If the U.S. does strike Syria, the price of oil — already at $115 and rising in the Brent index, largely because of political disruptions in Libya, a major producer — is likely to spike. It’s not that Syria is a major oil producer — even before the war its exports were modest by Middle East standards, and now the embattled regime of Syrian President Bashar Assad can manage just 50,000 barrels a day, barely 5% of what tiny Oman can pump. But even limited strikes would raise fears that the civil conflict in Syria could spread, inviting retaliatory action against Israel, moves by Assad’s ally Iran and disruptive protests in Middle Eastern countries that actually do produce a lot of oil. Fear alone would likely be enough to raise the price of oil above $120 a barrel, and if any of those scenarios actually came true, we might see crude beat the record $147 per barrel reached in 2008. Should that come to pass, the International Energy Agency would likely coordinate releases from national petroleum reserves to increase global supply and bring down prices somewhat, just as it did during the Libyan civil conflict in 2011. Nonetheless, U.S. drivers, currently paying an average of $3.61 a gallon, would be hit hard at the pump
But wait a minute. The U.S. is in the midst of a boom in domestic oil production, thanks largely to new unconventional reserves in North Dakota and Texas, even as oil demand has fallen thanks to improving energy efficiency (and a still sluggish economy). The U.S. now imports 36% of the oil it uses, down from 60% in 2006. With U.S. oil production projected to increase by 28% between 2011 and 2014, according to the Energy Information Administration, and tougher CAFE fuel standards forcing more-efficient cars and trucks, oil imports will likely keep dropping in the years to come. The U.S. — or at least larger North America — could finally achieve something that politicians on both sides of the aisle have been chasing for decades: energy independence. Finally Americans would no longer be dependent on oil from countries that don’t like us very much — which would in turn make us that much freer in the Middle East.
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Tom Friedman put it this way in a recent New York Times column:
As that reality has sunk in, so has another reality, which the American public intuits: Our rising energy efficiency, renewable energy, hydraulic fracturing and horizontal drilling are making us much less dependent on the Middle East for oil and gas. The Middle East has gone from an addiction to a distraction.
There’s just one problem — one that, in fairness, Friedman acknowledges: less dependent does not make us independent. It’s easy to forget, but the price of oil is truly global. If something happens to disrupt production in a major oil-exporting nation like Saudi Arabia or Kuwait — or worse, if Iran were to actually close the Persian Gulf as it has threatened to in the past — the supply of crude would contract, the price would skyrocket and all the shale oil in North Dakota’s Bakken formation wouldn’t be enough to shield American drivers from even more expensive gas.
The truth is that domestic oil production in the current market has little impact on the price of gas. In 1995 — which happens to be the last year that U.S. oil production exceeded imports until now — America pumped about 6.5 million barrels of oil a day. That’s less than the 7.2 million barrels a day the U.S. produces now. But gas in 1995 cost $2.07 in current dollars — a little more than half of what it costs today.
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This isn’t to say that the miniboom that American oil producers have experienced over the past few years is meaningless. It has helped reduce U.S. oil imports, which in turn shrinks America’s huge foreign trade deficit. In June the gap between how much petroleum the U.S. imports and exports in dollar terms fell to $17.4 billion, down from a record $42.4 billion five years ago. That means more dollars stay in the U.S. rather than being sent abroad. And the shale-oil boom has been very good to U.S. oil companies and their employees, which is good for the larger economy. The research firm IHS Global Insight estimates in a new report that increased production from unconventional oil and gas has increased disposable income by an average of $1,200 per household, a figure that’s predicted to rise in coming years.
But while the oil boom has been a nice boost, it hasn’t quite been a revolution. Since 2007, U.S. oil production has increased by a little more than 2 million barrels, good for a 44% increase. But those additional 2 million barrels represent just 2% of the 90 million barrels a day the world is consuming now. No wonder it’s had little impact on the price at the pump.
What truly protects American consumers — and what could really make the U.S. functionally energy-independent — is simply using less oil. And we are doing that: U.S. oil demand peaked in 2007 and has dropped in most of the following years, though it has ticked back up recently. Much of that change is due to the slowing economy and higher unemployment — no job means no commute. But better fuel efficiency and, intriguingly, structural changes like a decrease in young people getting driver’s licenses and more Americans moving to cities could indicate long-term reductions in oil use. Alternatives like biofuels, natural gas and electric cars will further cut into oil demand. The less oil the U.S. needs — from both foreign and domestic sources — the less vulnerable it should be if things go wonky in the Middle East and crude skyrockets. That’s real energy independence.