When then-US president Richard Nixon proclaimed in the early 1970s that he wanted to secure national energy independence, the US imported a quarter of its oil. By the decade’s end, after an Arab oil embargo and the Iranian Revolution, domestic production was in decline, the US was importing half of its petroleum needs at 15 times the price and it was widely believed that the country was running out of natural gas.
Energy shocks contributed to a lethal combination of stagnant economic growth and inflation, and every US president since Nixon likewise has proclaimed energy independence as a goal. However, few people took those promises seriously.
Today, energy experts no longer scoff. By the end of this decade, according to the US Energy Information Administration, nearly half of the crude oil that the US consumes will be produced at home, while 82 percent will come from the US side of the Atlantic. Philip Verleger, a respected energy analyst, says that, by 2023, the 50th anniversary of Nixon’s “Project Independence,” the US will be energy independent in the sense that it will export more energy than it imports.
Verleger says that energy independence “could make this the New American Century by creating an economic environment where the United States enjoys access to energy supplies at much lower cost than other parts of the world.”
Already, Europeans and Asians pay between four and six times more for their natural gas than Americans do.
What happened? The technology of horizontal drilling and hydraulic fracturing, by which shale and other tight rock formations at great depths are bombarded with water and chemicals, has released major new supplies of both natural gas and oil. The US’ shale-gas industry grew by 45 percent annually from 2005 to 2010, and the share of shale gas in the US’ overall gas production grew from 4 percent to 24 percent.
The US is estimated to have enough gas to sustain its current rate of production for more than a century. While many other nations also have considerable shale-gas potential, problems abound, including water scarcity in China, investment security in Argentina and environmental restrictions in several European countries.
The US economy will benefit in myriad ways from its change in energy supply. Hundreds of thousands of jobs are already being created, some in remote, previously stagnating regions. This additional economic activity will boost overall GDP growth, yielding significant new fiscal revenues. In addition, the lower energy-import bill will cause the US’ trade deficit to narrow and its balance-of-payments position to improve. Some US industries, such as chemicals and plastics, will gain a significant comparative advantage in production costs.
Indeed, the International Energy Agency estimates that the additional precautions needed to ensure shale-gas wells’ environmental safety — including careful attention to seismic conditions, properly sealed shafts and appropriate waste-water management — add only about 7 percent to the cost.
However, with respect to climate change, the effects of greater reliance on shale gas are mixed. Because natural-gas combustion produces fewer greenhouse gases than other hydrocarbons, such as coal or oil, it can be a bridge to a less carbon-intensive future. However, the low price of gas will impede the development of renewable energy sources unless accompanied by subsidies or carbon taxes.
At this stage, one can only speculate about the geopolitical effects. Clearly, the strengthening of the US economy would enhance its economic power — a scenario that runs counter to the current fashion of portraying the US as being in decline.
However, one should not jump to conclusions. A balance of energy imports and exports is only a first approximation of independence. Global interdependence involves both sensitivity and vulnerability. The US may be less vulnerable in the long run if it imports less energy, but oil is a fungible commodity and the US economy will remain sensitive to shocks from sudden changes in world prices.
In other words, a revolution in Saudi Arabia or a blockade of the Strait of Hormuz could still inflict damage on the US and its allies. So, even if the US had no other interests in the Middle East, such as Israel or nuclear non-proliferation, a balance of energy imports and exports would be unlikely to free the US from military expenditures — which some experts estimate run to US$50 billion per year — to protect oil routes in the region.
At the same time, the US’ bargaining position in world politics should be enhanced. Power arises from asymmetries in interdependence. You and I may depend on each other, but if I depend on you less than you do on me, my bargaining power is increased.
For decades, the US and Saudi Arabia have had a balance of asymmetries in which we depended on them as the swing producer of oil, and they depended on us for ultimate military security. Now the bargains will be struck on somewhat better terms, from the US’ point of view.
Likewise, Russia has enjoyed leverage over Europe and its small neighbors through its control of natural gas supplies and pipelines. As North America becomes self-sufficient in gas, more from various other regions will be freed up to provide alternative sources for Europe, thereby diminishing Russia’s leverage.
In East Asia, which has become the focus of US foreign policy, China will find itself increasingly dependent on Middle Eastern oil. US efforts to persuade China to play a greater role in regional security arrangements may be strengthened, and China’s awareness of the vulnerability of its supply routes to US naval disruption in the unlikely event of conflict could also have a subtle effect on each side’s bargaining power.
A balance of energy imports and exports does not produce pure independence, but it does alter the power relations involved in energy interdependence. Nixon got that right.
Joseph Nye, a former US assistant secretary of defense, is a professor at Harvard University.
Copyright: Project Syndicate
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry