A new year's resolution for the U.S.: End dependence on foreign oil

Posted Jan 1st 2009 1:00PM by Joseph Lazzaro
Filed under: International Markets, Commodities, Oil, Recession

President-elect Barack Obama and the new U.S. Congress, correctly, have to focus on getting the U.S. economy moving again, but the Democrats can not lose sight of another key policy area in 2009: energy policy.

Simply, the United States must finally end its dependence on foreign oil, and, in time, on oil itself, and the new administration must take giant steps toward this goal beginning in 2009.

Oil shocks devastate U.S. economy

Three oil shocks (1973-74, 1979-80, and 2008) have been major factors in three U.S. recessions, the U.S. transfers $200-$550 billion in wealth overseas annually - - depending on oil's price - - just to pay for oil imports, and imported oil has complicated U.S. foreign policy, to say the least.

Economist Richard Dawson estimates that if what Americans paid for foreign oil were retained in the United States economy, U.S. GDP would increase by 0.3-0.5 percentage points annually, "creating hundreds of thousands of domestic jobs and keeping that wealth and income working where should be working, in local economies."

Moreover, don't be fooled by today's lower gasoline prices: history demonstrates that these 'down cycles' are brief. Oil traded Wednesday morning down $1.38 to $37.65 per barrel. Unleaded gasoline averages about $1.60-$1.75 per gallon across the U.S., down from an average price over $4 earlier this year. In real terms, the above prices are roughly at their 50-year averages, but history has repeatedly demonstrated that prices can double in less than a year.

Economic Analysis: Three oil shock-induced recessions should be enough for the United States, and economist Dawson's point about domestic job creation is cogent. Wouldn't it be better to increase auto efficiency, develop renewable energy sources and keep hundreds of billions of energy dollars at home, creating jobs in the United States? This is President-elect Obama's view, so here's hoping he's able to pass an energy policy aimed at U.S. energy independence, soon. It's one new year's resolution the nation should not break.

Tags: Congress, energy policy, gasoline prices, gdp, imports, Obama, oil prices, oil shock, OPEC, U.S. economy

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Reader Comments (Page 1 of 1)

1-01-2009 @ 1:41PM

JCH said...

This is ridiculous.

We actually should be expanding our dependence upon foreign oil, which has been, on average, dirt cheap for almost the entire age of oil. Right now we get 40% of our oil from ourselves, and that reserve is depleting rapidly. We need to stop wasting it.