1. Drill Baby Drill! The Correlates of “Energy Independence” in the United States Llewelyn Hughes Assistant Professor Department of Political Science George Washington University Prepared for International Political Economy Society Wisconsin, Madison November 12, 2011 Francisco Flores-Macias Senior Oil Research Associate LCM Commodities

2. Oil Market Intervention in AISs

3. “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

4. 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

5.  “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?

6. “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

7.  “Industry Preferences” Hypothesis  Legislative outcomes are a function of regulatory capture Why Energy Autarky?

8.  “Constitutency Preferences” Hypothesis  Legislators represent district interests (employment, regional growth) Why Energy Autarky?

9.  “Ideology” Hypothesis  Policies are driven by the framing of oil as a strategic resource, rather than an economic commodity Why Energy Autarky?

10. 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”

11. 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

12. 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

13. Estimation Results

15. 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

16. 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

17. Appendix

18. Measuring Liberalization