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Fri October 26, 2012
Energy Independence Wouldn't Make Gasoline Any Cheaper
Originally published on Fri October 26, 2012 4:05 pm
Just about every president since Richard Nixon has set energy independence as a goal, and both major candidates have brought it up the current campaign.
As it turns out, there is a place, not so far from here, that has achieved energy independence: Canada.
Canada produces far more oil than it consumes. They're not dependent on the Middle East! They've got all the oil they need!
I called Stephen Gordon, a professor of economics at Université Laval in Quebec City, to ask him about what energy independence means for his nation.
"It's not really that big a deal," he told me.
Really? I asked him what gas station he used to fill up his car.
Ultramar. Corner of St. Olivie and St. Jean Baptiste. I called the station and (with the help of a colleague who speaks French) learned that they Charge $1.37 per liter, in Canadian dollars.
Do all the conversions, adjust for taxes, and you get something around $4 per gallon — about the same price as we pay in the U.S. right now.
Energy independence does not mean cheaper gasoline. It doesn't even mean that prices are more stable. Gas prices in Canada went up this summer just like they did in the United States. Prices in Canada are sensitive to conflict in the Middle East, or increased demand from China.
There is a global market for oil. That means there is basically one price, whether you are a net exporter (Canada) or the world's biggest importer (the U.S.).
It is good for Canada's economy to export oil to the rest of the world. Oil is money sitting there in the ground. But it doesn't make gas any cheaper at the pump.
RENEE MONTAGNE, HOST:
Now, to another theme that's come up this election season, and on this program, American energy independence. It sounds like a good idea. Just about every president since Richard Nixon has set it as a goal. Both presidential candidates have brought it up repeatedly this campaign. Yesterday, we looked at whether energy independence is an achievable goal.
STEVE INSKEEP, HOST:
Today, David Kestenbaum in our Planet Money team asked: is it worth achieving?
DAVID KESTENBAUM, BYLINE: There is a place a magical place that has achieved this Holy Grail of energy independence. It's just north of us - Canada - where this guy lives.
STEPHEN GORDON: I'm Stephen Gordon. I'm a professor of economics at Laval Universite in Quebec City.
KESTENBAUM: And in Canada you are energy independent?
GORDON: And we have been for as long as I can remember, anyway. It's not really that big a deal.
KESTENBAUM: Canada produces far more oil than it needs. There are huge reserves in the oil sands of Alberta. And to Americans this may sound great. No longer dependent on the Middle East. You've got all the oil you need at home.
So what does this do for the average Canadian? What does this do for Stephen Gordon? Let's call his gas station.
What's your gas station, where do you fill up your tank?
GORDON: Oh dear. It's called the Ultramar, at the corner of St. Olivie and St. Jean Baptiste.
(SOUNDBITE OF DIAL TONE)
KESTENBAUM: They only speak French, he warned.
(SOUNDBITE OF PHONE DIALING)
UNIDENTIFIED WOMAN: (French spoken) Bonjour.
KESTENBAUM: Fortunately, so does my colleague Dina Temple-Raston. She asked the price of gas.
DINA TEMPLE-RASTON, BYLINE: (French spoken)
UNIDENTIFIED WOMAN: (French spoken)
KESTENBAUM: One dollar, thirty-seven cents Canadian, per liter. How does that compare to the United States? If you do the conversion, correct for taxes, it's around $4 a gallon. Roughly what we pay in the United States these days.
Energy independence does not mean cheaper gas. It doesn't even mean stability. Gas prices in Canada went up this summer, just like they did in the United States. Canada is just as sensitive to conflict in the Middle East or increased demand from China.
Here's Jeff Rubin, another Canadian economist.
JEFF RUBIN: We're energy independent. You're a big net importer - the world's biggest net importer. But guess what? I'm not driving around in Toronto any cheaper than you're driving around in New York.
KESTENBAUM: The reason energy independence doesn't help Canada, he says, is that oil is a global market. Oil can be shipped all over the world. There's basically one Price for oil. That's why on the news, when they talk about the price of oil, they talk about the price of oil.
(SOUNDBITE OF VARIOUS NEWSCASTS)
UNIDENTIFIED MAN: The price of oil, look at this, down ever so slightly this morning.
UNIDENTIFIED WOMAN #1: The price of oil actually hit a seven month low...
UNIDENTIFIED WOMAN #2: Oil prices are down over three percent. Just look at the...
UNIDENTIFIED WOMAN #3: In commodities, oil prices nosedived...
KESTENBAUM: The main benefit Canada gets from having so much oil, these economists say, is just that it's great for the Canadian economy to have a lot of valuable oil to sell. It means jobs. It creates wealth. It's money sitting there in the ground. More oil is better, whether you are technically independent or not.
Canada has oil. The United States has things Canada needs. Like fruit.
GORDON: We're very happy to get that stuff trucked in from California and Mexico.
KESTENBAUM: Does anyone talk about fresh fruit independence up there?
GORDON: Only economists when we get cranky.
KESTENBAUM: David Kestenbaum, NPR News.
(SOUNDBITE OF MUSIC)
MONTAGNE: You're listening to MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.