Energy Independence: A Proverbial Icon

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According to Steven Chu, the U.S. Secretary of Energy and a Nobel physicist, “The most direct way to reduce our dependency on foreign oil is to simply use less of it.”  That makes sense. The arguments in support of energy independence, however, do not.

We hear that “[e]nergy independence means energy security (supply and price stability).” But restricting oil supply to within U.S. borders is more likely to increase instability than decrease it. We typically think of a diversified financial portfolio as stabilizing investment value. A shock impacting one market sector and, hence, investments in that sector, is less likely to have a significant impact on a diversified portfolio. The same is true with energy. If there is a shock in one region, say, the United States (remember Hurricane Katrina), having a diversified supply portfolio can help stabilize available resources and therefore price. Restricting supply to a specific region means shocks to that region are likely to have a significant impact on resource availability and price.

Consider this:

Despite its immense appeal, energy independence is a nonstarter—a populist charade masquerading as energy strategy that's no more likely to succeed (and could be even more damaging) than it was when Nixon declared war on foreign oil in the 1970s.
Sounds right-wing but this statement is from Mother Jones. The author, Paul Roberts, is smart enough to have figured out that many of the government backed alternative energy sources have secondary consequences that may in fact be worse than energy dependence.

He goes onto say:

nearly every major energy innovation of the last century—from our cars to transmission lines—was itself built with cheap energy.
Indeed, cheap energy and innovation have brought us great prosperity.

Nonetheless, “between 2001 and 2006 the number of media references to 'energy independence' jumped by a factor of eight,” and energy independence is continually emphasized by politicians. Why is energy independence so appealing? “[B]ecause it offers political cover for a whole range of controversial initiatives,” says Roberts. Though the Mother Jones article is four years ago, these statements still make good sense. Energy independence is a proverbial icon that provides votes for politicians but does little to stabilize energy prices or supply.

See additional "Charticle" on energy independence here.

Originally posted at Environmental Trends.

Holly Fretwell is a Research Fellow at PERC and an adjunct instructor at Montana State University where she has taught  introductory economics, macroeconomics, natural resources and environmental economics. She works with the Foundation for Teaching Economics, giving workshops for  high school teachers to improve their skills in teaching and...
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