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Energy independence in America? Don’t pop the cork yet

More US oil production won’t necessarily ease the tight global oil market
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First Published: Wed, Nov 14 2012. 05 41 PM IST
An oilfield pump jack in Graford, Texas. It may go without saying, but burning the US oil rather than Saudi oil brings few environmental advantages. Photo: Tom Pennington/Getty Images/AFP
An oilfield pump jack in Graford, Texas. It may go without saying, but burning the US oil rather than Saudi oil brings few environmental advantages. Photo: Tom Pennington/Getty Images/AFP
Updated: Wed, Nov 14 2012. 07 01 PM IST
Houston: Ever since the Arab oil embargoes in the 1960s and 1970s, the US presidents have pledged to end the country’s dependence on foreign oil by drilling more at home and increasing energy efficiency. But “energy independence” was little more than a dreamy campaign slogan.
Now, suddenly, the dream looks to be in reach. The International Energy Agency reported this week that the US was poised to become the world’s biggest oil producer thanks to new drilling technologies in shale fields across the country. With oil production going up each month, not only are imports from the Organization of the Petroleum Exporting Countries going to drop, the energy agency predicted, but the US will also become a net oil exporter by 2030.
At first look, the changing energy panorama seems implausibly fortuitous, and it is no doubt a strategic game-changer. But the report also warns that the global energy future is still full of challenges, and many energy experts say any celebrations should remain muted.
Even if the US were no longer dependent on oil from the tumultuous Middle East and North Africa, vital US trading partners like China, India, Japan and Europe would continue to import increasing amounts of oil from the region. Future price shocks at the pump would still be likely as long as the world depended on unsteady producing nations like Venezuela, Nigeria, Iraq, Libya and Iran, where politics often mixes inharmoniously with crude.
“This isn’t the end of history,” said Michael Makovsky, a Pentagon official in the George W. Bush administration. “If we are going to be a consumer of oil, it’s better that it be our oil rather than from the Middle East. But the oil market is still global, and the North American oil market will still be greatly impacted by developments in the Middle East.”
It may go without saying, but burning the US oil rather than Saudi oil brings few environmental advantages. Greenhouse gas emissions from the burning of fossil fuels, which will continue to dominate the energy landscape for decades, will raise global temperatures several degrees in the years ahead, according to the energy agency. Water constraints will threaten the sustainability of energy-generating projects, like oil drilling and expanding the production of biofuels, in the US and abroad.
And even though more US oil production will improve the country’s balance of trade and produce jobs, it will not necessarily ease the tight global oil market. That is because even as rigs and pumps in the US are producing more, oil production is now falling in the North Sea, Mexico and Venezuela. And mounting consumption of oil in Saudi Arabia and other producing countries that subsidize energy to keep domestic tranquillity is leaving less oil for export.
Nevertheless, to some, the report may offer the tantalizing prospect that the US security ties to the Middle East might loosen. If the US can surpass Saudi Arabian and Russian oil production before the end of the decade and decrease its thirst for energy by producing more fuel-efficient cars, as the agency report projects, it is arguable that future US military interventions in the Persian Gulf region would be less likely.
Why would the US protect Kuwaiti tankers from Iranian attack, as the Reagan administration did in the late 1980s? Or fight Iraq over an invasion of Kuwait, as the first Bush administration did in the early 1990s?
Why would the Fifth Fleet, now based in Bahrain to patrol the Persian Gulf area, have to exist if the US got all of its oil from shale fields in North Dakota and Texas and the Arctic coast of Alaska?
Unfortunately, energy and foreign policy experts say, the US would still need to worry about the Middle East since oil prices are set globally and much of the oil traded on world markets is produced by countries like Saudi Arabia, Iraq and Iran.
The energy agency report projects that oil demand in China and India will grow considerably in the decades ahead and that Europe will remain thirsty for energy. That means oil shipments through the Suez Canal will increase, according to the report, as Egypt’s future stability remains in question.
More ominous, perhaps, will be the continued global dependence on the Straits of Hormuz—now a flash point between the US and Iran, and historically an area of dispute between Saudi Arabia and Iran. The agency report estimated that the amount of oil passing through that narrow waterway would increase to 25 million barrels a day in 2035, or 50% of the global oil trade, from 18 million barrels a day in 2010, or 42% of the trade.
A disruption of the Straits of Hormuz would be disastrous for the economies of China, India and Japan, and it would probably spark a global recession if the blockage lasted for months. The US could not insulate itself from the damage to its trading partners.
“We’re still going to need to protect the sea lanes,” said David L. Goldwyn, who served as the State Department’s coordinator for international energy affairs in the Obama administration. “The rise in domestic production will not diminish in any way the need for the US to retain global reach, particularly in the Middle East.”
©2012/THE NEW YORK TIMES
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First Published: Wed, Nov 14 2012. 05 41 PM IST
More Topics: energy | US | shale | International Energy Agency | oil |
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