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KAI RYSSDAL: Barack Obama made another speech today — this one was on the war in Iraq and its effect on the economy. He said the war’s part of the reason oil prices are so high. Hillary Clinton was stumping in Indiana today, where she blamed oil company profits for rising gas prices.
Most of that oil’s not ours, we buy it from overseas. But commentator Jerry Taylor says the notion of energy independence doesn’t hold water.
Jerry Taylor: President Bush and many others are fond of saying that oil prices are high because we import too much oil. In reality, they’ve got it exactly backwards. We import energy for a reason: it’s cheaper than producing it here at home. A governmental war on energy imports will, by definition, raise energy prices.
Energy independence won’t protect us against embargoes, because embargoes are nothing but symbolic gestures. Take the 1973 embargo: Instead of buying oil directly from Arab members of OPEC, we simply bought oil from people who bought oil from Arab members of OPEC. Oil imports actually went up during that period.
And energy independence won’t protect our economy from supply disruptions abroad. Say Saudi, Iranian, or Venezuelan crude oil production were to suddenly come to a halt. Oil everywhere will just become more expensive no matter where it’s produced. For instance, the loss of Iranian crude oil in 1978 sent British oil prices just as high as Japanese prices. The thing is, Britain was “energy independent” while Japan depended entirely on imports.
Energy independence won’t necessarily guarantee more stable sources of supply. We could substitute gasoline for corn ethanol. But we would just be trading geopolitical risks for much larger weather-related risks.
Energy independence won’t win the war on terror. Even if we reduced oil consumption — and thus, oil imports — enough to drive world oil prices down from current levels to, say, $20 a barrel, it would simply return us to the world of the 1990s. And as you may recall, al Qaeda, Hezbollah and Saudi-financed madrassas were doing quite well under those conditions.
If you are a domestic oil producer, there is a good reason for you to like the idea of energy independence. It drives out a long list of competitors from the American market. It also raises prices and fattens profits. For everyone else, energy independence makes no more sense than, say, food independence. There is no BTU exception to the case for free trade laid out in Adam Smith’s Wealth of Nations.
RYSSDAL: Jerry Taylor is a senior fellow at the Cato Institute.