Energy Independence: Would It Free the United States From Oil Price Shocks?

Publication Date: January 2002

Publisher: Library of Congress. Congressional Research Service

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Research Area: Energy

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Abstract:

Over the past 25-years, the U.S. economy has experienced four large oil price shocks (1973-74, 1979-80, 1990-91, and 1999-2000). Each has been a catalyst for discussions about a proper national energy policy. Many analysts have suggested that energy independence should be an integral part of such a policy. Both major party candidates for president in the 2000 election expressed similar views. However, U.S. suppliers of energy participate in the world energy market. So long as prices are determined in that market, energy independence will not free the United States from oil price shocks. The effect of these shocks on economic activity has been and can continue to be reduced and reduced substantially if the United States continues to achieve greater energy efficiency. Such efficiencies have been achieved over the past 25 years and, as a result, the 1999-2000 oil price shock has had a much smaller effect than those of the past. This suggests that greater efficiency in the use of energy should be a major consideration in formulating energy policy. This paper will be updated as events warrant.