No Oil Imports? No Way
"Energy independence for America" -- the professed goal of every administration since the first Arab oil embargo in 1973 -- is a great concept. It promises a lower trade deficit (of which oil accounts for about half), a stronger dollar, restrained inflation, more U.S. jobs and less dependence on risky suppliers.
But what does "independence" really mean? Total self-sufficiency, zero imports of petroleum? Dream on. With imports accounting for 58% of America's 20-million-barrel-a-day usage (71% of which fuels our vehicles and planes), self-sufficiency for the U.S. isn't in the cards for decades, if ever.
Sure, we can and should boost oil production in Alaska, off the Atlantic, Pacific and Gulf coasts, and in the American West. Although the U.S. is the third-largest oil producer in the world (after Saudi Arabia and Russia), our production has been declining for 40 years.
Sure, we can and should reduce our nation's staggering oil usage (24% of global consumption by just 4.5% of the world's population) by embracing hybrid and all-electric cars. And if those electrics get their juice more from nuclear and wind power and less from coal, our air will get cleaner, too.
Yes, we can and should replace some foreign oil with American ethanol (ideally from cellulose and algae rather than corn) and with biodiesel (refined from waste cooking oil and animal fats rather than soybeans).
Secure sources. But even if we do all of those things, we'll still need to import foreign oil for years to come. The key question is, Where will it come from? From questionable regimes in unstable regions, or from democratic neighbors in our own hemisphere?
That's a no-brainer. The realistic goal should be energy security rather than independence, and that's not such a tough challenge.
It might surprise you to know that the top two suppliers of imported oil to the U.S. aren't King Abdullah's Saudi Arabia (the number-four supplier) or Hugo Chavez's Venezuela (number five). In fact, they are Canada and Mexico, with Canada sending the U.S. almost the same volume of oil as Mexico and number-three Nigeria combined.
Canada produces less than half the amount of oil the U.S. does each year. Unlike the U.S., however, its production has been growing in recent decades, and it has been growing much faster than consumption by the country's small population. So Canada is a net exporter of oil, and 99% of its exported oil flows into the U.S. Canada is also America's leading source of imported natural gas and hydroelectricity.
But more important than Canada's current production is its potential output. The U.S. is thought to hold less than 2% of the world's reserves, and our neighbor to the south, Mexico, about 1%. While reserve estimates may prove to be understated, their very modesty makes a compelling argument for U.S. investment in conservation and alternative fuels.
Canada's oil reserves are something else. At an estimated 13% of the world's total, they're second only to Saudi Arabia's 20% share and much greater than those of Iran, Iraq, Kuwait, Venezuela, Russia or any other oil giant.
Canada's reserves are not without controversy, however. They're mostly in Alberta's oil sands, which yield their black gold through open-pit mining and a refining process that consumes a lot of water and natural gas. Some Canadians would rather leave the sands in place, but the U.S. will be a hungry market for its neighbor's output.
No solution to the country's petroleum dependence -- especially on foreign oil -- is without its own costs and risks, whether economic, environmental or geopolitical. And every tactic -- conservation, alternative energy and stepped-up production -- is necessary but not in itself sufficient to slash imports boldly.
Columnist Knight Kiplinger is editor in chief of this magazine and of The Kiplinger Letter and Kiplinger.com.