The root causes of the fall in oil prices are many: increasing production from sources such as U.S. shale, and declining consumption, due to improved vehicle fuel economy here at home and stagnating economies abroad. At the same time, OPEC nations have agreed -- for the time being at least -- to allow oil prices to fall in an effort to drive high-cost oil producers such as U.S. shale operations bankrupt.
At the moment, though, everything is coming up roses: consumers are happy, OPEC is nervous, and America is producing a greater share of the oil we consume than at any time in the last 30 years. Could it be that the United States is on the verge of energy independence?
Not hardly, and here's why: as long as the United States remains dependent on the global market for oil -- even if an increasing share of that oil is produced domestically -- we remain subject to wild swings in price for a fossil fuel that is becoming increasingly expensive to produce.
Oil price volatility hurts the economy, lowering consumer confidence and making businesses less willing to invest. For fear of future price fluctuations, everyone slows their spending. That decreases consumer demand, which has ripples throughout the economy.
Increasing domestic oil production does not solve the problem. Oil produced in America does not necessarily stay in America; rather, oil is a globalized commodity, which is why revolution or war in far-off lands has a rapid impact on gas prices here at home. While increasing production at home adds to global supply, the effect on prices is no different than if production were to increase in Saudi Arabia or Venezuela.
And a "drill baby drill" approach to maximizing oil production brings its own risks, including that of environmental damage that threatens precious natural places and warms the planet. Oil booms also have the potential to create big economic problems when they go bust, as U.S. shale oil producers may find out soon and as world leaders such as Vladimir Putin are becoming keenly aware.
There is only one true path to energy independence, one that frees our economy of its ties to volatile world oil markets and our environment of the damage and risk that comes from oil production: cutting our dependence on oil entirely.
America is actually making good progress in cutting our reliance on oil. This stunning Bloomberg News data visualization shows that the U.S. is "shaking off its addiction to oil," with America using about a third less oil per dollar of GDP than we did in the mid-1970s. Americans are driving less, and what driving we do is in cars that are more fuel-efficient than in the past. New technologies -- such as electric vehicles -- are showing strong promise for displacing oil use in the transportation sector.
In the 1980s and 1990s, America responded to lower oil prices by slacking off on efforts to reduce our consumption of oil -- fuel economy standards for cars stagnated, SUVs proliferated, progress toward alternative-fuel vehicles stalled and auto-dependent sprawl spread across the land, leaving us all, and the American economy, to pay the piper in higher fuel prices over the last decade.
Let's not make the same mistake again. By using oil more efficiently and continuing progress toward electric vehicles, Americans can finally enjoy the lasting economic, environmental and health benefits of true energy independence.