I like Matt’s work a lot, which is why I am getting frustrated at his continual repitition of the incorrect claim that energy independence is meaningless. This is just plain wrong.
First, he ignores natural gas completely. He needs to stop and state that he is talking about oil independence. Natural gas is extremely difficult to transport across continents, which is why it is so much cheaper in North America than elsewhere. We have already seen big and positive effects from energy independence in natural gas!
So let us focus on oil.
Oil is not some super-fungible instantaneously-transportable commodity. It is much more like lobsters than it is like ... uh ... well, the mythical conception of oil as some super-fungible instantaneously-transportable commodity. Oil prices vary by geography and by quality. There is something called the realization spread, which is the difference between the Brent benchmark oil price and the price actually received by oil producers. In 2011, it was $45 per barrel.
Infrastructure bottlenecks create all sorts of odd overland pricing differentials. (Ocean transport is different: the cost of shipping from Venezuela to China is not much more than shipping to the Gulf coast of the United States.) A Kinder-Morgan report, for example, estimates that if the Northern Gateway pipeline from Alberta to the west coast is built, then the price of crude oil in Canada will rise. (Canadian Western Special fetches a higher price in Asia than it does it North America, where it sells for about $20 less than West Texas Intermediate.) In total, the firm estimates that the pipeline will cost Canadian refiners $432 million a year. If the refiners pass that on to consumers, then it will raise prices by 6¢ per gallon. The converse, of course, is that preventing the pipeline will save Canadian consumers 6¢ a gallon. That is from one pipeline. One unpopular pipeline.
Third, it is completely legal for the United States to stop exports.
Now, in a perfect world, it is true that limiting oil exports would not make economic sense. Why not? Well, a government could limit exports, thereby lowering domestic prices ... or it could sell the stuff overseas and use the profits to subsidize domestic consumers. The problem is that the United States does not practice the sort of socialist resource nationalism that would make the second option feasible. The government does not own the subsoil rights, nor are confiscatory windfall taxes particularly likely. That leaves export restraints as the only way to transfer rents from producers to consumers.
Now if Matt wants to attack the idea that oil independence will do any good, he has many solid arguments:
- North America (e.g., the U.S. and Canada) will never become oil independent;
- North America might become oil independent but domestic production costs will be so high that it won’t mean anything;
- North America might become oil independent but (2) will apply and domestic supply and demand shocks will produce significant price volatility;
- North America might become oil independent but refiners will capture any and all benefits (there is some evidence that refiners are already capturing the benefits from the price differentials between the central United States and the coasts);
- The idea that a U.S. administration will use its authority to limit exports is a political fantasy;
- Limiting exports is a bad idea for other reasons. For example, high oil prices at home help phase out a fuel that is wrecking the planet, and it would be stupid to try to lower them.
In short, Matt Yglesias is wrong! Energy independence will have economic impacts: it already has in natural gas. Even oil independence will have economic impacts. It will (to a small extent) even if we do nothing because oil is not a free-to-transport completely-fungible product. But it will to a very large extent if we do what other oil-producing countries regularly do, which is restrict exports.
What he should do is rephrase . Right now, his arguments are akin to the Republicans who claim that Obamacare will raise the deficit, when what they really mean is that they do not believe that the Medicare reimbursement cuts will actually happen. He claims that energy independence is meaningless, when what he really means is that doing what you would need to do to make oil independence meaningful is a bad idea.
If that is his argument, then I wish he would make it. The conflation of oil and natural gas combined with the silly rhetorical flourish that energy independence is a myth strikes me as most unbecoming.