The pitfalls of energy independence

As we look at the various places in the Middle East that produce oil and an interesting fact should become apparent to all:  the three largest Middle Eastern exporters (Saudi Arabia, United Arab Emirates and Kuwait) are all politically stable environments and allies of the United States.  Iraq and Iran are actually large exporters as well, but they are massive countries and export very little on a per square mile basis.

 

In other words, in being economically connected to the outside world via trade, stability is the result.  When countries don’t trade, instability has a tendency to rear its ugly head.  So while it may be nice to know that North America is now (thanks to hydraulic fracking and horizontal drilling) a net exporter of energy, the truth is that we should desire active energy markets whereby the Middle East is encouraged and enticed to trade with us. 

 

Naysayers will say, “but our money will end up in the hands of terrorists that wish to do us harm.”  This doesn’t make a whole lot of sense for two reasons:

 

  1. Why would a country like Saudi Arabia want to destroy the golden goose?

 

  1. Box cutters and flight training school are cheap. Accordingly, terrorists don’t need money, all they need is desire.

 

To be sure, for every dollar of energy we produce at home that’s good news for American industry and prosperity.  But if we could snap our fingers and stop purchasing foreign oil, it would devastate otherwise stable nations in a region of the world where we can ill afford more instability.  In addition, the more oil that finds its way to the international market the lower the price.

 

Similarly, to the extent we lifted our export ban, more countries would be inclined to treat us better than if we weren’t trading partners.  I would argue that if it wasn’t for the fact that Russia was so important to Europe in terms of energy, what they did in Ukraine would have been far more difficult to get away with. 

 

So the next time you’re driving on the Interstate and one of those tanker-trucks impedes your progress, realize it’s making our way of life possible, even if it’s filled with foreign oil heading to your local service station or domestic oil heading overseas.

Comments

Dino Manalis Added Dec 27, 2017 - 8:00am
In fact, we should be energy-independent, but I agree, we ought to maintain good relations with our Arab friends and allies.  Petroleum and gasoline should actually be cheaper and we can accomplish that with more refineries; more drilling, including on Native American lands; and greater usage of other energy sources, including natural gas and other sources.  The Arab World, too, needs to diversify its energy portfolio, like the rest of the world.
Phil Greenough Added Dec 27, 2017 - 9:06am
Your comment misses the point of my article.  Good relations with Arabs is accomplished by being dependent on Arab energy.
 
 In light of how easy it is for Arabs to extract oil, there is no reason for them to diversify their energy portfolio.   The same is true for us, just to a lesser degree.  
Dave Volek Added Dec 27, 2017 - 11:04am
Phil
 
That is some great thinking beyond the first set of ramifications. There are also pros and cons to any societal decision we make. When we can line all of them up to take a good look, then maybe we might be making better decisions.
 
 
 
Phil Greenough Added Dec 27, 2017 - 11:51am
I would also add that sometimes things are not always as they appear.  After all, if you agree with me, energy independence might lead to more problems with Middle Eastern nations than energy dependence.
opher goodwin Added Dec 27, 2017 - 12:02pm
Phil - the future is Green. That's where energy independence really works - not through polluting old energies.
Phil Greenough Added Dec 27, 2017 - 6:57pm
The oldest energy around is solar, water and wind.  The future is to appease the green gods while filling our cars and heating our homes with fossil fuels.  The good news is that the fuel we use today (oil and natural gas), is far cleaner than the fuel we used in the past. 
opher goodwin Added Dec 27, 2017 - 7:07pm
Phil - Aah but the fuel we'll use in the future (not too distant) will be completely clean. I fear America is getting stuck in the past.
Phil Greenough Added Dec 27, 2017 - 7:11pm
With the planet consuming more fossil fuels than ever before, that's quite a prediction.  
Bill H. Added Dec 27, 2017 - 8:08pm
 
Opher - We will remain "stuck in the past" until we free ourselves from the lobbying and financial grip that the oil industry has on our decision making process. They have been very successful at delaying implementation of alternative energy sources such as solar and advanced battery technology.
Obviously, we won't be making much progress for a while, and things will probably get worse before they get better.
We have friends in Germany who live in an area where they have all interconnected their rooftop solar systems. Not only do they not pay an electric bill at all, but they dump the excess power into their electric cars, resulting in no fuel bills whatsoever. The only expense is occasional battery replacement, of which much comes from recycled old battery materials.
I believe there are already ordinances in-place here in most US cities that would not allow this here thanks to the utility companies.
Thomas Napers Added Dec 28, 2017 - 3:10am
Bill –Like we should expect from any industry, they oil industry should primarily interested in itself.  The failure for any alternative energy to be adopted is entirely the product of their own shortcomings. However, we should all rejoice in the fact natural gas has replaced oil is the primary means of heating our homes.  As I’m sure any self-proclaimed greenie would know, natural gas burns much cleaner than oil and oil burns much cleaner than coal.  So the fossil fuel industry has made great strides in terms of the environment.
Phil Greenough Added Dec 28, 2017 - 5:22am
Do any of you folks read the articles before you comment?  This is not an article about fossil fuel or green fuel, it’s an article about trade and global peace.   
opher goodwin Added Dec 28, 2017 - 5:43am
Phil - Britain is making great strides. We have embraced alternative energy.
This year alternative energy has made up over 50% of our energy use.
The cost of off-shore wind energy has dropped below that of nuclear energy.
http://www.bbc.co.uk/news/business-40198567
http://www.telegraph.co.uk/business/2017/06/07/uk-sets-new-renewable-energy-record-wind-solar-surge/
This is the future.
Phil Greenough Added Dec 28, 2017 - 10:30am
Not true in the slightest.  The link clearly shows that renewables made up 50% of ELECTRICITY usage on WEDNESDAY (June 7th).  It happened to be a particularly windy and sunny day that day.  I read the comment section of the link and there are a lot of other facts which makes your 50% remark even more bogus than I already showed it to be.  
opher goodwin Added Dec 28, 2017 - 11:00am
Phil - yes it is. But read the article! Coal/gas/oil was down to 27.9%!
Offshore wind - one tenth the cost!
You did not read it all.
Tracy Kolenchuk Added Dec 28, 2017 - 12:49pm
Interesting concept... What might happen if we achieve cheap, safe, fusion power, such that oil become irrelevant and every country is "energy independent". It might isolate us and create more problems than it resolves? 
Phil Greenough Added Dec 28, 2017 - 1:18pm
Opher;
You made it sound like alternative energy makes up 50% of England’s energy use, but fail to mention it was for only a single day and only for electricity.  You are the most dishonest person I’ve encountered on this site, how do look at yourself in the mirror?
 
Tracy;
There will always be a reason to trade.  Let’s hope the Middle East comes up with something they excel at providing and we welcome their goods with open arms, if energy independence ever happens.
opher goodwin Added Dec 28, 2017 - 6:38pm
Phil - you just do not read the articles I sent through to you. I suggest you do so before you call people liars just because the truth doesn't comply with what you like to believe. Reading the opening line does not tell the whole story!!
Emma Pinchbeck, who heads up renewable energy trade body RenewableUK, said: "National Grid is confirming that low-carbon sources are generating 70pc of our electricity - with wind power the star amongst these sources."
Even A Broken Clock Added Dec 28, 2017 - 9:52pm
Phil, good article, but I do have a few points of disagreement. First, we must recognize that Saudi Arabia is at best a meta-stable country right now. The torch has been passed to the grandchildren's generation of the original founders, and the Crown Prince has been shaking things up substantially since he gained influence. Thus we have the proxy war between Saudi Arabia and Iran being fought in Yemen. And we have the cold war with Qatar as well.
 
Saudi Arabia has held the religious sect of the Wahhabis which when combined with oil revenues, has fomented the fundamentalist fighters that have tormented western society. I don't know if the current Crown Prince is trying to deal with this religious issue, but if he is, he is likely to face fierce resistance.
 
Finally, it is true that the interaction with the United States for trade for oil has benefited the US by keeping the region as secure as it has been. But the economic ties are fraying, and you are correct that reduced dependence of the US on gulf oil may break the ties. With that would also result in the loss of the reserve currency status. That will be a change that the US will rue once it happens.
Mark Hunter Added Dec 29, 2017 - 2:13am
I agree that trade tends to help with stability; but if that's the only thing keeping those countries in the Middle East stable, there's big trouble to come there. Other energy sources are going to become more and more popular, and oil less and less (although not as quickly as some people say, I suspect). When the time comes that the rich countries of that area no longer have customers for their oil, I suspect they're going to collapse into chaos.
Mircea Negres Added Dec 29, 2017 - 3:54am
Phil, your argument that trade fosters stability has merit, but only so far. There is a limit, and that is when trading with one's enemies. The Saudis are not friends, though they are less public enemies than Iran. In that regard, there have been quite a few analyses which point out that members of the Saudi royal family sponsor terrorism and that has as much to do with their interpretation of Islam as it does with the longstanding relationship between the House of Saud and the Wahhabi sect. When it comes to killing the goose that lays the golden eggs, I've learned that it's silly to expect rationality from religious fanatics. After all, some years ago the Saudis destroyed a lot of places significant to early Islam because they feared their existence would encourage extremists, kind of like cutting off the nose to spite the face- and that really didn't make sense to me, but that's how ridiculous religious people can be... As for box cutters and flight schools being cheap and terrorists only requiring desire, I'd recommend you start reading intelligence analyses of the terrorist world because moving people and goods around clandestinely is anything but cheap. Anyhow, the $125.000 (or more) transfer from the Pakistani ISI to one of the alleged 9/11 hijackers has never been explained, but that sum represents a very good year's salary even for Americans and thus is hardly chicken feed.
 
Here's a couple of questions for you: how far do you think the German Luftwaffe would've gotten if they weren't supplied with the binary fuel by Standard Oil of US throughout World War 2, and what would've happened if the United States had not sold the Soviet Union millions of tons of wheat and maize when its crop yields were falling around 1987, to say nothing of the Western firms which traded (sometimes illegally) with the Eastern Bloc and gave oppressive regimes technological means to further entrench their oppression machinery? Do you think those regimes would've fallen faster and prevented much of the suffering so much of the world endured?
Phil Greenough Added Dec 29, 2017 - 5:23am
Clock;
I’m not sure what you disagree with.  My article didn’t mention any specific Middle Eastern country.  I focused on the risks of decreased trade and based on my reading of your comment, you agree.  As to the unrelated thoughts you raised, I have the following comments:
 
The government in Yemen nearly collapsed.  Iran attempted to fill the power vacuum.  So the war in Yemen is a result of Saudi Arabia not wishing for another Middle Eastern country to become radicalized by Islamic Fundamentalists ala the type running Iran.  I don’t think it has anything to do with the internal politics of Saudi Arabia.
 
The dollar is the world’s reserve currency for all sorts of reasons.  The more we trade with the outside world the more likely it remains the world’s reserve currency and removing oil from the equation would make a dent.  However, it would be like removing sand at the beach.  There is no other currency remotely close to overtaking ours as the world’s reserve currency. 
 
Mark;
I didn’t say trade was the only thing keeping Middle Eastern countries together.  As global wealth increases so will demand for cars and other things that require oil.  So I disagree, oil is only going to get more and more popular.  If it were to lose out to anything, it would be natural gas.
 
Mircea;
The Saudi Royal family is estimated to consist of 15,000 people.  It is impossible to expect all of them to be moderate Muslims.  There is no evidence of current leadership supporting terrorism, if there were, America would expect the Crown Prince to do something about it.  If he didn’t, than Saudi Arabia is no different than Iran and America would treat it similarly.  Keep in mind, this delicate stuff because it’s difficult to be an ally of Saudi Arabia and Israel at the same time. 
 
Yes, $125 is chicken feed.  It also doesn’t take much of an oil operation to put together $1,250,000.  After the war started, Standard Oil did not do business with the German Army.   
Jeff Jackson Added Dec 29, 2017 - 1:55pm
The Chinese will be more than willing to buy all the oil in the Middle East. They are making investments in oil properties in Africa, and they aren't doing it to help the natives. They have a huge population, and they're going to need all kinds of oil now and in the future.
Phil Greenough Added Dec 30, 2017 - 4:51am
Jeff;
The price of oil is product of supply and demand.  So if the United States develops its own reserves, it will be more difficult from Saudi Arabia to profit from the sale of oil.  And so long as we aren’t trading partners, it will be more difficult for Saudi Arabians to accept our alliance with Israel. However, I agree that increasing Chinese demand helps the price from dropping far more than it already has. 
rycK the JFK Democrat Added Dec 30, 2017 - 4:41pm
Phil,
 
"So the next time you’re driving on the Interstate and one of those tanker-trucks impedes your progress, realize it’s making our way of life possible, even if it’s filled with foreign oil heading to your local service station or domestic oil heading overseas."
 
Well stated and note there are few electric cars on the road due to the expense. Drill and drill more and our energy costs will continue to be lower.  OPEC would actually have been a cause for war in centuries past so I hope SA goes broke. And, nukes are coming back too. 
rycK the JFK Democrat Added Dec 30, 2017 - 4:47pm
Mark Hunter,
 
"When the time comes that the rich countries of that area no longer have customers for their oil, I suspect they're going to collapse into chaos."
 
Have to agree 110% here. Technology is on our side and tends to lower drilling and production costs. I understand that at $57/brl the Saudis are down some %80 in revenues. This is the natural consequence of markets for which they appear to be ignorant. They thought OPEC could keep the oil prices up for decades more. Cartels never last in the prices of their goods are too high.
Phil Greenough Added Dec 30, 2017 - 8:28pm
Ryck;
Why do you hope for Saudi Arabia to go broke?
rycK the JFK Democrat Added Dec 31, 2017 - 10:37am
 Because they are leading a cartel that is abusive of fair trade and they supported terrorism for decades. The queen used to mail out checks daily. They do not need to have a corner on energy or anything else. Their cradle-to-grave system is crashing and they have not trained their citizens to do much else than to go to prayers and spend petro dollars. 
Phil Greenough Added Jan 1, 2018 - 6:25am
Thanks to hydraulic fracking, horizontal drilling and the discovery of oil in places like Venezuela, OPEC is not all that powerful anymore.  While I agree they should diversify their economy, any country should be expected to exploit what they do best and for Saudi Arabia, that’s oil.  While I agree there are many internal problems within Saudi Arabia, they are the most stable country in the Middle East, sans Israel.  If it wasn’t for their influence and power, America would probably have a much larger military presence in the region.  So not for one second to I agree with anything you just wrote. 

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