The first part of the America's Energy, America's Choice report discussed the US economy and jobs.
The second part of the report looks at a secure energy future for the USA.
Choosing a secure energy future
In the past, the US has always encouraged energy conservation and the adoption of alternative fuels to make the country less dependent on foreign oil. Now however, the US is in a position to become energy self sufficient in the not too distant future. America, with the shale revolution is now in a position to join the Middle East as a primary producer of oil and could mean that US geopolitical policy can be detached from oil. The Iran embargo is the most recent example of this which was indeed made possible by the increased levels of US domestic oil production.
America’s relationships with its allies is also likely to be cemented by the new findings. Natural gas could be the key to attracting trade with some European nations as well as Asian countries such as Japan.
The US was in the middle of a crippling oil embargo in the 1970s which is a starkly different from the US we have today. The OPEC embargo made oil prices jump dramatically overnight and was thought to be one of the causes of the 1973 recession. The Strategic Petroleum Reserve was introduced to prevent this happening again and having such an impact on the US, however, dependence on foreign oil continued to increase until the unconventional resources were utilised more and more.
According to the API report, ‘America’s oil imports have actually been declining since 2005, when we imported about 60% of the oil we consumed, and fell to roughly 40% in 2012.’ The security of America’s reserves are confirmed by the numbers in the report, ‘an estimated 2335 trillion ft3 of technically recoverable gas and 233 billion bbls of technically recovered oil. With these figures and the help of Canadian resources, the API believes that North America could be 100% liquid fuels self sufficient by 2024.
The Middle East has long been the number one region for oil production with four of the world’s top 10 producers in the region. However, now the US is destined to become a member of this elite by 2015. Yet, what does this mean for the rest of the world. As America becomes more self sufficient, other nations will need to replace the US as an export partner. To 2035, global energy demand is expected to grow by more than 33% with developing markets being 90% of this increase. The Middle East and Latin America are likely to be the two regions most impacted by this rise in American oil production.
For the Middle East, as the US becomes more self sufficient, the OPEC nations will have to seek out alternative areas of growing demand. Asia and the Southeast Asian nations are currently thought to be the most attractive. Also, the report says that ‘the influence of OPEC nations over the world oil market and US foreign policy could begin to wane.’
When it comes to Latin America, the growth in oilsands production in Canada and shale in the US will help fill the gaps left by declining production from Venezuela and Mexico.
Natural gas geopolitics
The US is also producing more natural gas than ever before. The US is also likely to become a stable source of supply for Europe and Asia however; international trade must be a prominent part US policy for this to happen.
Behind the US, Russia stands as the second largest producer of natural gas with 2010 export figures looking like this, ‘about 37% of Russia’s total natural gas exports went to customers in the Commonwealth of Independent States, 31% went to Eastern European countries, 27% was transported to Germany and the remaining amount went to Turkey, Italy and France.
LNG is something the US needs to take seriously if it wishes to fully utilise international trade and the export market. As of 1st December last year, five export terminals had been approved to non-free trade agreement nations but there are apparently 20 more still waiting for a decision. The problem is, according to the report ‘the longer US policymakers wait to approve these applications to export LNG, the greater the chance that America will miss its opportunity to achieve the associated economic benefits.’ Job growth is expected from LNG terminals as well as GDP gains.
Canada’s oilsands cannot be ignored as a source of self sufficiency for North America and Canada has long been an important partner to the US. In 2012 alone, Canada was responsible for more than quarter of the US’ oil imports. The API believe that the Keystone XL pipeline is the next step in advancing the relationship between the two nations. ‘Buying oil from Canada makes sense, because for every US dollar spend on Canadian products, such as oil, up to 89 cents is returned to the US in the form of Canadian imports of US goods,’ according to the API report.
Energy security in numbers
- 452 000; potential net US job growth resulting from LNG exports by 2035.
- US$ 73.6 billion; potential GDP gains from LNG exports by 2035.
- 500 000; the number of new jobs supported by new oilsands developments within 25 years.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/13012014/a_secure_energy_future_api36/