Oil Independence

Abstract

Oil independence has been a goal of U.S. energy policy for the past 30 years, yet the term has never been rigorously defined. A rigorous, measurable definition is proposed: to reduce the costs of oil dependence to less than 1% of gross domestic product in the next 20 to 25 years, with 95% probability. A simulation model incorporating the possibility of oil supply disruptions and other sources of uncertainty is used to test whether two alternative energy policy strategies—business as usual (BAU) and an interpretation of the strategy proposed by the National Commission on Energy Policy (NCEP)—can achieve oil independence for the United States. BAU does not produce oil independence. The augmented NCEP strategy comes close to achieving oil independence for the U.S. economy within the next 20 to 25 years, but more effort is needed to achieve full independence. The success of the strategy appears to be robust regardless of how the Organization of the Petroleum Exporting Countries responds to it. Expected annual savings are estimated to exceed $250 billion per year by 2030.