My point is just that the whole energy independence thing is a red herring since energy is traded on an open market. If we suddenly had to depend only on energy produced in the U.S. the resulting price increases would be prohibitive for everyone but the military (and we already have strategic oil reserves).
The whole concept of energy independence is a political cudgel to turn energy politics into security politics by taking advantage of people’s mercantilist intuitions about resources. But in a global free market those intuitions are wrong. Strictly speaking you don’t get to decide where your energy comes from. Often it is cheaper to get it from nearby sources but it is all part of the same pricing system. So yeah, increased domestic production might make us more independent in the sense that foreign countries won’t have quite the same ability to knock prices up but there isn’t a magic line where suddenly we’re “independent”.
Lets say we have 100 oil. 50 of it is produced in the Middle East and the U.S. uses 40 but currently produces 20. The remaining 30% is produced by other countries. An OPEC embargo leaves us with 50 oil about doubling the price (for convenience, usually supply curves are exponential but I’m not an economist I don’t know what the price would really do beyond going up, a lot.). If the U.S. increases production to 40% prices pre-embargo will be lower (since we have a supply of 120) but prices will still increase by a similar amount when we lose 50 of that 120 supply leaving us with only 70 oil. If the whole world turned against us prices would triple (according to our invented price model) as we would have only 40 in supply where once we had 120.
In order to make it so the rest of the world really couldn’t affect us we’d have to be producing a preponderance of the world’s energy such that foreign embargoes would only slightly affect total supply. Either that or we embargo foreign energy imports. But we’d be independent like chopping off your legs makes you independent of bicycles. Also, I imagine if our transportation infrastructure was such that it didn’t use gasoline we’d be much better insulated from price shifts in foreign oil. Like if our cars were all solar powered or if we were taxing CO2 to a prohibitive extent already. But in those cases technology has either rendered oil irrelevant or our economy has already internalized the cost of a foreign oil embargo.
You are. I obviously haven’t thought the issue through clearly and it’s not something I care deeply about, since ethanol is silly for many other, larger reasons, therefore I won’t waste your time with further questions. Definitely moving the whole “energy independence” thing to the “I have no idea” column for now.
In short, we’re “independent” when the cost of importing fossil fuels exceeds the cost of domestic production. The two ways this can happen are drastic technological improvements, and subsidies/tariffs on fuel resulting in economically wasteful overproduction. In the US we tend to give lip service to the former while actually implementing the latter.
My point is just that the whole energy independence thing is a red herring since energy is traded on an open market. If we suddenly had to depend only on energy produced in the U.S. the resulting price increases would be prohibitive for everyone but the military (and we already have strategic oil reserves).
The whole concept of energy independence is a political cudgel to turn energy politics into security politics by taking advantage of people’s mercantilist intuitions about resources. But in a global free market those intuitions are wrong. Strictly speaking you don’t get to decide where your energy comes from. Often it is cheaper to get it from nearby sources but it is all part of the same pricing system. So yeah, increased domestic production might make us more independent in the sense that foreign countries won’t have quite the same ability to knock prices up but there isn’t a magic line where suddenly we’re “independent”.
Lets say we have 100 oil. 50 of it is produced in the Middle East and the U.S. uses 40 but currently produces 20. The remaining 30% is produced by other countries. An OPEC embargo leaves us with 50 oil about doubling the price (for convenience, usually supply curves are exponential but I’m not an economist I don’t know what the price would really do beyond going up, a lot.). If the U.S. increases production to 40% prices pre-embargo will be lower (since we have a supply of 120) but prices will still increase by a similar amount when we lose 50 of that 120 supply leaving us with only 70 oil. If the whole world turned against us prices would triple (according to our invented price model) as we would have only 40 in supply where once we had 120.
In order to make it so the rest of the world really couldn’t affect us we’d have to be producing a preponderance of the world’s energy such that foreign embargoes would only slightly affect total supply. Either that or we embargo foreign energy imports. But we’d be independent like chopping off your legs makes you independent of bicycles. Also, I imagine if our transportation infrastructure was such that it didn’t use gasoline we’d be much better insulated from price shifts in foreign oil. Like if our cars were all solar powered or if we were taxing CO2 to a prohibitive extent already. But in those cases technology has either rendered oil irrelevant or our economy has already internalized the cost of a foreign oil embargo.
Hopefully I’m making some sense.
You are. I obviously haven’t thought the issue through clearly and it’s not something I care deeply about, since ethanol is silly for many other, larger reasons, therefore I won’t waste your time with further questions. Definitely moving the whole “energy independence” thing to the “I have no idea” column for now.
In short, we’re “independent” when the cost of importing fossil fuels exceeds the cost of domestic production. The two ways this can happen are drastic technological improvements, and subsidies/tariffs on fuel resulting in economically wasteful overproduction. In the US we tend to give lip service to the former while actually implementing the latter.