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100% Energy Independence is Unlikely The U.S. won’t become energy independent anytime soon. Even if we produced enough oil and natural gas or harnessed enough power from the sun, we’d still be beholden to foreign supply chains. Think of how many components of the lithium-ion battery come from outside the U.S. Want rare earth metals that are used in wind turbines? Most of that comes from China. The fact is our world is far too interconnected to simply cut ourselves off from one another entirely. It’s the benefit and downside of globalization. Take a Russian oil and gas ban. Sure the U.S. could do it. But how about Canada, one of our largest trading partners? Could we stop them from importing Russian crude and exporting their crude to us? Now imagine that on a global scale. That’s why simply cutting off Russia from the world when they trade with China who most of us trade with as well makes it difficult to truly isolate them. That doesn’t mean we can’t or shouldn’t try. We can certainly make life difficult for our adversaries. But for those who claim we are or can be ‘energy independent’, you need to ask them for context. |
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Energy |
Energy Independence – Who is to Blame? |
Key Takeaways:
Right now, there is bipartisan consensus that the U.S. needs to shut off energy imports from Russia. Plus, everyone agrees we need to gain energy independence. How we get there is where we diverge. What’s the Truth? Republicans blame President Biden’s policies for the rise in energy costs including:
Democrats highlight:
Let’s break these down in groups starting with the leases. There was a moratorium Biden signed during his first week in office. That was struck down in June by a Louisiana judge. Shortly thereafter, the administration was forced to begin selling leases at a breakneck pace. So yes, the administration did sell more than the Trump administration did in his 1st, 2nd, and 3rd years in office from February to November. However, it’s far below the level set in 2020. Source: The Washington Post Next, let’s look at the 9,000 unused leases. That number is correct as 90% of drilling happens on private land. However, it ignores key context. Not all leases can be used and it takes months if not years to secure the proper permits, equipment, and operations to make it happen. With the massive jump at the end of 2020, oil & gas companies prepared for a cut by President Biden and increased their purchases. Eventually, this number will dwindle. But there is always a sizable amount in flux. Lastly, the social cost and royalty fees were discussed and the social costs were implemented. However, they were struck down in February by a federal judge, which ironically delays the sale of federal lands. The royalty fees have been the same for the better part of a century. However, the recommendation for higher fees was not implemented. Lastly, Republicans are correct that the Keystone pipeline was axed. And it would have carried the same amount of oil we import from Russia on a daily basis. However, we get that oil right now, just through other means. Pipelines are transportation mechanisms, not Gaining Energy Independence Hindering oil and gas sales right now won’t have an immediate impact on our gas prices. However, it constrains our supply 3-5 years down the road. And despite the push for more green energy, the demand for oil and natural gas is expected to rise over the next decade. Currently, the U.S. is a net exporter of petroleum products but a net importer of crude oil. What this chart does show is that we need to produce about 4 million barrels per day more to become self-sufficient. The Bottom Line: Politicians have far less control over the price of oil and gas than we give them credit for. Supply and demand are what drive the price at the pump. Yes, long-term capacity is driven by investment which can be hindered or helped by government policies. That bodes well from members of the oil and gas exploration ETF XOP including APA Corporation (APA), Occidental Petroleum (OXY), and Devon Energy (DVN). |
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