Drill Baby Drill! The Correlates of “Energy Independence” in the United States

Llewelyn HughesAssistant Professor

Department of Political ScienceGeorge Washington University

Prepared for International Political Economy SocietyWisconsin, MadisonNovember 12, 2011

Francisco Flores-MaciasSenior Oil Research Associate

LCM Commodities

Oil Market Intervention in AISs

“The chant is ‘drill, baby, drill.’ And that's what we hear all across this country in our rallies because people are so hungry for those domestic sources of energy to be tapped into.”

Sarah Palin, October 2, 2008

“Our dangerous dependence on foreign oil has been 30 years in the making, and was caused by the failure of politicians in Washington to think long-term about the future of the country.”

Barack Obama, August 5, 2008

The Puzzle of Oil Autarky

A number of states to frame oil policies in mercantilist terms, and implement policies designed to increase “energy independence”

This makes no sense given integration of international oil market

It also rejects the norm of non-discrimination; in fact, it rejects the utility of external markets for supplying crude oil

“Industry Preferences” Hypothesis

Legislative outcomes are a function of regulatory capture

“Constitutency Preferences” Hypothesis

Legislators represent district interests (employment, regional growth)

“Ideology” Hypothesis Policies are driven by the ideological predispositions of legislators,

particularly the framing of oil as important to national security

Why Energy Autarky?

“Energy Independence” and the U.S.

Congress can legislate to alter the incentives for domestic oil production in three primary ways

Leasing of federal lands and (OCS) Federal lands = 68% of undiscovered oil (Griles 2004) OCS = 1.76 billion hectares; 9.6 billion barrels since 1982

(Allred, 2007) Fiscal Incentives

Depletion allowances Tax credits for EOR

Import Barriers

“Industry Preferences” Hypothesis

Legislative outcomes are a function of regulatory capture

Why Energy Autarky?

“Constitutency Preferences” Hypothesis

Legislators represent district interests (employment, regional growth)

Why Energy Autarky?

“Ideology” Hypothesis Policies are driven by the framing of oil as a strategic resource, rather

than an economic commodity

Why Energy Autarky?

Empirical Strategy

Econometric analysis of U.S. Senate voting (1992-2007)

18 votes

Vote inclusion rules: 1) substantively focused on domestic oil prouction; 2) justified in “energy independence” terms

Votes reflect wide range of congressional policy instruments: federal lands & OCS leasing, subsidies

Votes to both increase and decrease incentives for domestic drilling

Votes that “succeed” and “fail”

Operationalization

Dependent Variable Senate votes on domestic drilling related legislation

Explanatory Variables

Campaign contributions from oil industry PACs

Party Affiliation National Journal ranking of foreign policy positions of

legislators

State GDP from oil and gas production Gasoline prices, inflation adjusted Constituent beliefs on legitimacy of military intervention

to secure oil

Industry Preferences

Ideology

Constitutency Preferences

Estimation Strategy

Panel data with binary dependent variable Cross-sectional units: Senate seats Time-series units: Bills and relevant procedural motions N = 1800

Addressing 3 main empirical challenges: Unobserved heterogeneity mixed-effects logit Endogeneity instrumental-variables probit Strategic Voting misclassification-corrected probit

… plus standard pooled probit and RE and FE probit and logit

Estimation Results

Estimation Results

Summary of Findings

Strong evidence that ideology influences outcomes Ideology indicators significant across all specifications other than

fixed-effects logit

Party indicator significant except in IV probit

Weak evidence constituency effects influence outcomes Oil/GDP is positive and statistically significant in most models

Effect disappears when potential endogeneity taken into account

Weak evidence industry influences outcomes PAC significant in most models; sign in expected direction

Effect disappears when potential endogeneity taken into account

Implications

Robust evidence that ideology, in addition to

material interests, affect legislative outcomes

Framing of oil as a strategic resource makes

autarky, not non-discriminaton, one driver of

legislative outcomes

Ideology and the limits of the capitalist peace

Appendix

Measuring Liberalization