What would energy independence mean?

The news on the financial channels was this report from the Energy Information Agency that forecast the U.S. becoming energy independent within 20 years.

Here is the Bloomberg article:
http://www.bloomberg.com/news/2012-11-12/u-s-to-overtake-saudi-arabia-s-oil-production-by-2020-iea-says.html
and some excerpts:
U.S. oil output is poised to surpass Saudi Arabia’s in the next decade, making the world’s biggest fuel consumer almost self-reliant and putting it on track to become a net exporter, the International Energy Agency said.

Global demand for oil is projected to rise to 99.7 million barrels a day in 2035, up from 87.4 million last year, according to the IEA, which advises industrialized nations including the U.S., Germany and Japan. Today’s report projects trends to 2035. 　
If such a thing came to pass, what might it mean?
Well, presumably it would be good for the trade deficit. Oil making up one of the major areas of balance of trade deficit.

Energy independence would give the U.S. a comparative advantage in the energy intensive manufacturing industry. Steel and aluminum come to mind.

Oil and Nat gas could be exported according to the report. However I don't consider it a wise move to export ones natural resources. You are selling your advantage for a small profit. Value added industries usually add more employment.

But what really is on my mind is the question of what energy independence would mean for the U.S. dollar.

When the U.S. started importing oil in earnest back in the 1960's and 1970's we made deals with Saudi Arabia in particular that they would only accept payment in U.S. dollars for their oil. From that time on the world oil price is in dollars and most oil transactions are in U.S. dollars. If we are not buying oil from them anymore what incentive will they have to sell in our dollars? And if they begin accepting other currencies, that will make the USD less in demand around the world.

In addition, as we buy middle east oil they place the excess reserves in our US Treasurys. Keeping interest rates low. China does the same with their USD reserves, as Japan. As the USD loses relative value our imports become increasingly expensive, reducing the flow of USD to China and this reduces the excess reserves that they place in US Treasurys. At present interest rates have been kept artificially low by China, Japan and the oil exporters, while the USD has been kept artificially high.

As those world dollars are freed up those dollars will make their way back to this country. We will sell more to the world, imports will be more expensive, interest rates will tend to rise as the economy picks up. But we may lose the crutch of having the worlds reserve currency! In other words I would expect US Dollar weakness.

Long term stuff.gh