Security maybe, independence no

The cry of 'energy independence' has gone up in the US recently - but it's a red herring when it comes to America's dependence on foreign oil.

by Joe Gill, World Business
Last Updated: 23 Jul 2013

It's not the first time that the response to growing dependence on foreign supplies of oil or gas at a time of rising prices has been to call for a US withdrawal from the world energy market. But it's not going to happen any time soon, according to energy specialist Daniel Yergin (Wall Street Journal January 23).
 
As Yergin points out, since President Nixon promised it 34 years ago, the US has become more dependent on supplies in the Middle East, Latin America and Canada. Only supplies from the latter look likely to remain stable and free of political risk in the foreseeable future.
 
Yet dependence on the Middle East is not as great as is often feared. For starters, the US is 70% energy self-sufficient overall, if coal, oil and renewables are included.
 
Only 19% of energy imports are from the Middle East. Canada is the biggest importer to the US, and Mexico, the second largest. Neither country poses significant supply risks given their respective integration into the US economy.
 
The issue might better be looked at in terms of achieving energy efficiency and tackling over-consumption. Environmental concerns are rising up the US agenda. This week 10 major US firms called for a cap on carbon emissions, in recognition perhaps that the era of cheap gasoline and gas guzzlers is coming to an end.
 
US energy, utility and automotive companies are looking to a future when they will have to reduce energy consumption by investing in the development of alternative fuels and hybrid vehicles.
 
A certain amount of buck passing is evident among these three sectors - is it up the oil companies or carmakers to start cutting carbon emissions? A lot of profit is at stake depending on how regulators decide to impose a cap, and/or develop a system under which emissions allocations are traded.
 
Technology was seen as the pain-free solution favoured by the US government and industry until recently, yet as this week's pronouncement shows the realisation is dawning that hi-tech will not 'fix' the emissions or energy security issue by itself. It will be decades before alternatives exist to reliance of fossil fuels.
 
But the trend of the US becoming more dependent on unreliable foreign suppliers could be slowed down if, like other high energy-consuming countries, its industries focus on energy conservation, higher energy efficiency and lower energy intensity.
 
That is a model favoured in countries such as Germany where domestic energy sources have always been scarce. In the case of the US, as the world's largest energy consumer, it will be akin to turning around the Titanic at full speed.
 
Energy security, as against independence, can be achieved but it does require international cooperation on energy issues combined with measures at home to increase energy efficiency.
 
That in turn requires the US to manage better its relations with other regions as well as, perhaps, tempering its attachment to the high-consuming American way of life.

World Business website editorial

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