In this blog post, Resources for the Future Fellow Daniel Raimi provides his perspective: As long as the United States participates in the global economy and enjoys the benefits that come with access to low-cost minerals, metals, and fuels produced abroad, it cannot—and should not—seek independence from the global energy system.
Russia’s invasion of Ukraine has sent global energy prices skyrocketing, creating major economic challenges in Europe and around the world. International oil companies and the Biden administration, among others, have halted purchases of Russian energy, sending a strong message that naked military aggression is unacceptable in today’s world.
To counter the effect of rising oil prices, the Biden administration—like every US presidential administration since the late 1960s—has articulated the need for the United States to become energy “independent.” Judging by Google searches, public interest in the concept is the highest it’s been in decades.
But as many energy experts have argued before, energy independence is the wrong goal. In fact, seeking independence from the global energy system would be counterproductive, regardless of whether we’re talking about fossil fuels or clean energy technologies. In this blog post, I’ll try to argue why it’s finally time to let go of the alluring yet misleading concept of energy independence.
Energy Prices in Context
First, a little context. The ramp-up in crude oil and gasoline prices in recent weeks has been startling. However, the oft-repeated statements that gasoline prices have reached “record highs” are not quite right. Adjusted for inflation, prices were significantly higher in 2008, just before the Great Recession; prices also were higher for long stretches of the 2010s (Figure 1).
Figure 1. Average Weekly US Nationwide Gasoline Prices in Nominal and Inflation-Adjusted Terms ($/gallon)
Data source: US Energy Information Administration
Another element that will reduce pain at the pump for consumers are energy-efficiency improvements in the vehicle fleet. Real-world fuel economy has risen by 32 percent in model years 2005 through 2020 despite many trucks becoming heavier and more powerful.
Will these technocratic points ease the frustration for US drivers as they watch the ticker on the gasoline pump click past $40, $50, or $60? Unlikely. In fact, the recent price spike seems to have done more to capture the attention of the energy-consuming public than any event since the 1970s. In response, policymakers are once again promising energy independence.
The Illusion of Energy Independence
For decades, policymakers have chased the chimera of energy “independence.” Rising from the wake of the Arab oil embargoes of the late 1960s and early 1970s, and driven by a desire to insulate voters from high energy prices, more than a generation of US presidents have promised to make the United States “independent” from the tumult of the global oil market.
When policymakers use the term “energy independence,” a rational listener would assume that the term “independent” aligns with Merriam-Webster’s definition: “not subject to control by others.” In the context of energy markets, this control manifests itself not in the form of energy imports, but rather energy prices. The public cares much less about where our oil comes from than about how much it costs. Policymakers are seeking independence from the price impacts that result from the actions of other countries such as Russia.
So, when the United States cut off Russian oil imports, did the United States become “independent” of Russian oil? Anything but.
Because the oil market is global, a decrease in supply (or an increase in demand) anywhere in the world will raise prices for everyone. These price spikes will occur regardless of how much oil we import and where those imports come from. Indeed, the high prices that consumers are facing around the world demonstrate just how dependent the United States is—along with every other nation—on decisions made in Moscow, Riyadh, Beijing, and elsewhere.
Could the United States ramp up production to become independent, as some lawmakers have argued? No.
For instance: Let’s imagine that the United States increases its oil production to make up for the shortfall from zeroing out Russian imports. This higher production would increase revenues for those producers—that is, if higher production pulls in profits for US producers (a big if!)—but would do very little to insulate consumers from pain at the pump. That’s because the main causes of today’s high gasoline prices are not related to US imports or US production; the prices are driven by global oil markets.
Another hypothetical scenario: Let’s imagine that the United States increases its production even more dramatically, becoming a consistent net exporter of oil and petroleum products. Such a development, if it pulls in profits for producers (an even bigger if!), would again boost revenues for oil companies and provide broad economic benefits in oil-producing regions; it might also lead to lower global oil prices. But would it insulate US consumers from price shocks resulting from geopolitical turmoil? Again, no.
As long as the United States consumes oil, it cannot be energy independent.
So, if cutting off oil imports from Russia and increasing oil production won’t make the United States energy independent, what would? And even if we could achieve independence—would we want to?
What Would Real Energy Independence Look Like?
In broad strokes, becoming “independent” of a globally traded commodity (e.g., oil) can happen in two main ways. The first (highly theoretical) approach would be to consume only what is produced domestically. In this setting, domestic energy prices would be dictated by domestic supply and demand.
The obstacles here are obvious. First, the United States is still a major net importer of crude oil. In recent years, we have produced between 9 and 12 million barrels per day of crude oil but consumed between 15 and 17 million barrels per day of refined products (mostly gasoline and diesel). Matching domestic supply with current consumption would require a massive scale-up in US oil production, investments that producers would make only under a much higher price environment.
What’s more, walling off the United States from imports would isolate the country from the benefits that global markets offer in times of disruption. For example, when US producers and refiners in the Gulf of Mexico suspend production for hurricanes, or when major pipelines shut down due to cyberattacks, consumers depend on supplies from abroad. Without these foreign supplies, price impacts would be even more severe. In short, isolating the United States from global oil markets would increase—not decrease—domestic energy prices.
A clean energy future will not be an energy-independent future. Whether it’s nickel from Russia, cobalt from the Democratic Republic of Congo, “rare earths” from China, or lithium from Chile, the metals and minerals that underpin batteries, wind turbines, and solar photovoltaic modules rely on global supply chains that are subject to the same market and geopolitical pressures of oil.
The second, and more attractive, way to lessen dependence of a globally traded commodity is to reduce the use of that commodity. In the case of oil, some federal and state policies have taken steps in this direction: federal Corporate Average Fuel Economy (CAFE) standards, the Renewable Fuel Standard, subsidies for electric vehicles, and California’s Low-Carbon Fuel Standard.
Although these policies have not substantially moved the United States toward independence from global oil markets (since 2000, US consumption of crude oil and petroleum products has hovered consistently around 20 million barrels per day), they are the types of tools that can be most effective in reducing dependence on volatile oil prices. Because oil is mostly used in the transportation sector, the clearest path rests on a foundation of further improvements in vehicle efficiency, accelerated deployment of electric vehicles, and continued research into alternative fuels such as next-generation biofuels and emerging technologies such as “air-to-fuels.”
Will these efforts achieve true “independence” from the global oil market? Unlikely. Even under scenarios in which the world limits the global average increase in temperature to 1.5°C by 2100, oil consumption is likely to persist in the petrochemicals and heavy-duty transportation sectors for decades to come. Still, the levels of consumption in these sectors would be far lower than today, meaning that future price spikes would have a much smaller impact on consumer pocketbooks.
Clean Energy Codependence
These efforts to reduce oil consumption would bring benefits for the environment and climate. Enhancing energy efficiency has obvious climate benefits, and electrifying transportation also would dramatically reduce emissions, so long as the electricity system marches toward zero or net-zero emissions.
But let’s be clear: A clean energy future will not be an energy-independent future. Whether it’s nickel from Russia, cobalt from the Democratic Republic of Congo, “rare earths” from China, or lithium from Chile, the metals and minerals that underpin batteries, wind turbines, and solar photovoltaic modules rely on global supply chains that are subject to the same market and geopolitical pressures of oil.
Although domestic investments in the extraction and processing of these critical materials can enhance resilience to future shocks, walling off the United States from global supply chains in critical minerals is a bad idea for the same reason that walling off the United States from global oil markets is a bad idea. Isolation from these markets increases—not decreases—the risk of economically damaging price volatility.
As the United States and the world move toward a clean energy future, the geopolitical risks associated with oil consumption will recede. But as long as the United States participates in the global economy and enjoys the benefits that come with access to low-cost minerals, metals, and fuels produced abroad, it cannot—and should not—seek independence from the global energy system.
