https://tilakdoshi.substack.com/p/no-using-less-oil-wont-boost-americas
Excerpt:
Economic incompetence and geopolitical naïvety never go out of fashion, it seems. In a Foreign Policy article this week, Jason Bordoff — Director of Columbia University’s Centre on Global Energy Policy and a former Obama administration official — resurrects a tired old argument long favoured by the ‘progressive’ energy policy elite: that the best way to ensure America’s energy security is to reduce its demand for oil.
Using the backdrop of escalating tensions between Israel and Iran and a short-lived spike in crude oil prices, Bordoff insists that since oil prices are set globally, domestic production offers little “independence” against global oil price shocks. His conclusion: we must “use less oil”, chiefly by subsidising electric vehicles, building charging infrastructure and pressing forward with efficiency and emission mandates.
Bordoff’s arguments sound awfully similar to the ‘MEOW‘ (moral equivalent of war) speech by President Jimmy Carter in 1977 which called for policies to reduce dependence on oil imports. This was when the US was a net importer of oil and dependent on Middle East oil exports during a time of oil price shocks. President Carter’s approach — which some would call ‘pussy-footed’, pun intended – to the ‘energy crisis’ is a well-worn one advanced for decades.
However, such a thesis is deeply flawed, both economically and philosophically. What Bordoff and his cohort overlook is that human flourishing arises not from technocratic control over consumption, but from the freedom to produce, innovate and engage in voluntary exchange. As Adam Smith and Friedrich Hayek understood, markets — not mandarins in policy institutes — are best suited to determine the optimal allocation and consumption of resources. Bordoff’s call for reduced demand is not only economically questionable; it is politically naïve and strategically self-defeating.
The Misunderstood Value of Production
As Bordoff notes, oil prices are determined by global markets. This is a truism: oil is a fungible global commodity and any disruption in its supply anywhere effects all consumers everywhere. But from this he draws the erroneous conclusion that domestic production is of limited strategic value. This logic fails to grasp that even in a globally priced commodity market, domestic production plays a vital role in national resilience, economic growth and geopolitical strength. President Trump’s ‘energy dominance agenda’ and “drill, baby, drill” is not PR spin: it actually means something positive for the US economically and geopolitically.
As any Econ 101 student knows, in the simple identity of the components of GDP, exports add and imports subtract from the nation’s annual economic pie. When oil prices shoot up, a net oil exporter like the US benefits even if a segment of the economy (e.g. motorists) pays more at the pump. By the same token, when prices fall, motorists benefit while oil producing companies and their workers suffer adverse effects. When a nation produces and exports a commodity in global demand, it does more than hedge itself from price volatility — it creates income, jobs and technological advancement. Production is not a sideshow in the oil market; it is the main engine of prosperity.
Consider the case of the United States, which today stands as the world’s largest oil producer. This achievement is not the result of government planning or demand reduction. It is the consequence of private entrepreneurship, innovation in hydraulic fracturing and horizontal drilling, and an ecosystem that respected property rights and competitive markets.
The shift from perceived oil scarcity to a brave new world of oil abundance was brought about in an astonishingly short period of time by the advent of the ‘fracking’ revolution in the US. This involved horizontally drilling and hydraulically fracturing shale rock with high-pressure liquids to extract ‘unconventional’ oil and gas. After US crude oil production more than doubled in a decade, US production was rated at over 12 million barrels per day by mid-2019, surpassing Russian and Saudi Arabian output as the world’s largest.
The shale revolution, born in Texas and North Dakota, not only upended global energy geopolitics but restored the US as a credible energy superpower. That success story is grounded in production, not abstinence. The wealth generated by US oil and gas exports flows into the broader economy, stimulates investment in infrastructure and manufacturing and reinforces the country’s trade balance. The Trump administration’s ‘energy abundance’ agenda adds unmistakable strength to an economy which even its fiercest detractors will find hard to dispute.
