Title: Energy Policies and the Tension Between Independence and Security
Introduction:
President Joe Biden’s recent speech in Chicago, denouncing “trickle-down” economics, has sparked a debate on energy policies. In response, Speaker Kevin McCarthy visited eastern Ohio to revive the slogan of “energy dominance.” This clash of ideas highlights a lurking tension in the energy policies of both parties. While McCarthy’s emphasis on drilling may seem odd, it raises important questions about the United States’ energy independence and its impact on the economy.
US Energy Independence:
McCarthy’s claim that the US has been turning to foreign competitors for oil and natural gas under the Biden administration does not align with the actual numbers. In fact, the US has become a net exporter of oil and natural gas to a greater degree than under any previous administration. Although the US still imports crude oil, the amount has significantly decreased over the past decade. Furthermore, the majority of crude oil imports come from Canada, a friendly neighbor and reliable trading partner.
Biden’s Approach to Drilling:
Contrary to McCarthy’s narrative, President Biden has not choked off US oil and gas production. While he may not be a proponent of drilling, his administration has approved projects like the Willow oil project in Alaska to prioritize energy security. Analysts predict that US crude oil production will surpass pre-pandemic levels by the end of this year. Thus, the concerns raised by the oil lobby about Biden’s policies may be more about perception than actual outcomes.
The Consequences of “Drill, Baby, Drill”:
A significant reason why oil and gas companies are not drilling faster is due to the negative impact of the “drill-baby-drill” approach on their financial stability. The focus on quantity over sustainability during the shale boom undermined the industry’s financial foundation. Ironically, Trump’s industry-friendly “energy dominance” posture encouraged unsustainable drilling practices, leading to adverse effects on the industry’s balance sheets and investor confidence.
Energy Independence and Economic Realities:
McCarthy’s assertion that energy independence is essential for a strong economy contradicts historical evidence. The US has experienced significant economic growth while increasing its dependence on energy imports over the years. Striving for complete independence could lead to higher costs rather than reducing inflation, as McCarthy suggests. The US oil system is designed for globalization, and refineries are incentivized to maintain a diverse slate of crude oil streams to optimize economic efficiency.
Energy Security and Strategic Considerations:
Energy insecurity, like climate change, is an externality that the market does not price well. Shifting to wholly domestic energy sources to achieve energy security would come at a cost. As seen in the case of clean technologies, reducing dependence on Chinese inputs requires absorbing higher costs. The pursuit of strategic goals, such as job creation, tackling climate change, and national security, will likely be the driving force behind energy policies in the future.
Conclusion:
Optimal energy policies for the US would prioritize energy efficiency, domestic production of oil and gas, and the rapid deployment of alternative technologies. Reforms in permitting for energy infrastructure could help mitigate energy costs by connecting supply with demand more efficiently. However, achieving consensus on such policies has proven challenging in Washington. As the debate continues, it is crucial to strike a balance between energy independence and security while considering economic realities and strategic goals.
Note: This news report summarizes the original content written by Liam Denning for Bloomberg Opinion. The report highlights the clash between President Biden’s energy policies and Speaker McCarthy’s emphasis on energy dominance, analyzing the impact on energy independence, economic consequences, and the role of strategic considerations.
Original Story at www.washingtonpost.com – 2023-07-05 13:05:00
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