ENERGY INDEPENDENCE?

Every president since Richard Nixon has proclaimed the desire to make the United States energy independent. Yet, the United States continues to import crude oil from Venezuela, Mexico and the Middle East. Republicans, including President Bush and presidential nominee John McCain. deman that the oil companies be allowed to drill offshore and in the Alaska Wildlife Refuge. Democrats call for a windfall profits tax on big oil and somehow believe this would satisfy the American consumer's desire to hold some accountable for the big rise in the cost of gasoline. More jaundiced observers note that the United States has squandered opportunity after opportunity during the past 25 years and has left the nation ill-prepared to deal equitably with higher fuel costs. Meanwhile, truckers in Europe use their rigs to block roads and protest the even higher costs for diesel fuel overseas. Still, the average European is better able to deal with increased fuel costs. Bike sharing programs abound, mass transit systems flourish and SUVs never caught on. No one in Europe is calling for energy independence, even though the Czech Republic has now joined the Ukraine in the list of European nations that have fallen victim to dependence on Russian oil and gas. What, then, does energy independence mean?

Nothing! Energy independence is a meaningless phrase regularly pitched in the kabuki theatre that is American politics. It rests on an economic understanding that presumes little or no international commerce, requires a nation to have at its disposal all of the raw materials necessary to extract itself from international commerce in energy, and absolutely obfuscates the real world of energy economics.

Yes, at one time, the United States did develop and have at its disposal many of the raw materials needed to fuel economic growth. Pennsylvania coal and oil fostered the growth of the machine age. Exploitation of the California and Texas oil fields and the expansion of the coal industry from the Appalachians to Montana allowed that growth to continue.

At the same time, individual European nations had a different experience. Germany, Britain and France had large coal reserves. But, Rumaninan oil was crucial for the European powers. Trade was one way of acquiring oil. Colonization and conquest were other means. European countries used both.

For its part, American companies participated in the growth of the international oil market. As oil fields matured and new companies entered the market, the range of oil exploration extended into South America, Mexico and the Middle East. Cost, measured in terms of production and transportation, became a critical factor, especially with the abundance of oil in the world. Yet, overseas, nations threw off the yoke of colonialism and asserted their rights to control the oil beneath their lands. As the wave of nationalization of oil assets proceeded apace, OPEC was transformed into an organization subject to national political aims. In the 1970s, as a result of the Arab-Israeli conflict, Americans and Europeans awoke to the first of several oil shocks. Long lines at gasoline stations highlighted the growing dependence Americans had on overseas oil and confirmed what Europeans had long known: their economies could be held hostage to oil embargoes.

In the United States, politicians nurtured the belief that America could turn back the clock and free the United States of its growing dependence on overseas oil. Turning on the tap of Alaskan oil seemed to signify that such independence was indeed possible. Nevermind that much of the output of Alaskan oil was sold on the open market to Japan. Nevermind that the presence of Alaskan crude had little impact on the East Coast. The myth emerged that Alaska proved that energy independence was possible. The fact that energy imports kept rising, as American production costs made domestic oil less competitive, may have been noted by economists and political scientists, but remained a blur to most Americans and allowed politicians to continue to promise energy independence.

An even cursory comparison of worldwide prices indicates that American gasoline prices are neither unconscionably high or ridiculously low. Yes, European fuel costs more. But, Europeans pay much high taxes on gasoline and other fuels. Yes, gasoline costs less in Venezuela, Iran and even Mexico. And, yes, in each of these countries, the cost of gasoline is heavily subsidized even if this hurts the subsidizing economies. Iran rations gasoline; and Mexico cannot muster the investment necessary to expand its declining production by exploiting deeper, off-shore oil deposits.

So, could the United States allow more drilling off-shore and in the Arctic? Of course, it could. Already, capped wells in California's Central Valley are being retapped because now the economics warrant exploitation of these oil deposits. And, indeed, this oil is entering the American, that is California, oil market. Yet, there is no guarantee that new leases for off-shore drilling would produce new oil for the American market. There are already many leased acres that the oil companies are choosing not to exploit. And, even if new fields could be developed, there is no reason to assume that the production would go exclusively to the United States. Oil is fungible and is traded in a global market. It goes where production and transportation costs warrant it to be traded. In addition, crude oil must be refined. In the United States, refinery capacity has remained stagnant for the past thirty years as no new refineries have been built and local opposition to the building of new refineries has halted any and all construction plans. As domestic refineries are stretched to capacity, the US oil industry has supplemented gasoline supplies by importing refined products from the Caribbean. Unless the oil refiners make marked improvements in the capacity of existing refineries, establish new refineries throughout the United States or can import even more refined fuel, refining capacity will limit the ability of the United States to significantly reduce the cost of fuel.

Why not use higher fuel costs to usher in a new era where demand is made more efficient by encouraging the production of vehicles based on new technologies - hybrid vehicles, electric cars, perhaps even hydrogen fueled vehicles some day - that use less oil? Why not use higher fuel costs to justify a long-needed expansion of mass transit in American cities and suburbs? Why not use higher fuel costs and their impact on the less financially able to establish a program of subsidies and allocations that encourage the development of energy alternatives? Government buyouts of gas-guzzling vehicles above market cost might help wavering consumers to opt for more fuel efficient vehicles. Expanding mass transit alternatives and improving their reliability might encourage commuters to abandon the use of personal vehicles for daily commutes. Providing loans and subsidies to automobile manufacturers might enable companies to survive the sharp and sudden transition to a radically different transportation market.

Let it be clear. The cost of gasoline is not going to come down any time soon. Nor should it. The economics of supply and demand are having the desired effect. SUVs are unwanted and fetch rock bottom resale prices on the used car market. Demand drop-off is leading to the elimination of uncompetitive gasoline service stations. Manufacturers are touting fuel economy and rushing to expand the production of vehicles that will meet new consumer demand.

Energy independence has been used repeatedly as a mask to cover politicians' close relationships with oil producers. It has also been used to lull Americans into thinking that if only we removed the barriers to domestic oil production life continue as before. It is not, nor can it ever be, a rational program to prepare the American economy for the eventual exhaustion of oil as the main energy source and the ongoing tight relationship between energy demand and energy supply.