Clinton's energy independence claim may signal likely policy path

Near the end of Sunday’s contentious and much-maligned presidential debate, Hillary Clinton made, arguably, the most revealing statement yet on the likely path of energy policy in her White House.

“We’ve got to remain energy independent,” Clinton said. “It gives us much more power and freedom than to be worried about what goes on in the Middle East. We have enough worries over there without having to worry about that.”

Now, the statement may appear almost innocuous at first blush.

Every US president since Richard Nixon has spoken on the importance of energy independence, a notion which gained new life both after the September 11, 2001, attacks and amid the US shale oil and gas renaissance.

And Clinton’s use of the energy independence political catchphrase was quickly pointed to as one of two factual errors she made in the debate.

“US production is up and the share of imports is down, but that’s not the same as being energy-independent,” wrote Politico, which claimed that this and a reference to Donald Trump not apologizing were Clinton’s two “falsehoods” of the debate. (Donald Trump, Politico wrote, had made 13 falsehoods and six misleading claims during the debate).

It’s certainly difficult to think of the US being energy independent when it continues to import millions of barrels of foreign, and OPEC-sourced, crude oil.

This year, for example, the US is on pace to import an average of 7.85 million b/d of crude oil, including more than 3.15 million b/d of crude from OPEC nations, according to the US Energy Information Administration.

US crude imports in July averaged nearly 8.1 million b/d, the most since August 2013, according to EIA. US imports of OPEC crude have fallen from the nearly 5.42 million b/d peak in 2008, but are on pace to average more than 3.15 million b/d this year, up from 2.67 million b/d in 2015.

Imports have risen as US crude production has declined, to 8.7 million b/d in July from 9.6 million b/d in April 2015. As a percentage of total crude inputs into US refineries, production reflects a drop to 51% from nearly 60% in April 2015.

But if you want to use this as an argument that the US is now less oil dependent you also have to ignore that US refiners have been increasingly exporting refined products, and producers are now able to export crude. Total crude and petroleum products exports hit a record high 5.7 million b/d in May 2016, according to the EIA. That was up from just 694,000 b/d in March 1985, when the US produced 80% of the crude run through its refineries.

But was Clinton actually wrong?

It depends on how one wants to define energy independence.

In his 2011 book "The Quest," Daniel Yergin wonders if energy independence is even a realistic goal when the US is “deeply enmeshed” in the world economy.

“Some argue that the term ‘energy independence’ is misconstrued and should be understood not as ‘virtually import-free’ but rather as ‘not vulnerable’,” Yergin wrote. “Generally, however, it is understood to mean self-sufficiency.”

Sam Ori, executive director at the Energy Policy Institute at the University of Chicago, told S&P Global Platts this week that the idea of energy independence has become “kind of a myth.”

“Our economy is fully integrated in the global market by nature of the fact that we are such large consumers of fuels like gasoline and diesel, especially in transportation,” Ori said. “The price we pay for those fuels is set in a global market, and those prices are driven by all kinds of factors like geopolitics, supply interruptions, demand in China and so on.”

Kevin Book, managing director at ClearView Energy Partners, said that the idea of energy independence may be an antiquated one that can create risks of economic inefficiency.

“A 100% molecule-for-molecule supply-demand balance isn’t necessary ideal,” Book said. “Even resource-sufficient countries may export and import to minimize transportation costs and other factor costs.”

Book said that when Clinton was talking about energy independence she may have been referring to power generation and home heating, in which the US is nearly independent, but not transportation fuels.

In addition, Book said that rather than discussing energy independence, Clinton was likely signaling changes to US energy interdependence, or the changing role of US energy in a global market.

“Politicians, including Secretary Clinton, appear much more aware that supply interruptions anywhere in the world can impact oil prices everywhere in the world,” Book said. “Interdependence, however, doesn’t meet the usual definition of independence, which the situation where domestic resources fully satisfy domestic consumption.”

So, what if she did not misspeak? What if Clinton’s view is that, even with millions of barrels of foreign crude oil and other petroleum products coming into the US every day, that this nation is, in fact, energy independent?

Arguably, this could mean that Clinton believes that her White House will have no obligation to boost US fossil fuel production going forward.

Without the need to lower and ultimately end energy imports in a quest for what has long been viewed as the goal of US energy independence, Clinton may be likely to press ahead with regulations which could constrain production on federal lands and in federal waters. If Clinton views the energy independence goal as already achieved then there may be no reason for her to go beyond the status quo nor take any action to boost fossil fuel production.

This may best be seen in her potential plans to go further than even the Obama administration has on regulating fracking.

In a March debate with Vermont Senator Bernie Sanders, her opponent in the Democratic primary at the time, Clinton outlined three conditions which would cause her to oppose fracking: when a locality or state is against it; if it causes methane release or water contamination; and if operators do not make chemical disclosures.

“So by the time we get through all my conditions, I do not think there will be many places in America where fracking will continue to take place,” Clinton said in March.

The Clinton campaign this week did not respond to a request for further clarity on Clinton’s remarks.

Whether her energy independence comments were an error or a sign of a policy shift to come, we may have to wait until well after next month’s election to find out for sure.

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