Say “energy independence” to most people, and they will agree that it is a worthy and laudable policy goal. The right wants to wean us off of foreign oil. The left wants to wean us off of oil, period. Both seem to think it’s a bad thing that we buy oil or other fuels from foreign countries.
I’m not convinced. Energy is important to any economy, but I don’t think “energy independence” is any more important or worthy a goal than “food independence” or t-shirt independence. It indulges the “imports bad, exports good” fallacy of eighteenth-century mercantilism and privileges production per se as the raison d’etre of economic activity. It also promises additional security as we don’t expose ourselves to the possibility of being taken advantage of by foreigners who may not have our best interests at heart.
These are mistakes, however. To the extent that an economy has a “point,” it is not just producing stuff. It’s consuming—and not just stuff as there is a lot more to life. Greater productivity means more opportunities for leisure that we can use to cultivate our finer instincts. Lower energy prices brought about by increased foreign trade would mean lower prices for most things and, therefore, greater scope for flourishing. Yes, some people will use that new prosperity badly. Others, though, will use it to enrich their minds and bodies. Instead of enjoying this prosperity, however, we have resources tied up in artificially expensive energy production and storage.
But what about national security? Here again, I think it’s a mistake to discourage energy imports or privilege domestic energy production in the name of security. This is so for a couple of reasons. First, there are a lot of people around the world from whom we can buy oil, ethanol, steel, and other goods of strategic importance. Second, oil can be stockpiled as with the 727 million barrel US Strategic Petroleum Reserve. This doesn’t even have to be a government program as commodity investors can store and stockpile oil (or trade futures and options contracts) in anticipation of higher prices caused by supply disruptions. Well-functioning markets for commodities like oil and steel obviate the need for things like “energy independence” or the Strategic Petroleum Reserve.
Healthy commercial relations are, perhaps, important elements of healthy political relations, as well. Frederic Bastiat is reported to have said “when goods don’t cross borders, soldiers will.” Apparently, he didn’t actually say this, but it’s an important thing to keep in mind—especially in light of the theory of “the capitalist peace.”
And so it is that “energy independence” sounds good to some ears but doesn’t deliver. That isn’t to say that there aren’t a lot of good reasons to “drill, baby, drill” or adopt a fossil-fuel-free Green New Deal. Maybe there are. Decreasing our reliance on foreign energy, however, is not one of them.
Catalyst articles by Art Carden | Full Biography and Publications