Can the US Really Be Energy Independent?

We keep hearing about the US becoming energy independent, yet the reality of the term may be another story.

Jun 26, 2014 at 10:31AM

US energy independence: You probably have heard the phrase thrown around countless times, especially during political campaigns or election seasons. The problem with the term, which refers to being completely self-sufficient when it comes to meeting energy demand, is really based on flawed logic considering we are really decades away, if ever, from truly meeting all of our power needs with domestic energy production. Also, economics will always trump the goal of being energy independent if access to cheaper power is on the table. Just ask Germany, a nation dedicated to renewable energy yet now a significant importer of US coal to offset rising electricity prices, some of the highest in the European Union without their focus on nuclear power post Fukushima. 

So the question beckons, can the US really be energy independent? I recently spoke with former US Energy Secretary Spencer Abraham who told me, "We have huge demands for petroleum and we are probably never going to ever produce enough petroleum domestically to handle our needs every single day." If a former US Energy Secretary believes we can't be 100% energy independent, why the heck are we hearing so much talk about exporting crude oil and natural gas?

Thanks to the natural gas boom here at home, we should be looking at new ways to tap domestic natural gas as a transportation fuel versus simply using the resource solely for power production. This is an idea Secretary Abraham also strongly supports. However, creating the necessary infrastructure to establish nationwide natural gas fueling stations would realistically take years to build and a ton of cash to complete. Therefore, if the U.S. exports light sweet crude oil prematurely, we could be blindly opening the door for higher gasoline prices here at home since thanks to our continued reliance on foreign oil. How's that being energy independent? Additionally, domestic refiners like Valero Energy (NYSE:VLO) and Phillips 66 (NYSE:PSX) were hit hard on the oil export news as investors wonder if refiners margins will get squeezed if relaxing or tweaking the 40-year ban on crude oil exports opens the door to an even bigger move to send more oil overseas. 

The shale movement was supposed to be by Americans for Americans. So why not use or store the newly found light sweet crude, rather than exporting it at a time we still import petroleum in a big way? Additionally, are estimates for shale gas too high, and could domestic oil supplies actually begin to resume a downtrend by the end of the decade if export restrictions are removed? Also, to be energy independent we shouldn't be closing perfectly fine nuclear plants and letting production tax credits for wind expire, right? It's sad  to think the US doesn't produce any power whatsoever from offshore wind. This leads me to believe the US is thinking way too short term when it beats its drum about being energy independent. In fact, the very idea of being energy independent is hogwash. 

We simply can't trade one dependence on crude oil with a new one on natural gas and then export that natural gas without focusing much more on next generation renewable opportunities like solar, geothermal, wind and advanced 24/7 baseload nuclear power. Without the development of those industries in 5th gear, the whole notion of being energy independent is really political nonsense that needs to be challenged by voters. 

If exporting liquefied natural gas (LNG) helps remove the glut of natural gas here at home, prices of natural gas will most definitely lift from 40-year lows. That means the exporting of LNG, which is produced in our very own backyard, may actually punish the American consumer at a time our new domestic energy booty should be helping to lower power prices.

So if the US doesn't get much more serious about looking into renewable, sustainable domestic energy alternatives such as offshore wind and advanced nuclear reactors at a time when natural gas is still relatively close to 40-year lows, the very thought of being energy independent should be met with a great deal of skepticism. 

Therefore despite what we are being told about becoming "energy independent," exporting US natural gas and lifting a 40-year ban on sending oil overseas may ultimately cause the country to be more dependent on foreign sources of energy needed to satisfy growing domestic power consumption needs. That's not energy independence folks, that's politicians trying to make headlines. 

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John Licata has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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