The strategic good, bad, and ugly of the US energy revolution
Written by Klée Aiken
Image Source: Wikimedia Commons
A strung out oil junkie, desperately brandishing it’s diminishing global clout to get its fix, guzzling 18.49 million barrels of oil per day and burning 25,533 billion cubic feet of natural gas in 2012 on its way to be the top global consumer in both categories. Compare that to the budding energy producer of the next decade, already third in global oil production, first in natural gas production, on point for energy independence by 2020 and net energy exports by 2035, no doubt an enviable position. There is one catch with this dichotomy, both are the United States of America. The much heralded ‘shale gas revolution’ matched with technological innovation in oil extraction has Wall Street and the Hill bullish on American energy security. Sweeping aside the rhetoric for a moment we can see three key strategic developments that this revolution will likely bring about.
The Good | Flexibility
Energy Independence, tops on the political platform from the Republican battle cry ‘drill baby, drill’ to President Obama’s ‘all-of-the-above’ tag line. There is absolutely no doubt that energy independence provides increased latitude for America on the global stage. Putting aside (but not discounting) environmental and opportunity cost concerns related to this boon in energy resources, this massive shift in America’s energy situation is broadly positive. Domestic increases in energy investment will boost jobs and lower natural gas prices will provide US industry with a competitive advantages that we have already begun to see. Internationally the US gains incredible foreign policy latitude, will be less beholden to the pressures of OPEC countries, and can more effectively counter Iranian efforts to use energy demands to circumvent sanctions. With North America able to fulfil the majority of excess US energy demands in this scenario, this is a huge opportunity for the United States to right the ship.
The Bad | Diversification?
The last few weeks have seen European and American politicians appeal to the White House to fight fire with fire and use growing energy supplies ‘as part of our foreign policy.’ While Russia parades about in the former Soviet bloc, the ‘West’ has been left hamstrung, largely due to Russia energy pre-eminence. Russia supplies 34 percent of EU natural gas imports, 27 percent of oil imports, 24 percent of coal imports, and 30 percent of uranium imports. And while this relationship is a two-way dependence, throughout the last decade Russia has shown its willingness to wield this trump card as a political tool. The call for assistance from a newly energy rich partner is natural and expected.
Unfortunately, even if the Obama Administration were to ignore the lobby against energy exports, forge forward against environmental concerns, and release a slew of export licenses, there are structural realities that make energy exports difficult. Simple fact is that the only US LNG export terminal is a temporarily mothballed facility on the Kenai Peninsula in Alaska, with late-2015 the earliest that LNG can flow from the only fully approved export facility under construction in the lower 48, Sabine Pass.
In the long term, while there is no doubt that commercial pressure will see some natural gas exported, there are many forces working to stem this tide. Political pressure from many domestic industry interests are pushing against the call for exports and concerns over hydraulic fracturing range from water usage to contamination, noise pollution to earthquakes. Even with a boost in energy production, the US will remain a world-class energy consumer, leaving the slice of natural gas pie open to the international community very slim. With Canadian supply diverted away from a flush American market and limited US exports, there will some degree of supply diversification for the international community, but markets in Europe will be competing with energy hungry markets across the Pacific Rim and throughout the developing world.
In this picture the best US export will be technology and expertise. With shale gas formations spanning the globe and improved extraction technologies applicable in areas such as the Eastern Mediterranean and Eastern Europe this wild card does have the potential to be a real the game changer internationally.
The Ugly | Destabilization
An interesting perspective on the growing energy independence of the United States was forwarded by Dr Richard Haass this February at the ANU. Removing US dependence on energy imports, especially at a time of growing popular support for isolationism, could see the US shirk its role as a (relatively) stabilizing force in many of the world’s energy producing regions.
In removing American dependence on these regions, the US willingness to act internationally, especially in the Middle East, will fall below its already fatigued levels. This issue is of greatest concern when looking at how import dependent states such as China, Japan, India, much of Western Europe, and others would respond to the subsequent geopolitical vacuum in the region. Dr Haass described the United States as the only power with both the will and capacity to independently sort things out, and while he did not go into specifics, the removal of a fully committed US from the Middle East would make an already unpredictable region further tumultuous. For the Asia-Pacific the point was clear, increased volatility could challenge vital energy supplies, increasing regional tensions and forcing increased political investment in the Middle East.
The US has much to gain from a resurgence of domestic energy production. While the export potential may not be as rosy as many foreign partners would like, the technology and techniques developed in the States will increase market supply in the short term and in the long term spur similar developments elsewhere in the world. The concern over US disengagement is valid on many accounts, but in reality and cliché, foreign policy is made at home. A more energy secure and economically vibrant United States will provide the US far more ability to maintain its international influence, pivot to-and-fro, and without being dragged as easily into energy conflict, have the room to act more thoughtfully and strategically on the global stage.
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– U.S. Energy Independence by 2035? (November 28, 2012)
the Global Y 
