Over a barrel

July 29, 2004|By Bruce M. Everett

AMERICA IS awash in impassioned calls for energy independence, and Democratic Sen. John Kerry has made it a major presidential campaign theme. In one TV ad, Mr. Kerry solemnly intones, "It's time to make energy independence a national priority, and to put in place a plan that frees our nation from the grip of Mideast oil in the next 10 years."

Sounds great. Oil imports are indeed a serious problem. America relies on imports for more than half the 20 million barrels of oil per day we consume. And as Mr. Kerry correctly notes, the Middle East has two-thirds of the world's oil reserves.

But is energy independence really the answer?

During the Napoleonic wars, Britain and France threatened U.S. trade with Europe, confiscating ships and kidnapping our sailors. President Thomas Jefferson responded with his own version of Project Independence: the Embargo Act of 1807, which prohibited all foreign trade by the United States.

Justifying the action, Jefferson wrote, "To have submitted our rightful commerce to prohibitions and tributary exactions from others would have been to surrender our independence." He hoped the embargo would pressure Britain and France to relent. They didn't, and we suffered one of the worst economic depressions in our history. Popular outrage forced Congress to repeal the act in 1809, but the damage was done.

Eliminating oil imports now would repeat the same tragic mistake. Today, our economy depends on low-cost transportation, just as the economy in Jefferson's day depended on trade. For now, oil is the only economically viable transportation fuel. Oil allows us to move goods and services cheaply around a vast country and holds us together with the flexibility to live, work and shop in different places. Withdrawing from the world oil market would be a disaster, with the same widespread suffering Americans endured in 1807.

In fairness to Mr. Kerry, he doesn't really mean it.

The Energy Plan on Mr. Kerry's Web site calls for increased vehicle efficiency to 36 miles per gallon by 2015, reducing U.S. oil consumption by 2 million barrels per day (MBD). According to Energy Department forecasts, however, U.S. oil imports will increase from about 11 MBD today to more than 15 MBD in 2015. Mr. Kerry's plan would still have us importing more oil in 10 years than we do today. In what sense is this energy independence?

Mr. Kerry's plan points out that 2 MBD exceeds our current imports from the Middle East, but so what? The oil market is a global system. The measure of vulnerability is how much oil we import, not where we get it from. If Saudi Arabia collapses, oil prices will skyrocket for everyone, not just for Saudi customers.

Beyond vehicle efficiency, Mr. Kerry wants to "invent our way out of this problem" by encouraging alternative fuels. Technology will undoubtedly revolutionize the energy industry over time, but will government programs help? Over the last 30 years, the U.S. government has spent about $15 billion on renewable energy research with exactly zero impact on the oil market. What will Mr. Kerry do differently?

Mr. Kerry (and many others) use the Apollo Project as an example of a spectacularly successful government program. But in today's dollars, Apollo cost about $125 billion -- over $20 billion per moon landing. Apollo didn't (and never tried to) make space flight available to ordinary people. We know how to build solar power plants and how to travel to the moon. We have no idea how to make either one affordable.

Jefferson, too, hoped technology would come to the rescue, claiming, "To the advantages derived from [the embargo] will be added the improvements and discoveries made and making in the arts, and the establishments in domestic manufacture." Nineteenth- century technological progress was extraordinary, but it didn't make us independent of global trade.

Talk about tapping the ingenuity of the American people is just fluff. There is no technology now on the drawing board able to replace oil at an acceptable cost. New energy technologies will come, but only through private initiative and investment, and not at a time and place of our government's choosing.

Alas, President Bush isn't offering anything better. Opening new areas to oil exploration is a good idea, but it won't eliminate oil imports any more than would Mr. Kerry's proposals. According to the White House, the president's hydrogen vehicle initiative -- dubbed the FreedomCAR (Cooperative Automotive Research) -- will "dramatically improve America's energy security by significantly reducing the need for imported oil." Don't count on it.

Oil import dependence must be addressed seriously. Candidates from both parties should acknowledge our dependence on oil and explain how they plan to cope with it until the market finds an alternative. Instead, both are promising us a million-dollar result from a nickel's worth of policy.

Bruce M. Everett teaches petroleum economics at the Fletcher School at Tufts University in Massachusetts.

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