Published: May 13, 2012
Congress is battling over whether to approve the Keystone XL oil pipeline, proposed for the heart of the country. The project has clear value to the United States. Yet, with all the amped-up rhetoric, it is important to remember what the project would not do. It would not endow the United States with “energy security” in the sense that most Americans understand the phrase and that many pipeline advocates wield it. It would not significantly lower oil prices. In fact, when it comes to oil, America will be affected by global events for decades, and that’s assuming the right policies are in place.
The Congressional Budget Office (CBO) underscored that point in a report it released last week. “The extensive network of pipelines, shipping and other options for transporting oil around the world means that a single world oil price prevails,” the CBO pointed out. “Disruptions related to oil production that occur anywhere in the world raise the price of oil for every consumer of oil, regardless of the amount of oil imported or exported by that consumer’s country.”
If the United States imported every barrel it burned from Canada — or even unearthed it from American soil — a revolution in Libya, production quotas in Saudi Arabia or riots in Nigeria would still affect American consumers. Unless, as Michael Levi of the Council on Foreign Relations and The Post’s Brad Plumer pointed out, America were to take the extraordinary step of removing itself from the world oil market entirely, which could lead to its own price spikes and ignite a trade war.
With enhanced domestic and Canadian production, the country would achieve a certain energy independence: If the world oil market were to collapse because of a global war or another catastrophe, America would maintain access to its energy resources, though they could be much more expensive. But producing more oil here or north of the border would never mean, as Newt Gingrich put it in February, that the United States could “no longer worry about the Persian Gulf.”
In fact, the best way to insulate Americans from oil-price volatility and other drawbacks of oil use would be to use less oil. The price would still move around, but it would matter less. Such an approach would also help achieve the most important energy priority: slowing climate change.
There are sensible policies to promote this long-range goal. An economy-wide, anti-carbon policy, such as a carbon tax, would fit the bill. Short of that, the best policy would be a higher gasoline tax, which could also fund transportation needs. President Obama’s auto efficiency standards will also help. In contrast, direct subsidies for electric cars are extremely expensive for meager benefits.
None of this argues against the Keystone XL pipeline or expanding domestic oil production. There are valuable economic benefits to both, starting with jobs. But policymakers shouldn’t pretend that increasing supply can deliver energy independence. Reducing consumption has far more promise.______________________________
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