Posted on 02/03/2011 7:00:10 AM PST by SeekAndFind
This week's uprising in Egypt that occurred in concert with a minor spike in the price of oil unsurprisingly led to renewed commentary suggesting the U.S. must achieve "energy independence." A USA Today editorial noted that "More than half the oil Americans use is imported - a vulnerability exposed by the ongoing tumult in Egypt", while noted energy scold T. Boone Pickens decried our continued "exposure" to overseas events that allegedly reward us with higher oil prices.
But looked at with a more reasoned eye, the events in Egypt exposed the sheer absurdity of the charitably false notion of energy independence.
For one, the not so notable increase in oil prices was to be expected either way. As this column has shown more than once, the price of a barrel of crude tends to revert to 1/15th of an ounce of gold, and as of Tuesday, oil's price increase merely brought it in line with its historical cost.
On the other hand, assuming some of the oil price increase was related to fears of supply shortfalls given the shipping lanes under Egypt's purview, what becomes apparent is that even if the U.S. were totally oil sufficient, our being that way would in no way shield us from global events that might reduce supply while increasing costs. Oil is oil is oil, and it's a commodity whose price is discovered in deep world markets.
Canada is seemingly "energy independent", but assuming ongoing Middle East uncertainty, its citizens will - like us - buy gasoline the price of which is based on the cost per barrel set in global markets. Much as we might like to naively fantasize about walling ourselves off from international market realities, we'll never be immune to the activities around the world that impact oil's price.
(Excerpt) Read more at realclearmarkets.com ...
were dissipating our wealth at the rate of 500 to 800 billion dollars a year paying for imported oil. What does that mean? Here's what I see: The Other Guys ship us actual oil, and we ship them little green pieces of paper. Meanwhile, our own oil remains in the ground, where it will still be when The Other Guys run out. This sounds like a great deal to me. It's true that The Other Guys are accumulating lots of green paper. Should we care? If they never buy anything from us, then we win: we got their oil and they got squat. If they do buy stuff, then we have a big export boom with lots of jobs and profits while The Other Guys buy stuff from us. That sounds like a good deal, too. |
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