What Unconventional Fossil Fuels Change About Our Energy Picture, and What They Don't

One should also ask why we really care about energy independence. What will change if we import less oil? The world is much more interconnected than it was, not just for energy. Global trade as a portion of gross world product is more than twice what it was in Churchill's pre-WWI effort to switch the British fleet to oil and also twice what it was at the time President Nixon announced Project Independence. It's more than just trading goods and services; it's cross-border flows in investment, in people, in data, and ideas. Note that since we import a substantial portion of our consumption, we are also thus "dependent" on many aspects of modern life, such as foreign steel, fruit, cars, microprocessors, and flat-panel displays. This "dependence" is a consequence of seeking comparative advantage and trying to remain competitive in a global economy. The notion that we can increase domestic production to buffer ourselves from shocks originating in far away places has plenty of historical origin, but is less feasible than it used to be.

Unlike in many other countries, producers in the U.S. are not owned by the government and are free to sell their coal, gas, and oil wherever they can get the best price. If a supply shock or a demand shock happens on another continent, even domestic production will not insulate us from that. Do we really think that a company is going to sell at a discount to U.S. consumers when it could fetch a far higher price in Asia? Even if we were produce 100% of our consumption, all that insulates us from distant events is the cost of moving energy from one country to another. As prices rise, and transport technology improves, that frictional effect becomes smaller and smaller. The current effort to build gas liquefaction and coal shipping terminals in the U.S. reflects the effort to export energy and take advantage of prices that are higher elsewhere--4 times higher for gas. As we move to unconventionals and energy resources become more heterogeneous we can expect a world with more, not less trade. Moreover, consider whether a country that produces twice as much oil as it consumes (Iran), or even 3 (Russia) or 4 (Saudi Arabia) times as much, is actually energy independent. Those countries are desperately dependent on global demand and prices in a way that deeply affects their societies and makes US dependence seem tangential.

CONCLUSION

Unconventionals are important, but they don't change our need to do something about climate change amidst plentiful fossil fuels. They also don't extricate us from the shocks and apparent chaos inherent to participating in the global economy.

An important insight in Mann's article is that it will be harder to do something about climate change if we enter a regime that resembles the 1960s or 1990s, when energy was a benign issue in the background. Abundant gas may lead to lower air pollution and years of declining greenhouse gas emissions. The social demand to do something about energy could fade, just when the physical dimensions of the climate problem become more urgent. A decade-long lull in private sector investment and public concern is when we would most need a renewed emphasis on energy policy making.

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Gregory Nemet

Gregory Nemet is an assistant professor at the University of Wisconsin-Madison in the La Follette School of Public Affairs and the Nelson Institute's Center for Sustainability and the Global Environment. More

He teaches courses in energy systems analysis, governance of global energy problems, and international environmental policy.  His research analyzes the process of technological change in energy and its interactions with public policy.  He has been an author Intergovernmental Panel on Climate Change and the Global Energy Assessment. He received his doctorate in energy and resources from the University of California, Berkeley. His B.A. is in geography and economics from Dartmouth College.

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