NORTH American oil independence is inextricably tied to North American oil independents.
Continental Resources Chairman Harold Hamm made the point in these pages the other day that the oil industry, led by independent firms such as Continental, is bringing this country ever closer to being free of dependence on imported oil.
The goal isn't to be free of oil imports. It's to be free of dependence on those imports. A balance of foreign and domestic supplies is good for national security and good for consumers.
Hamm celebrates the use of horizontal drilling and its effect on supply. It's worth celebrating for a number of reasons, especially in Oklahoma. This is a state that saw steep declines in oil production as natural gas became the dominant resource. Price declines for gas motivated energy firms to go after oil.
The Wall Street Journal reports that the North American oil boom “is acting as a shock absorber to global price hikes ...” This means a problem in the North Sea doesn't mean a supply disruption will push up prices here. It happened in January when a temporary pipeline shutdown kept North Sea oil from leaving massive offshore production platforms. Such a disruption would have once sent prices higher. Instead, they actually declined.
Often forgotten when discussing imports is that oil doesn't come only from countries with unstable or hostile governments. Some of it comes from friendly countries. The friendliest of all is Canada. Its oil sands reserves are vast and ready to supply U.S. refineries if a green light is given for the Keystone XL pipeline.
The Obama administration demonstrates that sometimes you can have things both ways. The president benefits politically from a stable supply and price environment. Previous presidents had to contend with volatile pricing and supply disruptions, including the notorious Arab oil embargo in the 1970s. At the same time, Barack Obama can pander to environmentalists by delaying a decision on the Keystone pipeline.
No one can say, at least not now, that the United States is desperate to get more oil from Canada. Why? Because we're getting so much of it from within this country.
Trend lines spanning the past decade show a steady increase in oil imports from Canada and a precipitous decline in imports from Africa. Imports from the Mideast have been variable over the 10-year period but have generally declined. Combined, oil production in the United States and Canada is on a steep climb. The Journal reported that price volatility was the lowest last year since at least 2000. So far this year, the daily fluctuation in prices is about half of what it was in the early 2000s.
Increased domestic supply comes with its own set of problems. Adam Wilmoth, The Oklahoman's energy editor, reports that hundreds of new tanks have been built in Cushing to store oil until capacity becomes available in pipelines to move it to refineries. Construction on the Keystone project's southern leg, which Obama enthusiastically endorsed in a 2012 visit to a pipeyard near Cushing, continues apace despite juvenile protests to stop it.
About the same time Obama had his whistle-stop photo op in Payne County, his Republican opponent unveiled his vision for North American energy independence. It was somewhat of a novel concept then, an optimistic view of what could be and should be. Since then, the vision has come much more into focus.
Just as we believe coal should be part of the fuel mix to make electricity, we believe imported oil should be part of the mix to make gasoline. But we should not be dependent on it and we don't have to be.
Increasingly, we aren't.