US Energy Diversification vs. "Independence

Saturday's Wall Street Journal had an unusual cornucopia of interesting articles. One of them, entitled "The Mirage of Energy Independence," by Doug Wilson, expressed, with great clarity, some sentiments that I have had for years.

Specifically, Mr. Wilson notes that, with America's energy needs, and the fungible nature of the global energy market, there is no such thing as 'energy independence.' A fall in oil supply anywhere on the globe will raise prices for everyone. Further, if America were to attempt to isolate and develop non-fungible sources of oil, it would, as Mr. Wilson points out, undermine the entire interconnected world of supply chains which have brought global prosperity and individual economy specialization.

As an example of the unintended costs of misguided attempts at energy independence, Mr. Wilson recounts the cost to Brazil of building its ethanol industry. More marginal land has been used to feed the enlarged demand for corn, more fuel is used, because corn as a fuel is less powerful than carbon-based fuel, and government subsidies now abound to drive the whole process. Already, in the US and Mexico, corn prices are skyrocketing, fueling inflation throughout America's food chain, as well as for Mexico, as well.

Instead, Mr. Wilson notes that non-transportation-oriented energy consumers in the US, e.g., utilities, long ago began diversifying into natural gas, coal and nuclear, to lessen their reliance on scarce liquid petroleum from politically-unstable parts of the globe.

For transportation, Mr. Wilson suggests assisting Venezuela and Canada with the development of their respective high-sulfur oil and heavy tar sand oil deposits. Though not within our border, Wilson argues that by developing alternative sources of oil-based energy, away from the Gulf, we increase the choices for our own energy purchases, help other economies grow dependent upon selling us that energy, and lessen the hold that the Mideast has on current global energy security and availability.

In short, energy independence is almost certainly an impossibility, but diversity of supply sources is not. This makes a lot of sense, especially in the face of the reality of globally-traded, fungible oil supplies. Even if the US were to become energy-independent, we would still want to be affected by the world price for our own energy. To fail to do so would be to return to an era of indifference and wastefulness in the usage of petroleum-based energy sources.