Advertisement
Economic Forecasts

No Oil Imports? No Way

How about we focus on energy security instead.

"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.

Advertisement - Article continues below

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).

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

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.

Advertisement - Article continues below

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.

Advertisement

Most Popular

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020

Recommended

Travel Planning in the Time of Coronavirus
Travel

Travel Planning in the Time of Coronavirus

Insurance may not cover canceled vacations, but airlines and hotels may be flexible.
June 11, 2020
13 Things That May Soon Disappear Forever (The Pandemic Edition)
business

13 Things That May Soon Disappear Forever (The Pandemic Edition)

Emerging technologies (and now the COVID-19 pandemic) are putting an end to these familiar items and practices.
June 9, 2020
Don't Let the Drama Surrounding PPP Distract You from Running Your Business
business

Don't Let the Drama Surrounding PPP Distract You from Running Your Business

If you're so wrapped up in worry about your Paycheck Protection Program loan not being forgiven, think about the worst-case scenario. It might not be …
June 5, 2020
Another Epidemic to Worry About: Identity Theft
business

Another Epidemic to Worry About: Identity Theft

Fraud losses grew in 2019 and are likely to increase in 2020.
June 5, 2020