Thus far, the improved domestic and international position of the United States resulting from the energy boom has been largely the product of markets. Although the United States is the epicenter of this new abundance, American policymakers as a whole have not yet fully embraced a mind-set that labels energy a strategic asset. For decades, they were repeatedly reminded—by the intelligence community, academe, think tanks, and their own daily experience—that the United States depended on imported energy and that energy markets favored producers over consumers. It was gospel that the American need to access to reliable and affordable energy was a major strategic vulnerability. The energy boom has transformed realities faster than policymakers have been able to change their own mind-sets.
There is some evidence that policymakers are beginning to adapt. In terms of rhetoric, it is still possible to find the occasional policymaker warning against the evils that imported oil brings to the United States. Yet, some policymakers have at least identified the foreign policy opportunity presented by the boom. In 2013, National Security Advisor Tom Donilon gave a speech at Columbia University claiming, “America’s new energy posture allows us to engage from a position of greater strength.” For Donilon, energy was a new foreign policy asset for the United States. Similarly, the National Security Strategy of the Obama Administration, released in February 2015, stated that “America’s energy revival is not only good for growth, it offers new buffers against the coercive use of energy by some and new opportunities for helping others transition to low-carbon economies.”
While these acknowledgments have been largely limited to generalities or conventional wisdoms—which, as we know, tend to be off the mark—some actions have also been taken to better align U.S. interests with new energy realities. The historic lifting of the forty-year-old ban on U.S. oil exports at the end of 2015 was largely done for economic reasons. Yet in the flood of justifications for the move, some advocates highlighted geopolitical benefits. For example, the Bipartisan Policy Center asserted that if the ban were lifted “foreign crude oil exporters will lose market share and political power.”
The United States is still in a nascent state in terms of truly understanding the energy boom as a gift to American foreign policy. U.S. policymakers first need to appreciate the vast strategic benefits that the United States has already reaped from the boom. One way is to imagine the American position in a world without this boom. With much higher oil prices and the absence of a growing energy sector from 2009 to 2014, the Great Recession would have been much harder to overcome. In 2007, the U.S. government expected net crude oil imports to continuously increase. Absent the new energy abundance, the volume of U.S. imports could have reached all-time highs, even if we take into account that higher prices would have led to Americans driving smaller cars and consuming less oil. Moreover, the increase in American energy imports would have been coming at least in part from less-than-savory sources. For instance, in a world where producers still had the upper hand, the United States might have well been heavily dependent on imports of Russian natural gas.
Exactly how this energy picture would have influenced American foreign policy is impossible to ascertain, but some questions about what might have been are worth considering. If Russia had been an important natural gas supplier to America, could have Washington taken the same strong stand against Russia in the wake of its annexation of Crimea? How would Europe have reacted had natural gas markets been tighter than ever, rather than being increasingly flush with supplies from other sources? If Russia was the only viable source of the natural gas needed to sustain Chinese growth, would Beijing have been more vocally supportive of Russia’s foreign policy adventurism? If natural gas had not been available to substitute for nuclear power in the wake of the Fukushima disaster, would Japan have maintained its political stability in the face of massive energy shortages? How much stronger would the voice of Venezuelan president Nicolás Maduro be today in the region were oil prices at significant highs? Would President Obama have been able to pursue his opening with Cuba had Havana not been worried about the economic viability of its near only patron, Caracas? Would the United States have been able to marshal support for economic sanctions against Iran with oil prices at record levels? If not, would the Iranians have come to the negotiating table where the nuclear deal was signed? What would have been the eventual fate of American partners in the Gulf had economic pressures not compelled them to take the hard decisions on reform? Would the United States have been in a position in 2015 to credibly present a plan to tackle carbon emissions and motivate the world to follow had natural gas been both expensive and imported? The previous chapters describe in detail my answers to each of these questions, but the macro answer is a generalized “no.” Through multiple paths, the new energy abundance—often in conjunction with other forces and impetuses—has produced outcomes beneficial to the United States that might not have otherwise materialized.
We do not and cannot know all the contours of the energy future. But the United States has a real opportunity—and even an obligation—to take advantage of this moment to craft its policies and strategies to ensure it harnesses the new energy abundance to advance its interests and those of its friends and allies. Few countries ever see their strategic situation improve so suddenly and even fewer policymakers are successful in maximizing the opportunity such a shift presents. In his book, A World in Disarray, Richard N. Haass, the president of the Council on Foreign Relations, laments how the United States did not fully capitalize on the new circumstances created by the collapse of the Soviet Union in 1991 to build a new global order. Imagine, therefore, how much harder it will be for current policymakers to seize upon a geopolitical moment created by markets, the internal workings of which are often obscure to the foreign policy establishment.
The Trump Administration clearly views the energy boom as having enormous value to the United States and that in itself is a welcome orientation. As evident by both its rhetoric and its early policy moves, the new administration is placing a high priority on removing impediments to greater oil and gas production and putting in place new infrastructure to move these resources once produced. On the whole, these inclinations are reasonable and are a positive departure from a national conversation that was moving in the opposite direction. Yet, the lens from which the administration appears to be viewing the energy boom is far too narrow and, as a result, carries some significant risks.
Rather than seeing U.S. oil and gas production as an end in itself, or at best a vehicle for more jobs in the American economy, U.S. policymakers should adopt a different outlook. They should view the boom as a means of maximizing strategic value and benefit to the United States and its partners and increasing overall American standing in the world. Adopting such a perspective would result in a somewhat different and broader set of policy prescriptions. More specifically, U.S. policymakers should embrace an expansive range of actions that can roughly be grouped into four categories: sustaining the boom at home; using America’s new energy position to advance wider, non-energy foreign policy and national security goals; taking advantage of the new strategic landscape created by the energy boom to advance American interests; and anticipating and planning for new challenges that may arise as a result of the new energy landscape.
Sustaining the Boom at Home
While focusing on increased domestic oil and gas production cannot be the entirety of the U.S. policy approach, it is certainly an important element of the equation if America is to maximize the strategic value of the boom. As explored throughout this book, some of the geopolitical benefits of America’s new energy prowess come simply from the changes that greater quantities of American oil and gas have instigated through market forces. OPEC’s influence over oil markets—and therefore global economic growth—has been much diminished, in part by the quantities of tight oil produced in the United States, but more importantly due to the new business model tight oil has introduced. Similarly, the American shale gas bonanza has b
een a major factor in changing gas markets and diminishing the geopolitical power of producers such as Russia; these developments are partially a result of how the shale boom both directly and indirectly increased the volume of LNG on global markets and the terms though which consumers can gain access to this energy.
As a result, a comprehensive U.S. strategy to take advantage of the new energy abundance would include measures to boost and sustain tight oil and shale gas production. As discussed elsewhere, some reform of onerous or duplicative regulations would be beneficial. Also needed is a shift in the weight of who regulates oil and gas production from the federal government to the state level, at least where the capacity to do the job well exists. State officials are likely better positioned to regulate local production, given that they are more sensitive to local conditions. Finally, the United States is in dire need of more infrastructure to transport oil and gas to demand centers and export terminals.
As important as these measures are, unfettered oil and gas development may ultimately go against the broader goal of amplifying America’s strategic benefit from the boom—and even compromise the more narrow goal of maximizing oil and gas production. This is because producers must be conscious of maintaining the social license to operate; if they lose the trust of the communities in which they work, their efforts to produce will be severely hampered, even if their activities are legal. As demonstrated in Europe, and in locales far closer to home, public support for fracking is already on a thin margin in many places. Environmental or other accidents could tip a fragile acquiescence in favor of allowing oil and gas companies to operate to a stronger consensus against it.
Sustaining the boom at home will also require U.S. policymakers to take a hard look at a range of non-energy national security and foreign policy approaches. Although often overlooked, the fortunes of America’s own energy producers are dramatically affected by what happens in other domains. In fact, policymakers may find that the largest impediments to U.S. oil and gas expansion are not regulations, but policies in other areas that, on the surface, appear to be unrelated to energy. For example, the American provision of global public goods in the protection of sea lanes from the Gulf to the Pacific underpins robust global trade in energy. Any suggestion that the United States will or could withdraw from these responsibilities could severely hamper these flows, which now include exports of American oil and gas. In addition, both energy trade and global energy demand will be adversely affected by a retreat from the embrace of free trade—a ballast to worldwide economic growth for decades. And finally, America’s own energy fortunes will be affected by policies espoused toward individual countries, Canada and Mexico in particular. Where some may not see the connection, a U.S. approach that destabilizes Mexican politics and creates new barriers to trade and investment between the United States and its southern neighbor will crimp America’s own energy boom—and any hope Washington might have of reaching the most meaningful form of energy self-sufficiency: North American energy independence.
Using Energy as a Means to Achieve Wider Goals
The second domain in which U.S. policymakers need to challenge their thinking is one in which America’s new energy situation is a tool to attain non-energy pursuits. Here the possibilities are large and span the globe.
First, the United States should prioritize maintaining a position of global leadership on the issue of tackling climate change. The Obama administration leveraged the decline in U.S. carbon emissions resulting from the shift from coal to less emissions-intensive natural gas to reassert American influence on an issue of great importance to a large number of countries around the world. Even putting the importance of mitigating climate risks aside, the United States should treasure this source of soft power, particularly in light of the growing difficulties associated with wielding hard power. Ideally, Washington would take the lead, as the federal government not only has the most influence on policy, but is best positioned to generate and make use of soft power. However, states, localities, corporations, and even individuals can help substitute for federal action if necessary.
Second, the United States should use its energy instruments to further integrate its economy with those of Canada and Mexico. In truth, the three countries have already reached an extraordinary level of interdependence, but energy offers the opportunity to take this integration further, particularly between the United States and Mexico. Not only will this be good for U.S. natural gas exports, given that Mexico is by far the largest importer of this American commodity. But the United States and Mexico have almost a unique economic relationship in which they literally build products together. As a result, supporting a prosperous Mexico, not a failing one, is unequivocally good for the American economy.
Third, America can also reap greater gains by reinvigorating earlier efforts to help other countries with unconventional oil and gas reserves to develop them. While initial endeavors by non-U.S. countries to unleash their own oil and gas potential proved disappointing, such efforts are by no means over. Vast quantities of oil and gas exist that will be tapped in the years ahead, although doing so may require approaches that vary significantly from those pursued by America. The United States should be at the forefront of helping the countries that desire assistance manage this process. Programs under the Obama administration to provide this support were popular, but lost steam in large part due to environmental sensitivities. Now there seems to be little funding for such efforts. But these programs should be revived and, when they are, they should be evaluated on a broader basis than whether the country in question develops its oil and gas. Instead, their assessment should take into account the extent to which they provide critical avenues for advancing U.S. ideas related to transparency, open markets, and anti-corruption.
Fourth, the United States should look for ways in which its good energy fortunes can help ensure that China realizes its objective of increasing the role of natural gas in its domestic energy mix. One may be tempted to think that if China fails to reach such goals, renewable energies will be the beneficiaries. However, if natural gas does not permeate the Chinese economy in a larger way, it is more likely that China will continue its heavy dependence on coal. Whether China accelerates its shift away from coal is critical both to the fate of global efforts to tackle climate change and to the Chinese government’s ability to maintain stability in that vast country. It is in the interests of the United States that China is successful in both domains. Helping China realize greater natural gas use will not necessarily require huge policy shifts on the part of the United States; the impact of U.S. shale on global markets is already very positive. But policymakers could reinforce these positive trends in a variety of ways, from publicly welcoming LNG flows between the United States and China, to removing any hurdles to Chinese companies directly importing U.S. gas, and reexamining any policies that could stand in the way of China adapting and utilizing technologies to produce shale gas and tight oil itself.
Some foreign policy analysts prefer that U.S. companies not help China address its energy vulnerability. For them, this is particularly the case if, as a producer, the United States can leverage China’s vulnerability for its own diplomatic ends. Ultimately, however, Americans are better off realizing that the more energy self-sufficient China becomes, the less it needs to engage in problematic policies abroad, such as partnering with Russia. The more confident China is in the current order managing its energy needs—whether in the global market or through its own production capacity—the less need it will feel to build alternative institutions.
The fifth way in which specific energy tools can help the United States advance broader foreign policy goals is by shoring up alliances and building new, more pro-America centers of power abroad. For instance, in Latin America, the energy boom has helped create further opportunities for the United States, this time in the Caribbean. The new energy abundance is but one factor that has pushed Venezuela and its Bolivarian government close to collapse. A destabilized, poor Venez
uela has already begun to curtail Petrocaribe, its program that provides cheap heavy fuel oil to countries in Central America and the Caribbean in exchange for political support. As this program fizzles out, the United States and others have the chance to help countries in this region find energy substitutes for Venezuela’s oil that are not only cleaner, but also come without political expectations. More generally, America’s status as a natural gas exporter is helping strengthen U.S. allies from Europe to Japan—not by fully replacing Russian gas, but by providing another source of diversity of supply and by shifting the balance in favor of consumer countries against traditional producer ones.
Finally, U.S. policymakers should consider the extent to which they want to use certain energy instruments—such as approvals for the export of natural gas or a revamped and reconsidered Strategic Petroleum Reserve—to promote foreign policy interests. Doing so would not be a complete departure from past practices; the United States has been an avid implementer of sanctions against oil exporters in efforts to combat terrorism and constrain proliferation and advance other goals. Nevertheless, the United States will need to carefully balance its commitment to free and smoothly functioning energy markets—which has been so critical to U.S. energy security—with the opportunity to exert geopolitical leverage. While it will be tempting to deploy these new or revised tools in an effort to advance an international agenda, the United States will probably find that maintaining well functioning energy markets delivers greater benefits to it on the whole.
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