In the U.S. these days, it seems like you can sell almost anything if you spin it as part of the pursuit of energy independence. Enter Uranium Energy Corp. A junior mining company with Canadian roots, UEC is developing the newest uranium mine in the U.S. And it’s counting on fracking to do it.

Texans, in general, are no strangers to fracking. UEC is operating in the heart of fracking country, south Texas’s Eagle Ford basin, one of the most prolific shale plays in the country. Instead of oil and gas, though, UEC (recently profiled by Forbes Magazine) is fracking for yellowcake.

The technology is basically the same. It involves injecting a mixture of highly pressurized water and sand into an underground formation in order to break open fissures in the rock that allow the energy riches within to be extracted. In this case, it’s a slurry of uranium ore that’s then dried and processed into powdery yellowcake, an intermediate product that eventually becomes fuel for nuclear reactors.

Of course, the very idea of fracking for yellowcake begs the question—just because you can do something, should you?

The world isn’t exactly running short of uranium. Prices tell you that much. Uranium prices have plunged from more than $90 a pound before the last recession to just more than $40 a pound following the Fukushima disaster. Friendly countries like Canada and Australia are able to ramp up supply, as can less friendly countries like Kazakhstan. Yellowcake is also exported by Niger (part of the reason, according to some, that nuclear-powered France is taking such an interest in neighbouring Mali right now.)

What’s more, the emergence of cheap natural gas from shale plays is making nuclear energy less attractive to U.S. power utilities. Many are considering shuttering some high cost nuclear stations and switching to cheaper natural gas, just as they’ve been doing with a number of coal plants in recent years.

When it comes to fracking for yellowcake, even more pressing than shaky economics is the obvious potential for environmental contamination. The process is not only extremely water intensive, as is typical of fracking, but it’s also happening at a shallow depth. Unlike the Eagle Ford’s oil and gas reserves, which are miles underground, the in situ uranium mining is taking place at the same level as local groundwater supplies.

According to the International Energy Agency, the amount of fresh water used for global energy production will double over the next twenty-five years. Whether it’s Alberta’s oil sands that run on water from the Athabasca River or the countless gallons used to frack underground stores of oil, gas and now even uranium, it’s easy to see why.

It’s unfortunate, because the new fuel sources that the International Energy Agency claims will allow North America to reach energy independence require tremendous amounts of water. Whether it’s from shale plays or the oil sands, millions of gallons of water are needed to pull that energy out of the ground.

Alberta’s oil sands mines require more than 3 barrels of water to produce a barrel of bitumen. With daily output of 1.5 million barrels, the oil sands is one thirsty customer. Fortunately for Big Oil, northern Alberta is blessed with the mighty Athabasca River.

Many US shale producers wish they were so lucky. The industry’s growing need for water comes at a time when much of the country is grinding through the worst drought in more than half a century.

That’s bad news for hydraulic fracking — the latest cure for America’s energy addiction. Fracking is a process that injects a mixture of water and rock-shattering chemicals (all benign, according to industry) into an underground shale formation with the goal of opening fissures in the rock that allow hydrocarbons to flow to the surface.

To get an idea of how much water is involved in the process, consider that in Texas’s Eagle Ford formation, one of the country’s most prolific shale plays, it takes about 150,000 gallons to drill a single well. And that’s a drop in the bucket compared to the 6 million gallons that are needed to frack that same well.

Unlike northern Alberta, there isn’t a whole lot of water flowing through Texas these days. Last summer, companies were forced to truck in water from as far away as 75 miles in order to drill their wells.

Producers in Pennsylvania are running into similar problem trying to drill into the region’s Marcellus formation. State water authorities have cut off companies from drawing water from at least two major rivers. A shortage of water forced one producer, Breitling Oil and Gas, to shutter production from more than 10 percent of its wells.

When it comes to achieving energy independence, the ongoing drought in the US Midwest is an unexpected obstacle. Production from North Dakota’s Bakken play, already at 700,000 barrels a day, holds the potential to double and even triple, according to the IEA. That forecast, however, is critically contingent on sourcing adequate supplies of water. Simply put, without water you can’t frack.

We’re already seeing a tug of war between the water needs of the fracking boom in the Bakken and barge traffic on the Mississippi.

North Dakota wants to tap reservoirs that feed the Missouri River for fracking. Others want that water diverted to the Mississippi to ensure the river maintains the minimum level needed for shipping. South of St. Louis, low water levels are threatening to shut down commercial barge traffic.

Drought and fracking clearly don’t mix. Will America’s shale revolution soon run out of water?

Over the last few years, Suncor’s emphasis has shifted from exponential production growth to milking the full value of what it digs out of the ground. Fortunately for Suncor, it processes nearly all of the bitumen it pulls from the oil sands in its own refineries.

On the other hand, CNRL, like most oil sands producers, exports raw bitumen to the United States. In so doing, however, the company also transfers an enormous amount of wealth from its Canadian operations to American refiners in the Midwest.

In the refining business, the difference between what a refinery pays for its inputs (like crude or bitumen) and the price it gets for finished products (like gasoline or diesel) is known as a crack spread. The glut of oil coming from Canadian producers means Midwest refineries are enjoying crack spreads up to five times larger than those seen by American coastal refineries, which pay world prices for their feedstock.

Investors have certainly noticed what such large crack spreads mean for the bottom line. CNRL, which lacks its own refineries, is forced to sell its raw product at a heavy discount, thereby missing out on those juicy refining margins. Suncor, on the other hand, is able to capture the huge crack spreads through its downstream refining operations. In 2012, CNRL’s stock fell more than 20 percent, while Suncor’s gained more than 10 percent.

The issue is writ large in the price differential between West Texas Intermediate (WTI) and Brent crude. Although WTI is often quoted in North America as the price of oil, Brent is actually the global benchmark for crude. Unfortunately for Canadian producers, lately the spot price of Brent has been as much as $25 a barrel higher than that of WTI.

While Canadian oil sands producers are the main victims of this price gap, they’re also, somewhat ironically, its principal cause. Without more pipeline infrastructure to offload oil to other markets, oil sands crude, as well as shale oil from the Bakken play in North Dakota, has no where else to go. More production from these places only boosts supply, further lowering the price of WTI.

Aside from a few hundred thousand barrels a day from wells offshore Newfoundland that get Brent prices, virtually all of Canada’s 2.4 million barrels a day are priced off WTI.

An even bigger concern for Canadian oil producers than the discount between WTI and Brent is the price differential between WTI and Western Canadian Select—the benchmark price for western Canadian oil exports to the US. It’s trading around $60 a barrel, a third less than WTI and 45 percent lower than Brent.

Do the math on some 2 million barrels a day of heavily discounted oil exports and suddenly you’re talking about an enormous wealth transfer from Canadian oil producers to American refineries. (Note, the subsidy is pocketed by US refiners, not motorists, who don’t see the Canadian discount when filling up at the pumps.) What if Canadian oil was getting world prices? At the current Brent-Western Canadian Select spread of roughly $50 a barrel, you’re in the neighbourhood of $100 million a day. That equates to foregone revenues of more than $35 billion over the course of a year.

It’s not just shareholders of companies like CNRL who are getting squeezed by this wealth transfer. The Alberta government loses royalties, while Ottawa (and the rest of Canada by extension) misses out on cash from corporate income taxes.

The rest of the oil sands industry may need to take a page from Suncor’s playbook. Before rushing ahead to double oil sands production to 3 million barrels a day—and sending billions more in de facto energy subsidies to US refiners—investors and the Canadian economy may be better off if producers figure out how to capture more value from what they’re already digging out of the ground.

Notions of energy independence, however far fetched they may seem today, play well to the IEA’s target audience, which is largely American. Irrespective of the political rhetoric we endured from both presidential candidates, energy independence isn’t really the issue confronting the US economy or American motorists. The real problem is the price of oil—not its country of origin.

It doesn’t really matter whether the US drills for its own oil, gets it from Canada, or ships it in from Venezuela or the Middle East. Hostile or friendly, no foreign supplier has turned off the spigot. At least not since the last OPEC oil shock three decades ago. The problem for oil consumers right now isn’t the availability of the fuel, but the price needed to get it out of the ground. Unfortunately, that’s already more than we can afford.

Brent, the de facto world oil price, is hovering near $110 a barrel precisely because of our growing dependence on the very unconventional sources of supply being championed in the IEA report. Energy independence isn’t going to change the reality of triple-digit oil prices. On the contrary, oil prices will have to climb much higher for the IEA’s forecast to come true. If that’s the case, does energy independence actually have any value for oil consumers?

The IEA pretends that its prediction for a huge increase in unconventional oil supply can occur with only a modest increase in oil prices. Such unbridled optimism is belied by what’s going on in the industry. Getting oil out of the ground has never been more expensive. And costs are only going up from here. Just look at the pullback in capital spending among oil sands operators. And that says nothing of the lack of pipeline routes coming out of Alberta. Does it really look like bitumen production is about to triple in the next few decades?

Good old-fashioned North American engineering know how like horizontal drilling, fracking, or steam-assisted gravity drainage (SAGD) isn’t why we’re now tapping supply from problematic sources like the oil sands or the Bakken formation. Neither of these are new discoveries. The real heavy lifting that’s catapulted once marginal sources of supply to prominence has been done by soaring global oil prices. Without higher prices, no one would be chasing tight oil from shale formations or trying to pull tar-like bitumen out of the oil sands.

It’s no mystery how rising prices work. Just think about the simple power described by an upward sloping supply curve. The higher the price of oil, the more will be produced. This is a fundamental economic tenet that continually confounds the geologists of the peak oil movement.

In a world of $200-a-barrel oil, the IEA is probably right in believing that US production might reach 11 million barrels a day or that Canada could deliver 6 million barrels into the global market.

The problem with such a bullish outlook for supply is explained by another economic axiom—the dampening effect of a downward sloping demand curve. The higher the price of oil, the less of it our economies can afford to burn. If global economic growth is already grinding to a halt when oil prices are around $100 a barrel, what do you think would happen to economic growth—and hence global oil demand—if prices reached the levels needed to make the IEA’s supply dreams come true?

Every major global recession in the past four decades has oil’s fingerprints all over it. For all of our efforts to wean ourselves off the fuel, oil remains the world economy’s most important source of energy (and, as a transit fuel, almost its only source of energy).

In the past, oil prices spiked to growth-killing levels when key producers shut off supply. Today we see these prices with the spigot wide open.

If you are wondering why, just look at where the fuel supply is coming from. Consider the Alberta oil sands, for example.

The oil sands’ real nemesis isn’t the so-called “eco-terrorists” that worry governments, but the shape of the cost curves that have plagued expanded production.

Why do you think Calgary-based Nexen Inc. is so eager to sell to China National Offshore Oil Corp.? While state-owned CNOOC thinks it is buying a strategic reserve, what it is really buying are huge cost overruns and production delays.

What’s true of Nexen’s bitumen resource is true for the Orinoco heavy oil belt in Venezuela, shale oil, or deepwater oil. The world will never run out of oil, but as we increasingly depend on these unconventional sources for our fuel supply, we are rapidly running out of the oil our economies can afford to burn.

The very prices that bring these fuels out of the ground stop our economy in its tracks. No amount of government pump priming or printing money is going to suddenly make that fuel more affordable and bring back growth.

By the metrics of my profession, oil’s collar on growth will leave us all poorer. Almost every measurement of economic welfare is tied to growth. But as every day brings new evidence of how our economic activity is distorting our environment and climate as never before, surely the measure of our well-being is more than simply the sum of what we consume.

As economies gear down, we may just find that a smaller human footprint, be it carbon or otherwise, may be just what our world really needs.