If you’re anything like me, you may find that the claims made in an election year start to get a bit irrational by this point. Still, they give us an opportunity to do a self-check on what is feasible and what is impractical. Romney’s energy plan, released yesterday, aims to make the United States energy independent by 2020. He proposes to do this with the following:
- Streamline the regulatory procedures for coal-fired power plants to facilitate approval and recommissioning.
- Explore and develop US oil and gas reserves to bring lower energy prices, greater reliability of supply, and jobs.
- Reform nuclear regulation to issue more permits, begin construction on new plants, and add to existing infrastructure.
- Overhaul the Clean Air Act and Clean Water Act such that domestic energy companies are less burdened.
- Invest in Canadian and Mexican sources of oil and gas.
- Redirect clean energy funding towards basic energy research.
To say nothing of the fact that Canada and Mexico are not technically part of the United States, and to spare you some political rhetoric, I give you the following facts.
First, the United States imported 11.4 million barrels of oil per day in 2011 (EIA 2012). Despite impressive advancements in technology and cost reductions for oil and gas extraction, can the Shale Gas Revolution really reverse the import trend shown below in as few as eight years?
US Imports of Crude Oil and Petroleum Products (thousand barrels). Source: EIA 2012
For more charts like these, visit the US Energy Information Administration’s website.
And second, there is an element of economics that is often forgotten when discussing oil prices, national security, and energy imports: the price of oil is set in global markets. Although increasing domestic production increases supply (and similarly, reducing dependence of oil by using domestically produced natural gas reduces demand), thereby having some impact on prices, the United States is still subject to global price fluctuations that are affected by both friendly and unfriendly countries restricting production or flooding the market. At the end of the day, being one hundred percent energy independent can help, but is not guaranteed to eliminate the risk of price volatility because the United States is only producing a fraction of the world’s oil supply.
Oil production by region (MT). Source: 2012 BP Statistical Review
For more charts like this one, see the BP Statistical Review.
The United States accounted for just 8.8% of the world’s oil production in 2011. The total North American oil production was about twice that, at 16.8%. By contrast, the Middle East accounted for the greatest percentage of global oil production at 32.6%. Furthermore, although the United States increased its oil production by 3% from 2010 to 2011, the countries in the Middle East increased oil production by 9.3% (BP Statistical Review 2012). Remember this reality the next time you hear that domestic energy is a silver bullet solution to high energy prices, price volatility, and national security.
Next week, I will do a reality-check on the Obama energy proposal, both present and future.