BREAKINGVIEWS-US will keep dancing to global energy tune

By Gabriel Rubin

WASHINGTON, April 1 (Reuters Breakingviews) - American energy independence is the future, insofar as it does not exist today. In March, as Iranian attacks struck energy infrastructure throughout the Persian Gulf, President Donald Trump crowed that “we make a lot of money” when oil prices go up. Yet despite nearly tripling oil field production in the past two decades, U.S. energy costs remain closely tied to global commodity markets thanks to aging infrastructure and complex cross-border demand. The only way to truly break the relationship is to stop burning fossil fuels.

Domestic oil production once accounted for virtually all U.S. consumption: in 1949, petroleum output was equivalent to 95% of overall usage. Insatiable demand led to more imports in the 1960s and 1970s, until the shocking reality check of the 1973 oil embargo. Homegrown production would still decline steadily throughout the 1980s and ‘90s until a technological revolution turbo-charged shale and offshore drilling in the 2000s.

That interregnum has left its mark. Though U.S. oil drillers are now producing the equivalent of two-thirds of home consumption, an infrastructure mismatch persists: about 40% of refining capacity processes imports, according to Bank of America, since much of it is built to handle the heavy, dirty crude that mostly comes from the likes of Canada, Mexico and Venezuela. Crude produced by American fracking, by contrast, is generally of the light, sweet variety, and much of it is exported to Asia and increasingly Europe.

The current oil shock will affect these flows. The unfolding Gulf crisis has effectively removed 11 million barrels of oil a day from global markets, outpacing the supply hit in the 1970s.

Some factors will at least dampen the hit to U.S. consumers. For instance: gasoline simply isn’t that large a share of household budgets anymore. Thanks to decades of efficiency gains, it now accounts for 2% of consumer spending, compared to around 5% in 1974.

These efficiency gains came in large part as a response to the 1970s crisis. Smaller cars—including Japanese imports—became increasingly popular, while Congress established the first-ever fuel-economy standards in 1975.

The current era offers yet more effective solutions. Electric cars can decouple transportation from the supply of hydrocarbons. Heat pumps allow households to ditch gas. The transition to both was slowed by the Trump administration's cancellation of consumer subsidies in 2025, however, and EV sales remain below 10% of auto purchases, according to Cox Automotive. American oil production has proven a major strategic advantage, especially as peer nations struggle through outright shortages. Eventually, though, the world will adapt to scarcity. If the United States doesn’t, it may suddenly look more exposed than its friends or its rivals.

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CONTEXT NEWS

The conflict in Iran has all but halted shipments of oil and liquefied natural gas through the Strait of Hormuz, which typically carries about one-fifth of the world's LNG and crude supply. The International Energy Agency has called it the biggest-ever oil supply disruption.