America’s Path to Energy Independence

Oil pump in front of American flag

Energy independence is one of the few things that Democrats and Republicans can agree on, but they disagree strongly on exactly what energy independence means and how to achieve it.

Generally, “energy independence” refers to a country’s ability to produce all of the energy it needs (or a surplus) by itself. During his State of the Union Address in February 2020, President Trump proudly announced that America is now energy independent. In some sense, we can say this is true because the U.S. exports more petroleum than it imports.

However, as critics are quick to point out, America is still importing petroleum. Some would argue that until we produce all of our energy domestically, we are not truly energy independent.

If we can produce more petroleum than we need, why are we still importing it from other countries? The situation is more complex than many people realize. There are several reasons the U.S. might continue to import petroleum, such as:

Cost

Producing oil is an expensive process that requires heavy equipment and highly trained personnel. In addition, oil production often occurs in remote areas. Labor costs in the United States are high, and importing oil is often a more cost-effective solution.

Logistics

How do we transport oil from its remote production sites to refineries, distribution centers, and customers? The most efficient way to transport oil is through a network of pipelines, but constructing them is another hotly contested political issue in America. The relative lack of pipeline distribution networks means imported oil may be cheaper than the oil we produce domestically.

Refinement

Have you ever thought about what happens between petroleum producers pumping oil out of the ground and you pumping gasoline into your car? Oil goes through a complex process of refining, purifying, and blending before it becomes usable fuel. It can be cheaper and more efficient to import a finished product from another country.

Petroleum Grades

Oil comes in a variety of grades and types that are suitable for different purposes. Just because America produces plenty of oil doesn’t mean it’s always the kind we need to make diesel, gasoline, or other fuels we depend on.

By some measures, the United States has already achieved energy independence. In another sense, we have a long way to go. Whether or not we ultimately achieve full energy independence, producing more energy domestically puts us in a powerful place to negotiate from when working out trade deals with other nations.

California’s Zero-Emission Equipment Program

"No emissions allowed" sign depicting a car.

The impact of human activity on the environment is increasingly important to consumers. The financial cost of reducing carbon emissions is significant, but the cost of alienating environmentally aware consumers may be greater.

For some shippers, there could be a significant reduction in the expenses that go toward meeting carbon emissions goals. The California Air Resources Board has launched its Clean Off-Road Equipment Voucher Incentive Project, or CORE. This program designates $44 million in vouchers that shippers can use to deploy low- and zero-emission equipment at airports, distribution centers, ports, and rail yards. The funds come from the California Climate Investment Initiative, a statewide program that invests cap-and-trade dollars in projects designed to reduce carbon emissions.

The shipping industry is one of California’s biggest economic sectors, but it is heavily reliant on equipment powered by fossil fuels. What steps can the industry take to change this? Here are five possibilities:

Zero-Emission Vehicles

Zero-emission vehicles are gaining popularity for both personal and commercial use. Traditional manufacturers like Daimler, Hyundai, and Toyota, and the electric vehicle manufacturer Tesla, are rolling out electric and fuel-cell powered vehicles that operate without carbon emissions. These technologies are easy to apply to forklifts and other transportation equipment.

Renewable Energy

Electric vehicles can be environmentally friendly if their source of power is clean. Renewable energy from sources like wind and solar power can make carbon-neutral logistics possible.

Cold Ironing in Port

Ships in port often run generators to power light, ventilation, and other systems on board. Ships can switch to “cold ironing” and use clean, onshore power when they are in port. The fuel savings could be small but significant.

Route Optimization

There is a lot of room for efficiency improvements in how oceangoing ships operate. By optimizing routes to take advantage of currents, weather, and other ocean conditions, ships can make efficiency gains of five to ten percent.

Improved Hardware

An oceangoing cargo vessel may use over 2,500 gallons of fuel every hour. Small changes such as improved hull designs, optimized screws, and waste heat recovery may only reduce fuel usage by a few percentage points, but the savings add up quickly.

The shipping industry has been dependent on inefficient equipment powered by diesel and fuel oil for many years. Rolling out new low- and zero-emission equipment can be costly, but stricter regulations and consumer opinion are now forcing companies to make this investment.

The Consequences of Container Port Automation

Container cargo freight ship in container terminal yard in sea port.

Shippers have always been on the lookout for ways to make shipping more efficient and profitable. This need has driven the development of everything from block and tackle to more accurate clocks.

Sixty years ago, containerized shipping turned the shipping industry upside down. Today, shippers pack cargo into standardized containers that can quickly and easily be loaded and unloaded by crane. Now, container terminal automation is poised to revolutionize the industry again—however, it may have unintended consequences.

1.      Lost Jobs

The most obvious consequence of container port automation is lost jobs. When machines do more of the work, we need fewer people. In June 2019, a Los Angeles Times article on automation at the Port of Los Angeles reported that automation would cause 500 lost jobs.

2.      Reduced Tax Revenue

When people lose jobs, reduced tax revenue is an inevitable result. Federal, state, and local governments in coastal regions already bear a significant burden of responsibility. Asking these agencies to continue to do their jobs while facing a significant reduction in revenue is a recipe for disaster.

3.      Secondary Business Failure

Jobs at the port affect far more than just the port. Other businesses, ranging from restaurants and theaters to medical clinics and construction companies, exist to serve port workers and their families. Automation threatens these businesses.

Clearly, the consequences of automating ports may be significantly negative—but if automation makes ports more efficient, won’t we all enjoy lower costs for imported goods? Perhaps not. When McKinsey & Company investigated container port automation in 2018, they found that it may reduce operating expenses but will probably not deliver the expected productivity gains and cost savings. Global shipping is a complex issue. If you want to see how more efficient shipping can improve your bottom line, you will want to have the right partner in your corner. At Global Shipping Services, we specialize in providing logistics management services at all major ports worldwide. We are a fully licensed NVOCC (Non Vessel Owning Common Carrier) with the experience and industry connections to get your job done right. Contact us online or call us at (908) 922-4290. We’ll show you how efficient global shipping can make your business better.