.S. production. The United States is again a major factor in world energy markets other than being the one-time largest oil importer. We export gas and oil products and look to increasing our role.
But our transportation system remains 97 percent dependent on liquid fuels--primarily oil. As long as the vehicle fleet depends on oil, we will have some vulnerability. And the world overall will remain far more vulnerable to major disruptions in the Middle East--which would effect us directly and indirectly.
The oil exporters have learned that the use of the "oil weapon" can boomerang on them.
Shale oil is not a "myth," but commentators should not let their enthusiasm get out of hand.
PHILIP K. VERLEGER, JR.
President, PKVerleger LLC
By 2020, the United States will export more energy than it imports. In fact, by that time it may be the world's largest exporter of petroleum products. It will be one of the world's largest coal exporters. It will also have become a major natural gas exporter. Thus, as I described on these pages almost two years ago, the United States will have achieved "energy independence" as defined by President Richard Nixon.
The United States will, however, still be part of the world energy market. U.S. petroleum product prices will reflect global trends. U.S. natural gas prices, while well below world levels, will also follow global fluctuations more than they do today.
Even so, the U.S. economy will be decoupled from the global energy market's ups and downs. To be blunt, the United States has won the global energy lottery. The rest of the world has lost. This means the United States will see increasing inflows of direct foreign investment in manufacturing and other energy-intensive processes should OPEC members and other producing nations keep world crude prices at current levels. This also means that EU countries, particularly Germany but also Japan and China, will see capital flying to the United States as firms seek access to lower-priced energy.
The United States won the energy lottery thanks to hundreds of efforts. While oil and gas explorers receive most of the publicity, the nation's success comes from a wide variety of contributors.
President George W. Bush deserves credit for his 2007 call to end our addiction to oil. The renewable fuel requirements in the Energy Independence and Security Act of 2007 that Congress passed at his behest have already cut U.S. oil imports 15 percent and trimmed world oil prices at least $15 per barrel.
Governors, legislators, and regulators in over thirty states also deserve credit for requiring electric utilities to replace power generated by fossil fuels with generation from renewables. The latter now accounts for 14 percent of electricity production and may account for 30 percent by 2020.
President Obama and the auto industry deserve credit for their 2011 agreement to dramatically increase automobile fuel economy. The resulting mileage improvements could halve U.S. gasoline use in 2020 from the 2020 levels projected in 2008.
The entrepreneurs who regularly risk their own capital on new ideas deserve credit as well. They have introduced measures that reduce consumer energy costs (for example, leasing solar electric equipment for home installations). By 2020, these actions will render much fossil fuel use unnecessary.
This list can be extended almost indefinitely. Winning the energy lottery is also the result of the nation's decentralized government structure. Many of the early successes happened at the local or state level, not in Washington, D.C. Whereas leadership abroad comes from Brussels, Beijing, Tokyo, Paris, Berlin, London, and other capitals, in the United States it comes from the bottom. Leadership also comes from the smaller companies seeking to grow, not the multinationals.
Credit for the U.S. energy success also goes to average individuals rather than elites from Harvard or Johns Hopkins. It was engineers from Texas A&M and the Colorado School of Mines, not Princeton or Yale, who solved the shale oil and gas conundrum. Washington, particularly officials at the U.S. Departments of State and Energy, slowed rather than speeded progress.
The success of our decentralized approach to energy will yield larger and larger economic dividends over the next ten years, especially if other countries do not follow the U.S. example. Competition between individual states promises to drive electricity costs down even as nations such as Germany force consumers to pay higher and higher prices to amortize the costs of uneconomic renewable energy projects. In that country, electricity has become a luxury. As the president of E.ON, Germany's largest utility, warned recently, "There is a competitive advantage for America that we cannot prevent, at least for some time. It will take years and long years [sic] of innovation before we can start to shrink it."
The United States then has achieved something far greater than energy independence. Our success in weaning the nation's economy from global energy markets will reestablish our country as the world's strongest and most resilient economy.
Institute Professor, Massachusetts Institute of Technology, former U.S. Undersecretary of Energy, and former Director of Central Intelligence
The welcome and unexpected expansion of unconventional oil and natural gas resources and production in North America means that the region will no longer be hopelessly dependent on insecure and expensive foreign imports. It is likely that by 2015 imports of oil will fall below 10 percent of consumption and North America will export some liquefied natural gas, natural gas liquids, and oil. While there are many important economic and environmental uncertainties, this period of plenty will likely continue for several decades.
This is a genuine energy revolution that brings major economic benefits--jobs and low energy prices at home--but also significant geopolitical advantages. The United States will be a major player in global oil and gas markets, and import dependence will be less a constraint on U.S. foreign policy than in the past. Over time as low-cost unconventional oil and gas production spreads to other parts of the world, the diversity of supply increases, creating a downward pressure on oil prices and narrowing the energy equivalent price of oil and natural gas.
Beyond oil and natural gas, other energy matters to the U.S. economy and geopolitics. Global warming remains a major concern that links the United States to the world. Commercial nuclear power needs to expand worldwide while avoiding proliferation risks at the front and back end of the fuel cycle. Renewable energy also has an increasingly global character, as the recent trade controversy over the sale of Chinese-produced photovoltaic modules to the United States and the European Union illustrates.
Moreover, reduced oil and gas import dependence does not translate into energy independence. First, as the North American market will continue to be linked globally by energy prices, certainly for oil and over time for natural gas, so the U.S. economy will experience price shocks from supply interruptions that occur elsewhere. Some of our closest allies will remain dependent on oil imports; their vulnerability will need to be taken into account by U.S. foreign policy. Sharply lower oil and natural gas prices are welcome to consumers and industry but put stress on the domestic economies of traditional major resource holders such as Saudi Arabia, Russia, and Iran, which in turn may lead to political instability and different security concerns.
The notion that the United States is energy independent implies that government and business leaders and the public no longer need to take into account energy issues in formulating economic or foreign policy. This is a false and dangerous conclusion. Energy remains a vital consideration linking U.S. prosperity and security to the rest of the world.
President, Middle East Forum
Energy independence can be understood to mean different things: Being unaffected by price changes and importing no energy from outside the country; or just importing no energy whatsoever from outside the country; or not relying to a significant degree on foreign energy sources.
The U.S. economy is not autarchic and so the country will be influenced by factors that affect the price of energy elsewhere, such as by a closure of the Strait of Hormuz. It makes sense to trade in energy as in other commodities, so no commerce in energy is a foolish idea. But thanks to new technologies, the United States can become self-sufficient in the third, more restricted, meaning of the phrase.
I predict this because every...