Now the U.S. is back to producing slightly more oil than it needs (as shown in the preceding chart, crude imports are still well higher than exports, but net exports of refined petroleum products more than cancel that out), yet isn’t exactly independent of overseas oil exporters. As my fellow Bloomberg Opinion columnist Liam Denning explained recently, Gulf Coast oil refiners that are set up to handle heavy crude from Venezuela have been importing a lot of oil from Russia lately because U.S. sanctions don’t allow them to import from Venezuela. More generally, oil prices are set on global markets that the U.S., as a major producer, can influence but not control. There is no observable link, for example, between movements in the U.S. petroleum trade balance and in the gasoline prices Americans pay.
So no, gasoline prices aren’t high right now because Joe Biden “destroyed American energy dependence.” They’re high mainly because the collapse in energy demand at the beginning of the pandemic caused oil producers around the world to cut back on pumping and investment. Then again, those prices may stay high because drillers are wary of increasing investment given (1) painful recent experience and (2) efforts by the Biden administration and other governments around the world to shift energy use away from fossil fuels.
It is these efforts to which Biden critics are referring with their talk of destroying energy independence, so that charge is not grabbed entirely out of thin air. But discouraging fossil fuel use in favor of renewables and other non-carbon-dioxide-emitting energy sources is arguably a step toward increased energy independence over the long haul. Burning fossil fuels imposes economic harms through global warming, while domestically generated wind and solar power have helped reduce the need for energy imports. Then again, the fracking boom of the past decade has done far more to reduce the U.S. need for energy imports, and decreased carbon-dioxide emissions as fracked natural gas supplanted coal in electricity generation—while also increasing emissions of methane, another greenhouse gas, as a by-product of all the drilling. Energy independence is complicated!
It’s on the demand side that the concept is perhaps least fraught. If you can find ways to achieve your economic goals with less energy, you are by definition less energy-dependent. Since the the oil crises of the 1970s, the U.S. has through gains in efficiency and economic shifts found ways to generate a lot more gross domestic product per unit of energy consumed.
If that numerator and denominator feel too abstract, here’s another, closer-to-home way of looking at more or less the same phenomenon.
The share of U.S. consumer spending going to energy plumbed its all-time depths in the first few months of the pandemic, and while it has bounced back since it’s still lower than at any point before 1998 (and yes these statistics only go back to 1959 but I don’t see how energy’s wallet share could ever have been lower, at least not if you count food for horses and time spent cutting wood as energy expenses). This is one big reason why, while a 50% nominal increase in gasoline prices in 1973 and 1974 helped spark a sharp recession, a similar rise over the past year has been accompanied by 5.5% real GDP growth. That’s a sort of energy independence, even if it doesn’t quite feel like it as events overseas again make themselves felt at the gasoline pump.
Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of The Myth of the Rational Market.
