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Energy Independence – and Beyond

Perhaps you’re hearing a lot of gloom and/or doom about the economy. Most of it is pretty easy to refute, as Barataria has shown. There is every reason to say that we are indeed turning a corner into next year and that Spring is Coming.

Could there be any more good news? Of course there is. Let’s talk about energy independence and the lingering trade deficits that have been plaguing this nation since about the mid 1970s. Could it be that we’re about to slay at least one of the 40 year old demons that has defined the United States for as long as nearly half of today’s voters have been alive?

It's always been about the black stuff.

It’s always been about the black stuff.

We first reported on the increasing energy independence of the US a bit over two years ago. At the time, we had moved from the domestic production accounting for only 28% of our daily oil diet to 43%. factor in Canada and Mexico, our two closest trading partners, and 34% of our oil came to us in big ships.

North American Independence is a good milestone for a lot of reasons. We can depend on our neighbors for a constant supply without fear of wars and other interruptions.

Even at the ridiculously low price of $48 per barrel the domestic oil industry has been pumping hard – combined with improved fuel economy that has actually reduced our demand for the stuff. Today, fully 72% of our oil comes from US sources and 11% from Canada and Mexico. The current trend tells us that by 2020 North America will indeed be energy independent.

We can see why this is important for a lot of reasons. Chief among them is a great reduction in our need to actually care about the Middle East outside of the need for improved human rights, the rule of law, and stability. A strong socially based foreign policy is very much within our reach.

If that’s not selfish enough for you, let’s take a look at the “Current Account”, which is the total net outflow of money from the US for goods and services as a share of the Gross Domestic Product (GDP):

Current Account (trade in goods and services) as a Percent of GDP.  Data from the St Louis Federal Reserve.

Current Account (trade in goods and services) as a Percent of GDP. Data from the St Louis Federal Reserve.

As you can see, the great exporter turned into a net importer in the mid 1970s. Outside of a few rises back to even, we’ve been sending money out to the rest of the world, sometimes at a rapid clip, most of the time since.

Yikes!

Yikes!

Today, however, it looks much better. Oil is the main reason. Consider the floor back in 2006, when fully 6% of GDP was sent overseas. About $260B of that was oil, or about 2% of GDP. One of the problems leading up to the 2008 crash was that even as so many assets were inflating into bubbles the US was bleeding cash – at a rate of over $2,000 for every household every year.

Not any more. Our Current Account deficit is up to just 2% of GDP and rising rapidly. Things haven’t been this good since 1998 and haven’t been improving this rapidly since 1989.

That’s the effect of energy independence. When we combine that with a re-configured military built around a reduced need for forward bases protecting “vital assets” the improvements to our budget multiply.

There is work to be done.

There is work to be done.

Let’s combine that with a two-pronged approach to boost our manufacturing. It starts with big investments in infrastructure that will keep the US Dollar from increasing in value too much and pricing us out of the market. If we do all that, and come to terms with the high overhead per employee which is driving the increased automation which is really killing jobs, we can reasonably see our Current Account crossing back over to zero in the next four years.

In other words, we have a real opportunity to provide good jobs for Americans. All it takes is a commitment to keep our manufacturing, our money, and most importantly our soldiers here.

How good might the next four years be? As I predicted back in 2013, this is what the big turnaround looks like and how it multiplies. There are a lot of reasons to believe that things are about to get much, much better – if we act to build on the great progress we’ve already made.

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9 thoughts on “Energy Independence – and Beyond

  1. There is Mr Sunshine! But seriously good blog. I can see a lot of things are moving the right direction. People need to stop paying attention to garbage and realize what has to be done.

    • It’s never even been raised. I think that with the right commitment to reconfiguring as a rapid deployment force, we could easily lose most of our forward bases. That’s worth over $100B per year.

  2. Pingback: Resetting the Middle East | Barataria - The work of Erik Hare

  3. Pingback: Oil Finds a Range | Barataria - The work of Erik Hare

  4. Pingback: Strong Dollar | Barataria - The work of Erik Hare

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