Recently, my colleague at the Institute for Energy Research, David Kreutzer, and I published a new paper called the Environmental Quality Index. In the paper, we used Yale’s Environmental Performance Index to calculate the weighted environmental impact scores of the average barrel of oil and Bcf of natural gas from the U.S., and from the next 20 largest producers.
We found that the score for the next 20 oil producers was 39, as compared to a score of 51.1 for the U.S., and for natural gas, the average was 38.6 to 51.1 for the U.S. These conclusions show the wide gulf between the United States and the next highest producers on environmental quality. This aspect of the paper tells an important story. The environmental impacts of production have significant variation depending on where that production occurs, and attempts to restrict domestic production rarely take those impacts into account.
But the environment isn’t the only thing that suffers when production is exported by restrictionist policies. There is a human freedom element to consider as well. Many other major oil and gas producing countries have both terrible human freedom ratings and governments that control and profit from their industry.
In this paper, we focused on telling two stories in particular about this. Russia, the third largest oil producer, and second largest natural gas producer in the world, has unsurprisingly low rankings on human freedom. It has a Freedom House rating of 19, compared to the United State’s ranking of 83. Spending on Russian oil and gas gives its authoritarian government the resources it needs to continue the war in Ukraine and other incursions on the freedom of its people and neighbors.
Blocking United States production through diminishing leases or any other means does not create a concomitant reduction in global oil or gas demand, rather, it simply takes that production elsewhere.
Another notable story is that of Venezuela. The Venezuelan oil industry is a staggering example of how easily immense material resources can be squandered. Venezuela has the world’s largest proven oil reserves, and used to be a major producer. But under years of despotism those resources have been squandered, and the industry bled of all productivity.
The Maduro regime allowed corruption and disorder to reign over the industry and drew sanctions from the rest of the world that made what production still occurred to be unsaleable. Venezuela’s capacity to produce has been idle for long enough that it was estimated that it would take $250 billion over between 7 and 8 years to restore the industry there. An industry, moreover, that has a far worse record on environmental quality and human freedom than the domestic oil industry in the U.S..
As a way to ameliorate high gas prices, the Biden administration looked for ways to encourage production in Venezuela while concomitantly continuing policies that harmed oil production domestically.
The Environmental Quality Index was written to demonstrate that U.S. production meets a demand that will continue to exist regardless of how much oil the United States produces, but the quality of what meets that demand can vary significantly in how it impacts both the environment and human freedom.