Energy Independence = Wealth Reduction

Published October 1, 2009

Energy independence is bad economics and bad public policy.

Energy supply, as viewed in economics, is ordered according to cost, with the least-costly energy produced first, and the more-costly supply added later from a variety of sources. The total supply is determined where the cost of the last unit produced is just equal to what the last consumer is willing to pay.

To restrict U.S. supply to domestic sources raises prices at home and lowers the prices to consumers abroad, as supplies are diverted overseas that would have come to the United States. Energy independence is simply another protectionist policy that reduces the overall wealth of the nation.

Jim Johnston ([email protected]) is a policy advisor to The Heartland Institute.