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  • Writer's pictureCorey L. Wilson

Fact Check: Which Factors Determine U.S. ‘Energy Independence’?

Updated: Nov 28, 2023

As U.S. consumers experienced record high gas prices days into the Russian invasion of Ukraine, various political figures have said the United States was “energy independent” under the administration of former president Donald Trump and have criticized policy under President Joe Biden. Reuters spoke to experts about the how energy independence can be defined or measured, and factors affecting the balance of energy imports and exports. It is true that imports of petroleum (which includes crude oil, refined petroleum products, and other liquids) decreased in 2020, the last year of Trump’s presidential term: 7.863 million barrels per day imported versus 10.055 million barrels per day imported in 2016, former president Barack Obama’s last year, data from the U.S. Energy Information Administration (EIA) shows. In 2020, the United States Became a “Net Exporter” That year the United States became a “net exporter” - exporting more of a commodity than what it imports - of petroleum for the first time since 1949 (it exported 8.498 million barrels per day, and imported 7.863 mb/d). But, contrary to what some online interpret as “energy independence,” when it comes to commodities that are traded in global markets, like crude oil and transportation fuels, the U.S. is not immune to worldwide effects even as a net exporter. For instance, while oil production in the U.S. is on the upswing , the country’s pump prices have raised to record highs. For Andrew Campbell, Executive Director of the Energy Institute at Berkeley Haas “energy independence” is a “political slogan, not an economic or technical concept with a clear definition” often used by politicians to “imply that a country is insulated from global energy markets”. “This is rarely the case,” he said. “If a country produces all of the energy that it consumes, does not participate in international trade in energy, does not import energy-intensive products and does not send energy-related pollution to its neighbors or the atmosphere, then I would consider it energy independent. I don’t think any country meets that definition.” Energy Independence is a Tricky Concept Harrison Fell, a Senior Research Scholar at the Center on Global Energy Policy at Columbia University SIPA said “energy independence is a tricky concept” and said it was often quantified by comparing energy production to energy consumption, but cautioned that the implications of this may be misunderstood. “I think many believe that if this quantity-based definition of energy independence is met we (the U.S.) will be shielded from market disruptions in other areas,” he said. “However, for the case of at least oil this quantity-based energy independence clearly does not shield a country from factors abroad. The reason is, of course, because oil is internationally traded, with prices set by global oil supply and demand conditions. So, even if the US is a net exporter of oil, prices paid domestically will always reflect supply and demand conditions abroad.” In an email to Reuters, David Brown, Wood Mackenzie’s Head of Markets and Transitions for the Americas, said the U.S. achieved “energy independence,” which he considered to be a “long term trend”, in 2020 – in the sense that in an overall energy basis (taking all sources into consideration), the country did not need to import energy to meet energy demand at home. The US Started on the Pathway of Energy Independence in 2005 Looking back at data over the last 20 years, net energy imports peaked in 2005 at approximately 28% of US energy consumption. Higher domestic energy supply, driven primarily by unconventional oil and gas production, energy efficiency measures especially in the transport sector, and a ramp up in LNG and oil export projects led to declining energy imports from 2005.” By 2050, Brown said, “we expect the U.S. to export the equivalent of 26% of U.S. energy consumption,” a shift compared to 2005 when the country imported around 28% of its energy needs. In terms of natural gas, for example, the U.S. is also a net exporter, but its market remains mostly shielded from higher global prices, because it has all the fuel it needs for domestic use, and the country's ability to export more LNG is constrained by limited capacity. Why the United States Still Imports Whether the United States needs to import energy depends on the region, season and energy product, said Brown. For example, due to domestic natural gas prices, domestic power demand and global market, the Northeast may require imports of liquefied natural gas (LNG), he observed. Fell offered another example: crude oil. While the U.S. East Coast refiners are designed to handle lower-quality forms of crude oil, the United States generally produces a higher quality crude and has a limited capacity to refine high-quality crude. “We often export some domestic crude to be refined elsewhere, while we simultaneously import lower quality crudes to be refined in our refineries.” Geography also comes into play. For instance, West Coast refineries are highly dependent on oil imports from overseas because the oil production within the United States tends to occur in the middle of the country. “In the eastern U.S. there can be transportation bottlenecks or high transportation costs that mean it is lower cost to buy from overseas than from U.S. producers,” Campbell said. A Complex Picture Even with the United States meeting quantity qualifications of energy exports being greater than energy imports and energy consumption being lower than total production, domestic energy prices are still affected by what happens in other countries. “To get to the point of energy independence in the spirit I believe many are thinking - where our energy prices are unaffected by supply and demand conditions abroad - it will require having less dependence on energy coming from internationally traded energy commodities,” Fell said. Campbell concurred and said moving away from oil and toward other energy sources would help the United States begin to escape the impact of global oil markets and become more energy independent. Furthermore, the spike in energy prices consumers have seen in the last few weeks are tied to various factors, Brown said: investors enforcing capital discipline on oil and gas companies, uncertainty over U.S. emissions regulations and rising energy demand as COVID eases in the United States. Article content from the Reuters Fact Check team on March 23, 2022..

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