Is Energy Dependence a Problem?

But one thing is sure: it’s a myth that being dependent on imported oil is bad. As a way to stump politicians who perpetuate this nonsense, perhaps we should ask them this question: If oil is so critical and will become even more valuable when world supplies allegedly dwindle in the future, shouldn’t we use other countries’ oil now and have the U.S. government require that our limited production be saved to use or sell as the shortages worsen and future prices go even higher? Diametrically opposed to the present time, with the prevalent fears of dependency on foreign oil, this “conservation theory” was all the rage in the late 1930s and 1940s when a slowdown in finding new oil deposits seemed to threaten chronic future shortages (similar to the dire predictions after World War I and in the early 1920s before big oil discoveries were made late in the 1920s).

Of course, this is not the right policy prescription either. We should instead treat oil as any other product and let the market provide ample supplies at the lowest cost to the consumer.

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U.S. Dependence on Foreign Oil: Why We Shouldn’t Be Alarmed

If we were talking about bananas, everybody would see immediately the foolishness of seeking “banana independence.” Nobody would fall for half-baked arguments about our addiction to foreign bananas or our love affair with banana bread. It’s obviously uneconomic to grow millions of bananas in this country; it could be done, but doing it would entail much greater costs than buying them from producers in places better suited to their production (that is, places where they can be produced at lower opportunity cost).

The argument with regard to oil, or anything else, is identical...

Arguments that we must resort to U.S. imperialism in order to enjoy the imported oil or the security of having continued access to it are bogus. If policy makers really believe such nonsense, they are bigger idiots than we thought–and they ought to fire those thousands of economists on the government payroll on grounds of rank incompetence. U.S. imperialism may spring from various motives, but the popular notion of “war for oil” makes no economic sense...

David Ricardo explained these sorts of things clearly two hundred years ago. They are explained in every introductory economics course taught in college. It’s high time the pundits caught up with the essentials of their subject.

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Must the Government Combat Americans’ Addiction to Foreign Bananas?