Would Energy Independence Insulate the US from Oil Price Spikes and Reduce Wars in the Middle East?

What energy independence would mean--and what it wouldn't

The US's dependence on foreign oil is often cited as the root of several evils. The two most prominent are the ones in the title. The short answer to the first one is "probably not, but potentially." The answer to the second is "no."

Let's put aside the shear difficulties involved in becoming energy independent for a moment to concentrate on this hypothetical situation. In an apolitical and amoral world, an energy independent United States could halt oil exports and insulate itself from rising prices by cutting off the excess demand for US oil and using it exclusively for the domestic market, for which there would be enough oil to go around (hence prices would not rise). We don't live in an apolitical and amoral world however. Here's why that matters: cutting off exports is known as a beggar-thy-neighbor policy. The reason is that it would benefit American oil consumers while harming consumers in the rest of the world. That is because some additional supply would be removed from world markets, driving up the oil price still further.

Not only does this rub against our moral sensibilities, the political (and economic) backlash would be huge. And it wouldn't just be about higher oil prices. The US has encouraged free trade for decades and built up a global economic system based upon that idea. A move like that would be hypocritical and seriously undermine the US's credibility. The result could be a trade war, with other countries erecting trade barriers as well, slowing global trade, driving up consumer prices, and killing the world economy. In other words, the result could very well be worse than higher energy prices themselves would have been. So it would be better if the US didn't use its (fictional) energy independence in this way to keep its own prices low.

On to war in the Middle East (ME). Hasn't US involvement there been based on its thirst for the region's oil? Hasn't this led to wars? This is unfair. US involvement in the Middle East is due in no small part to the region's oil. To deny this would be a bald-faced lie. But I think many people assume that US involvement would somehow be proportional to the amount of its oil it gets from the region. This is a misunderstanding of economics. The US imports less than 25% of its oil from the Middle East (that's including the entire "rest of the world" statistic as being all from the Middle East, which surely drastically overstates things). But this is completely irrelevant. The oil price is determined by global supply and global demand. It doesn't matter if your traditional suppliers still have the same amount of oil. If another supplier doesn't, demand for oil from your suppliers will rise, and so will the price. Even if the US didn't import any oil from the ME, that region would still be among the world's most important suppliers, if not the most important one. It could therefore never be ignored.

This means that the US and every oil consuming country in the world has an interest in ensuring that ME oil keeps flowing. The US, however, is one of the few countries with the power to do so--so it does. Does this cause wars? I actually don't really think so. The US is guilty of promoting "stability" in the region over the years, which has often meant doing business with, and at times outright supporting, Arab dictators. As I've explained in other posts, though, these were marriages of convenience. As the Arab Spring has shown, if all other things are equal, the US will support democracy. Usually all other things are NOT equal, however. The alternative to doing business with dictators is not doing business with dictators, who will then do business with others and stay in power. This would mean the US would also have little influence on those countries (influence it could use for good) and would be more beholden to a smaller number of suppliers, putting its energy supplies at risk and artificially raising its oil prices, damaging its economy. In short, everyone would be worse off. I personally think following rigid and allegedly moral principles to the point that everyone suffers is a false, and facile, morality.

So energy independence doesn't make sense? Well, that's not entirely true, either. In an emergency, it would mean the US could ban exports as detailed above, or threaten to do so, giving it more leverage. That's the sort of "political dark arts" side of it. More cheerfully, energy independence would probably have to mean more green technology--efficiency improvements, renewables, etc., which are a good thing in their own right because of climate change, for one. Efficiency gains are also good because they reduce the energy intensity of the US economy. That means the US would require less energy for each dollar of GDP it produces. THAT really would make the US economy more resilient against rises in the oil price. Why? It's like this: if the US requires one barrel of oil for $2,000 of GDP, a rise in the oil price will have a greater effect than if a barrel of oil can generate $4,000 of GDP simply because the oil price will make up a smaller proportion of total costs in the economy. In the end, then, energy independence as a goal in its own right is not so important, which explains why the US hasn't pushed that hard for it. Reducing US dependence on oil by reducing the economy's energy intensity would provide the greatest benefits of all at a reasonable price.

And we're in luck: US oil consumption has fallen since 2005, despite rising GDP and a larger population. That means its oil intensity is falling (and actually, its overall energy intensity has been falling, too). This will make the US economy more resilient to energy price shocks over time. That can only be a good thing, because energy prices don't look set to fall much in the coming decades (except maybe for natural gas, but even that is uncertain). Just don't expect that to bring peace to the Middle East or to reduce US involvement there. Democracy just might, though, you never know...

Sandra Fluke, Rush Limbaugh, Contraception, and Clashing Values

Quite often when I write a post, I get a nervous feeling: I'm about to write something that could potentially piss people off, both on the right and left ends of the spectrum. This is especially acute with such emotionally charged (in the US at least) issues as contraception in all its forms. The antidote to this, to some degree, is to remain respectful and fair, and that's just the solution to the problem, as I will now argue.

Sandra Fluke is a law student at Georgetown, a prestigious catholic university. She testified before Congress in support of mandating that insurance companies pay for contraception for women. In this case, I believe the contraception specifically in question was birth control pills. Her argument centered around the costs of birth control during a student's time in law school (up to $3,000 according to her estimate) and the fact that birth control pills can be used to treat other medical issues, such as ovarian cysts. This condition caused a fellow student of hers to lose an ovary, and the implication was that, had Georgetown been willing to fund birth control pills, she would not have had to suffer that loss. Fluke argued "It's not about church and state, it's about women's health."¹

Rush Limbaugh attacked her on character grounds, saying that asking for others to pay her so she could have sex made her a "slut" and a "prostitute." Don't worry, I'm not about to defend him. Georgetown University President John DeGioia said it best when he called Limbaugh's remarks "misogynistic, vitriolic, and a misrepresentation of the position of our student."²

So where's the controversy? It's that I'm on the fence in this debate, though Obama has apparently already suggested the sensible thing in exempting religious organizations from the rule and putting the onus on insurance companies to offer free contraception.

The thing is: contraception can only cost $3,000 if you're using birth control pills. Why not use condoms? They'd be cheaper unless you're having a lot of sex. If you are, fine by me, but I also am not sure other people should help pay for condoms if you're using so many you can't afford them yourself. But this talk is bringing the debate dangerously toward Limbaugh's position, which is not at all what it's about. Let's bring it back to more likely condom use. One argument would be that condoms can break. Well, then use the morning after pill. Condom failure is really not an issue if women have access to the whole palette of contraceptive options, which they should, in my view. And there's another argument for condoms: only they can prevent the spread of most STDs. Birth control will not, so only using that is a risk to women's (and everyone's) health by itself.

There are other reasons for using birth control. Many may use it for health reasons (like for ovarian cysts). So be it, surely an exception for medical necessity ought not to be the vitriolic debate starter it is.

So what am I arguing? I am NOT arguing against birth control and certainly not against contraception in any of its forms. I AM arguing against mandating that all insurance companies must always pay for one of the more expensive forms of contraception whenever a woman wishes to have it: birth control pills. They might instead be required to cover funding for condoms... or not, they ought to be cheap enough and many organizations give them away for free. Birth control pills ought to be offered by insurance companies in cases of other medical necessity on the recommendation of a doctor.

What would this look like in practice? If you're a woman and want birth control pills, you would be free to choose an insurance provider who would pay for them (or buy them yourself, of course). If the plan is too expensive, you'd have two options: switch to condoms or convince your doctor you need them for health reasons. If you really do, then obviously that would be the route you should take, no questions asked. If you don't really need it for your health, I'd personally recommend the first choice because of my views on honesty.

In short: women should have a right to contraception and be free to choose whatever form of it they wish. However, it does not follow from that line that all forms of contraception must be made available free of charge, regardless of the relative merits and costs of other forms. In an age of rising health care costs and increasing government austerity, we should be looking at ways to save public money where this is feasible and does not cause undo harm. This seems like an okay area to do so. If only we could have a sane conversation about it...

As always, I welcome your comments. I actively encourage everyone to express whatever views they have, but please keep the discourse respectful and stick to the facts.

1: “Obama Calls Student Insulted by Talk Show Host.” Yahoo!, n.d. http://uk.news.yahoo.com/obama-calls-student-insulted-talk-show-host-034907306.html.
2: “Obama Calls Student in Slut Slur.” BBC, March 2, 2012, sec. US & Canada. http://www.bbc.co.uk/news/world-us-canada-17241803.