It looks like the world oil market avoided a worst-case scenario over the weekend. Saturday's drone strikes against Saudi Arabia's oil infrastructure may have temporarily knocked out a hefty chunk of the country's production capacity, but by all accounts something close to full production should be restored soon.
Still, oil prices jumped roughly 20 percent after the attacks, and remained 10 percent higher as of Monday. That was despite the recent massive boom in U.S. oil production and President Trump's commitment to "American energy dominance."
It was a stark reminder that, when it comes to energy sources like oil, coal, and natural gas, there is no hiding from the fluctuations of the global market. Should the worst-case scenario ever arrive, our domestic production, however big, will not protect us. The only way to be truly independent of those risks is to not use those energy sources at all.
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The basic problem here is fungibility — the fact that a gallon of oil drilled and produced in Russia is just as good as a gallon drilled and produced in the U.S. or anywhere else. The same generally goes for a pound of coal or a cubic foot of natural gas. And while there are plenty of barriers to free trade across the globe — from legal sanctions and tariffs to practical problems of price and infrastructure — consumers of all these energy sources all over the world are generally able to buy from producers all over the world.
That means a shock to production anywhere in the world affects prices everywhere else. Even if America currently produces 18 percent of the world's oil, changes to the other 82 percent will still move the prices Americans pay at the pump, for good and ill. That drones were able to temporarily cripple Saudi Arabian production — which currently accounts for 12 percent of the global total — still matters enormously.
And it could've been much worse.
The attacks shut down processing for 5.7 million barrels a day — a huge chunk of the 8.45 million barrels of crude oil that the two targeted facilities process each day, and of the 7.4 million barrels a day Saudi Arabia exports. But Saudi officials said the country expected to restore one-third of that lost production by the end of the day Monday. And experts argue that both Saudi Arabia and the rest of the world have enough reserves to cover the loss for several weeks, giving the Saudis time to get the facilities back on their feet.
Still, it's not clear yet how extensive the damage is. How soon repairs can be made will decide whether global oil prices ultimately return to their levels before the attack or remain elevated. And so long as America and the world rely on previously stored oil supplies to cover the gap, they're more vulnerable to any other random crisis that may occur. More than anything, the attack was a dramatic reminder that stability in oil production is no guarantee: "It demonstrates that one of the best regional oil companies has difficulties defending itself from this new style of threat," one market researcher told The New York Times. "That theme is going to endure."
Nothing in the world is static: As the Times noted, had this attack happened just ten years ago, oil prices would probably have spiked much higher. Things could get worse again. Indeed, global warming itself — which is being driven ever higher by humanity's fossil fuel consumption — will make instability across the globe progressively worse, as regional climates become more harsh, and resources like food and water become scarce, all leading to further conflict.
If we assume that what President Trump means by "energy dominance" is true protection from the political and economic instability of the rest of the world, then producing 18 percent of the globe's oil is not nearly enough. America would need to produce the vast majority of the global oil supply — an impossible feat. Or it would need to completely outlaw all imports and exports of oil (as well as coal and natural gas), which seems equally hair-brained. Even then, the U.S. would still be vulnerable to the domestic risks of these energy sources: the doubtful geological and economic sustainability of the American shale oil boom, the massive water consumption that electricity production from fossil fuels requires, the ongoing press of climate change, and of course the fact that eventually these energy sources will run out.
The only true way to minimize all those risks to America's economy and security is to cease using these energy sources at all. Electrify everything — not just transportation, but heating for homes and buildings, heavy industry processes, and all the rest of it — and then shift all electricity generation onto solar, wind, and other renewables.
Of course, at the end of the day, there is no such thing as true energy independence. Nothing can completely disentangle us from the rest of the world. Even electricity is traded between nations — though, as of 2014, only three percent of global electricity production was exported, versus 64 percent of global oil production. Green technologies also require special metals and other elements: there's lithium for batteries; gallium, indium, and tellurium for solar panels; yttrium, neodymium, europium, terbium and dysprosium for magnets, energy-efficient lights, and more. These must be either imported, or mined domestically at great potential environmental cost. The good news is that, since these elements aren't the energy source itself, but rather part of the tech for making use of the energy, they can possibly be replaced through innovation.
There are no guarantees, and moving the American (or the world) economy to a 100-percent green footing is a gargantuan endeavor: A complete top-to-bottom overhaul of our energy production, our infrastructure, our transportation, and our grid, not to mention the creation of new technology and innovations in fields such as batteries and storage.
Still, if all this talk of energy "independence" and "dominance" is ultimately about being the masters of our own fate, then taking the U.S. economy entirely green is the closest we'll ever get.
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