Does Energy Security Really Matter?

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Energy security—it’s the policy everyone loves. Republicans love it. Democrats love it. Environmentalists love it.  President Barack Obama  loves it. Even BP CEO Tony Hayward loves it. While we fight over the need to fight climate change and battle over subsidies for oil, there’s a strong consensus that the U.S. needs to break its dependency on foreign oil, which now makes up over 65% of our petroleum consumption. Foreign oil addiction is supposed to be bad for our economy and bad for geopolitics, providing billions to petrostates like Iran and Venezuela. Thomas Friedman has even postulated the First Law of Petropolitics, which states that freedom and democracy worldwide tend to decline as oil prices rise.

But what if energy security is overrated as a policy goal? That’s the question Michael Levi, a senior fellow at the Council on Foreign Relations (CFR) and a great energy blogger, raises in a new article in Foreign Policy, and here’s what he found: “We know a lot less about what energy security is than our confident rhetoric suggests.” Levi takes on the  argument that sending billions abroad for oil hurts the U.S. economy:

Our understanding of how oil affects the U.S. economy is shockingly limited. We hear often, for example, that Americans send a billion dollars abroad every day to pay for oil. But what matters is not only how much Americans spend on oil, or who reaps the profits, but also what they do with them — something about which we know very little. If oil producers spend the money on U.S. exports, the impact on the U.S. economy might be minimal. If they park it in bank accounts, or use it to fund sketchy home loans, the consequences are likely far graver.

Next Levi looks at the Petropolitics argument, and find that it’s far from clear whether oil revenue really funds terrorism, and how much leverage petroleum exports give petrostates:

Different terrorist organizations rely on oil profits to varying degrees, which aren’t at all commensurate with the threat they pose to the United States. Hezbollah, for example, is an expensive enterprise to run, and oil money is a critical source of funding, according to a recent Rand study. But al Qaeda is much cheaper to operate, according to the same study, and the group’s much-vaunted Saudi oil connection may be relatively unimportant to its survival. Our understanding of how oil empowers hostile states themselves is equally poor. It is hard to tell, for example, whether Iran was able to charge ahead with its nuclear program during the last decade because of high oil revenues, or because of unrelated technical breakthroughs.

Nor is it clear that oil is an unmitigated benefit for exporting nations. The resource curse has left many oil-rich nations—like Nigeria—mired in poverty and violence, even as the trading nations of Asia that lack oil have experienced tremendous economic growth over the past several decades. It seems premature to assume that if the U.S. could achieve energy autarky—complete control over its energy supply—it would be much safer or more prosperous. Nor is it a very realistic goal—domestic petroleum production is barely a quarter of total U.S. consumption, and even if we were to open up every fathom of deep water in the Gulf of Mexico or every inch of the Arctic National Wildlife Refuge, we’d still be dependent on foreign oil. (See Levi’s full CFR study on energy security here.)

And there can be hidden costs to seeking energy security above all else. Right now Canada is the biggest exporter of oil to the U.S. From an energy security perspective, that seems pretty good—I don’t think anyone’s worried about Canadian oil money going to terrorists or hostile Canadian government cutting off exports for political reasons. (I’m assuming there aren’t any hockey-related disputes.) But nearly half of Canadian oil comes from tar sands—an incredibly polluting process that destroys local land and water supplies, and which produces up to four times the amount of greenhouse gases per barrel that traditional petroleum does. So buying more tar sands oil from Canada may improve our energy security, but with serious costs to the environment and climate.

The same goes for the push for corn ethanol, which is seen as another way to guarantee American energy security. Congress has given generous subsidies to the ethanol industry and has set a goal for the country to produce 15 billion gallons worth of ethanol by 2015. Yet shifting more biomass—like the corn crop—to  biofuels can lead to unexpected environmental problems, including greater deforestation and higher food prices. And it could get worse. A new report released today by the Environmental Working Group estimated that if the carbon cap legislation passed by the House—which contains significant incentives for the biofuel industry—30 million acres of American forests could be cut down and used for fuel, leading to the emissions of 4.7 billion tons of carbon dioxide.

That doesn’t mean energy security isn’t a worthwhile goal. It certainly wouldn’t hurt the U.S. to be less dependent on oil that comes from countries that don’t like us very much, and for the country–and the world really–to have a more diverse energy supply, just as it’s a good idea to have a diverse investment portfolio. But we need to remember–energy security isn’t free, and sometimes the costs will outweigh the benefits.