American energy independence in an emerging global economy

The Wall Street Journal reports that the financial market opened this morning with crude prices continuing to drop (“Commodities continue to plunge” August 15, 2008).  Spurred by worry that weakening growth will upset demand, oil futures dropped nearly $1 to around $114 a barrel in New York this morning, down roughly 21% from its July 3 peak of $145.29 a barrel.

With the price of oil futures tumbling, many Americans may be breathing a sigh of relief pocketing those few dollars “saved” at the pump while gasoline prices decline.

But what has America really learned about the oil commodities market?  And will the declining prices slowly silence the cries for energy independence?

Let’s face it:  Americans embrace short-term solutions.  With the pain at the pump abating, the declining crude prices, though largely resulting from a sluggish world economy, may lull Americans into believing that the latest round of energy cost peaks was merely an anomaly in the market, a mere spike on a graph published in a reputable financial journal.

But with China and India emerging as strongly-growing markets, the demands for energy will only increase from that sector of the global economy.  And despite America’s best conservation efforts, voluntary or otherwise, without changes in America’s energy policy, the future can only bring a surge in demand for energy sources that will, once again, hit Americans in their wallets.

The only solution is to decrease American dependence on foreign oil suppliers.  America must develop American resources to address American supply issues.

Offshore drilling can allow American access to reserves estimated to hold over 18 billion barrels of oil and 55 trillion cubic feet of natural gas.  “And in America’s West, oil shale is estimated to between 800 billion and 2 trillion barrels of oil—more than three times the proven oil reserves in Saudi Arabia (www.energyfreedomday.org).

Granted, this is a longer-term solution.  It will take time to create the infrastructure to support production of petroleum products extracted from these resources.  And everyone knows it takes ten years to build a workable refinery.  But with current refineries in America operating at 88% capacity, it does not take much calculation to realize that even one new refinery could drastically increase the supply required by growing global demand for energy.  Why shouldn’t America benefit from developing its own resources?

The pro-environment Democrats have been posturing for over twenty years that it would take ten years before Americans would even see a drop of gasoline produced from American supply of crude oil.  They insisted that the environmental risks to our pristine coastline and Alaskan wilderness were too great.

But one wonders how much of a crisis the latest oil “shortage” would have been had politicians been pro-active, insisting on energy independence as a national priority twenty years ago when demand for oil was lower.  One wonders what might have been had politicians provided American petroleum companies incentives to develop American resources for American energy independence.

Instead, feigning concern for the environment, politicians chose dependence on “allies” like Saudi Arabia to provide crude supply for America’s energy needs, the then “cheaper” consumer solution.

But as the saying goes, “With friends like these….”  Dependence on a foreign government with the power to regulate supply has proven to be disastrous for the average American consumer.

However, the sluggish growth in the American market, now also appearing in European and Asian markets, has slowed growth in the world economy.  This economic reality will cause a decrease in the price of crude oil, and lower the cost of fuel for consumers.

Basic laws of supply and demand dictate such a free market response.

This may be a small window of opportunity for Americans to insist that politicians are prepared for the next surge in demand for oil prices by allowing access to offshore energy resources and providing incentives to develop those resources for American consumers.

We must maintain the momentum of the energy independence movement while the pain at the pump is still fresh in our wallets.  Or we will find that more than our gas tanks are empty.

This entry was posted on Sunday, August 17th, 2008 at 9:27 pm and is filed under Energy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.