What others say: Energy policy impacts global relations

  • Sunday, October 12, 2014 3:23pm
  • Opinion

The net U.S. energy import ratio (imports minus exports) was 30 percent at its peak just nine years ago. In 2012, the figure was 16 percent; by 2040 it could be as low as 4 percent.

John Manzella, writing in his Manzella Report, says this trend has profound implications on global relationships. Some major sources of energy exports to the United States — Russia, Venezuela and Saudia Arabia — will be hurt economically. With falling U.S. dependency on Middle Eastern oil, the world’s largest consumer of energy will have increasing influence in the Mideast.

That consumer is China.

The net import changes have enormous potential to help the U.S. economy. Policy changes we support, including lifting the ban on crude oil exports from the United States and fast-tracking liquefied natural gas terminal permits, would make this even more true.

Aside from the obvious benefit to the American economy, what will the moving energy picture mean for geopolitics? It may be trite to say that energy is politics and politics is energy, but the truth of the statement is self-evident.

A decline in dependency on Russian oil and gas among European nations would decrease Vladimir Putin’s ability to behave badly. Countries dependent on Russian energy are reluctant to criticize Putin’s moves.

What happens in China won’t stay in China. If the Chinese economy expands and taps more and more Mideast oil, exporting countries will prosper and energy prices will be higher. But if China can’t supplant the U.S. as a major importer of Mideast oil, Manzella said, “global energy prices may remain relatively low or not rise to levels projected in the past.”

We’re already seeing the downside of recent lower oil prices in Oklahoma. Many of the publicly traded Oklahoma oil and gas producers saw their share prices drop in the third quarter, by as much as 40 percent.

This bad news should be tempered by the realization that, long term, the United States is better off when it’s less dependent on Mideast oil. And the world is better off if Russia loses leverage because of lower energy prices — and/or if U.S. exports supply some of what Russia’s been shipping to Europe.

The U.S. energy boom has wiped out predictions made not so long ago that American demand for energy would continue to increase its vulnerability to unstable governments halfway across the globe. Last year, domestic energy production fulfilled nearly 85 percent of U.S. demand. The nation’s superior and pioneering use of new drilling technologies has tapped vast reserves of oil and gas. Can’t those same technologies be used elsewhere in the world and erase the advantage the United States now has?

Perhaps, Manzella says, but in the short term the U.S. energy boom is unlikely to be replicated. America has an edge, he says, because of the huge base of shale/tight oil plays, private ownership of mineral rights, thousands of independent drilling companies, a large census of drilling rigs and “strong capital markets that fund new ventures.”

In England, where on-shore energy reserves may be abundant, individuals don’t own mineral rights. Surface landowners are loath to accept disruptive drilling activity that won’t benefit them financially.

The wild card in the advance to an extremely low U.S. net import rate over the next 25 years is government policy — in particular, potential restrictions on hydraulic fracturing and a crackdown on how oil is transported.

Perhaps of greater concern, long term, is China. It’s become the largest importer of Mideast oil. What will the Chinese do militarily to safeguard their oceanic pipeline of energy supplies?

The bottom line, in Manzella’s view, is that although America is becoming more energy secure, “subsequent events could make the global environment more volatile.”

That’s all the more reason to encourage domestic energy production with rational and realistic federal energy and environmental policies.

— The Oklahoman, Oklahoma City, Oklahoma,

Oct. 7

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