But wait. What happened to the energy crisis?
Rising tensions over Iran’s saber rattling show that it’s still with us. Oil still costs $100 a barrel or so, even more for the Brent quality crude sold in London, a more widely used benchmark. In inflation-adjusted terms, crude oil prices are higher than they have ever been with the exception of short spikes in late 1979 and mid-2008. Yes, the United States exports some refined petroleum products, but the United States is still an overall net importer of more than 9 million barrels of crude oil and refined products a day — about the same as the oil produced by the world’s largest exporter, Saudi Arabia.
Moreover, about 17 million barrels a day of oil still flow through the Strait of Hormuz, a potential choke point that Iran has threatened to close. The United States has retorted that its doctrine of protecting freedom of shipping through that Persian Gulf waterway remains unchanged. Why? Because those supplies account for a fifth of global oil consumption; no other spot remains as vital to world oil prices. A disruption there affects prices everywhere.
There are, to be sure, many reasons for energy experts to feel more sanguine about the U.S. energy future. Domestic oil production is up and on track to go up further because of a boom of drilling in shale rock. Natural gas supplies, thanks to hydraulic fracturing, seem limitless and natural gas prices have plunged to 10-year lows. A lot of jobs have been created, albeit not nearly as many as some oil industry studies claim.
U.S. oil consumption is also reaching a plateau and might start declining, in part because of more fuel-efficient vehicles, rising biofuel production and high future mileage standards set by the Obama administration.
But America’s dependence on foreign oil and gas sources has been reduced, not eliminated. The nation imports 15 percent less petroleum than in 2005 — in part because of the recession. But prices have soared; we cannot disentangle ourselves so easily from the global oil supply balance. As a result, in 2011, the United States paid a net of $326.5 billion for oil imports, accounting for 44 percent of the U.S. trade deficit. The crude oil import bill was the second highest ever, narrowly less than in 2008 and nearly twice as much as it was in 2005.
That drains money from the pockets of American consumers. AAA estimates, for example, that buying gasoline costs the average Virginia household $428 a month.
A year ago, President Obama set a goal of cutting oil imports by a third.
If U.S. domestic oil output climbs to 7 million barrels a day, as many oil industry people claim it can, that will trim about an eighth off current imports. If we improve automobile fuel efficiency, that will slice just as much or more. But that will take many years as the car fleet gradually turns over. Right now, one in every 10 barrels of oil produced worldwide goes into the gasoline tanks of American passenger vehicles — not counting fuel-guzzling U.S. trucks.
What about the natural gas rush? For all the euphoria about shale gas, the United States is still a net importer of natural gas. Conventional natural gas production is falling, and we still rely on imports from Canada. That will change, perhaps by 2016 or so, according to government and industry estimates. But the fact that it hasn’t happened yet is testimony to the fact that sometimes impressions run a bit ahead of reality — to say nothing of environmental concerns about hydraulic fracturing techniques used to tap those gas resources.
One statistic that has been tossed around lately says that the United States in 2011 produced 81 percent of its energy demand. But that number includes U.S. electricity consumption. With the exception of hydropower imports from Canada, the United States has never relied on foreign sources for electricity generation. The country has relied on U.S. coal, U.S. nuclear power and U.S. natural gas. Once upon a time, many utilities and factories used oil, but with the exception of a little bit of oil formerly used by the Hawaii utility company that hasn’t been the case since the early 1980s, after the 1979 oil price shock.
The key statistic is oil independence, and the United States still relies on foreign oil to cover about half of U.S. consumption.
Another important change in the global oil picture has been the shift in oil production away from the traditional OPEC countries. Offshore oil fields near Brazil and off the coast of west Africa as well as the tar sands from Canada have already become major sources of U.S. oil imports and could become bigger. Canada is already the largest source of U.S. oil imports, with Saudi Arabia in second but only half as big. The next three biggest sources are Mexico, Venezuela and Nigeria.
What does that mean for geopolitics? It gives the United States a greater interest in the stability and economic policies of those nations. But it doesn’t mean that the United States no longer needs to worry about the Organization of the Petroleum Exporting Countries and the choke point at the Strait of Hormuz as long as that remains a major trade route. That’s why Defense Secretary Leon E. Panetta and other administration officials have warned Iran that cutting off traffic through the strait would be crossing a red line.
Not long ago, it was front-page news when the price of oil topped $100 a barrel. Now it has become commonplace. In midday trading Wednesday, on news of Iran’s declaration that it would cut off oil sales to six countries that already placed sanctions on the Tehran regime, the price edged up to $101.80 a barrel, up $1.06, for March delivery.
There has been a lot of good news lately for the energy business and for a world that still consumes vast amounts of energy. The ability to tap vast new gas reserves is, as the cliche goes, a game changer, lowering electricity prices and competing with other energy sources. Renewables are making strides too.
But is this great news or just good news? Have we arrived at a point when Americans consume energy in modest enough quantities so as to ease both U.S. dependence on foreign nations and difficult trade-offs between environmental protection and self-reliance?
Until then, make way for the next supertanker.