America’s Rational Dependence on Oil

President Obama is hardly the first to complain of America’s dependence on foreign oil. But there’s nothing wrong with it.

In his State of the Union address, President Barack Obama reiterated his commitment to make America less dependent on foreign oil. Twenty-five years from now, he promised that 80 percent of the country’s electricity will come from clean energy sources. To pay for public investment in renewable energies, the president proposed to flash subsidies for the oil industry.

“I don’t know if you’ve noticed,” President Obama told Congress, “but [the oil companies] are doing just fine on their own.” Not really, says RedState‘s Vladimir.

I don’t know if Mr Obama noticed, but there was an oil spill in the Gulf of Mexico last summer. He imposed a moratorium, with a subsequent “permitorium” that has much of the industry in limbo. We’re already hemorrhaging jobs, thanks to Obama’s misguided overreaction.

He further notes that the billions of dollars supposedly “handed out” to oil companies are mostly tax breaks that are available to many other industries as well.

Prior Congresses, going back nearly 100 years, purposely tweaked the tax code to encourage drilling. Their “investment” resulted in the stable, secure and affordable energy supply that enabled our nation’s industrial might.

Oil companies shouldn’t drill less. They should drill more. There are vast reserves of oil and natural gas waiting to be exploited underneath the Atlantic coastline, beneath the northern coast of Alaska, and on land, in Colorado and Wyoming. Combined, these regions hold over two hundred billion barrels of oil and 2,000 trillion cubic feet of natural gas that are recoverable with today’s technology. That’s more than most OPEC nations. If fully developed, it would be enough to free America from the import of foreign oil for almost fifty years.

Yet the president said last year that “drilling alone cannot come close to meeting our long-term energy needs.” Instead, his administration is set to subsidize currently unprofitable renewable energies, stifling necessary innovation in these sectors at the expense of millions of Americans who will either lose their jobs, see their energy bills go up, or both.

But a tiny fraction of America’s energy supply is currently produced green or clean. Wind and solar power are especially expensive. Mandating energy companies to increasingly make use of such methods will inevitably drive prices up.

Politicians from both sides of the spectrum complain of America’s dependence on foreign oil. But as Alex Epstein worte at Fox News last month, there is nothing irrational about America’s oil consumption. “Oil is unmatched as a concentrated, safe and affordable source of portable energy,” according to Epstein. “And our lives depend on such a source of energy.”

The notion that clean energies, such as solar, wind and biofuels, could replace oil any time soon is misguided moreover. All three have received extravagant subsidies in both Europe and the United States. “And yet America uses more oil than ever, while Americans get less than 2 percent of their energy from solar and wind combined, and less than 4 percent of their energy, including transportation fuel, from biofuels and other plant and animal sources.”

Why? Because solar, wind and biofuels have proven utterly incapable of matching two of oil’s key virtues: low price and enormous abundance.

For years, doomsayers have predicted the world running out of oil within a generation. As early as 1939 the Department of the Interior forecast that American oil supplies would be exhausted by 1952. Thirty years later, not only had oil production not run out; it had tripled.

The year 2009 was one full of talk of “peak oil,” yet some of the most momentous, unexpected oil finds in history, especially in Brazil, followed each announcement.

Why do the “experts” get it wrong? According to Epstein, it’s because they “routinely neglect or underestimate the capacity of the human mind to discover better methods of locating and extracting oil.”

In industry parlance, they falsely equate “proven reserves” — the amount of oil that is known to exist and be extractable in the present — with future production: the amount of oil that will be known and be extractable in the future.

But new supplies are constantly discovered and changing weather conditions and technological advancements make it possible to exploit reserves that could previously not be reached.

Once oil reserves are depleted — which will likely be several generations from now — energy companies will have a true incentive to create substitutes or devise alternatives. That’s how a free market works.