U.S. Taps New Energy Sources, And Potential Geopolitical Clout

Apr 4, 2014
Originally published on April 4, 2014 5:18 pm

The recent oil and natural gas boom in the U.S. is paying major dividends for Washington's geopolitical clout. Thanks to hydraulic fracturing, the U.S. is awash in domestic energy, which is having a ripple effect globally.

If you want to gauge one effect of this newfound energy wealth, you don't have to look any further than the current crisis between Russia and Ukraine, says Michael Levi, a senior fellow for energy and the environment at the Council on Foreign Relations.

He says the U.S. would be reacting very differently to what's happening now if it was still a big natural gas importer. There's concern Moscow could cut natural gas supplies to the Ukraine, which, in turn, would disrupt the flow to much of Europe.

Even five years ago, Levi says, Washington would have been alarmed that European nations could turn to U.S. suppliers, driving up the cost.

"We would be asking ourselves with every policy option we face: Will this disrupt markets and come back to hurt the U.S. economy? We're not asking ourselves that question, because we're not dependent on imports," he says. "That's a surprise — and a good one."

The shift from dependency toward self-sufficiency came extraordinarily fast, says Jason Bordoff, director of Columbia University's Center on Global Energy Policy and a former senior energy adviser to President Obama.

A few years ago, the U.S. was expecting to be dependent on natural gas imports from countries such as Qatar. In early 2010, Bordoff says, the administration began to grasp the implications of the oil and gas boom as a result of fracking, the controversial method of pumping water and chemicals deep into shale deposits to release oil and natural gas.

"This is a really historic opportunity for the country to dramatically reduce our dependence on energy imports and increase economic activity," Bordoff says, though he adds that the U.S. is still learning and understanding what impact it has on foreign policy and diplomacy. "But I do think the U.S. is engaging diplomatically from a position of greater strength now."

This is a far cry from 40 years ago when Arab oil producers, angry over Washington's military support for Israel during its 1973 war with Egypt and Syria, cut off oil exports to the U.S. Gas prices skyrocketed, there were long lines at American filling stations, and the country's economy took a downturn.

These days, the global oil market is more integrated, and the problem is volatility of prices rather than supply. The U.S. is still one of the largest importers of oil in the world — and thus still vulnerable to global disruptions.

That's not the case with natural gas, the price of which is set regionally. Natural gas costs half as much in the U.S. as it does in Europe, and a quarter of the cost in Asia.

Bruce Jones, director of the Brookings Institution's Project on International Order and Strategy, says these prices will give the U.S. a competitive edge when the first exports of American liquefied natural gas, or LNG, are released in a couple of years, particularly in energy-starved emerging markets.

"The important thing to understand is the huge boom in American supply ... is matched by an equal revolution in demand from Asia," he says.

"China has a huge appetite for energy now, and that's a source of real vulnerability for China," Jones says. "India will start to import more and more energy as well."

It's not clear whether China will want to import natural gas from the U.S.

Almost half of China's energy comes from fragile states such as Angola and Sudan. As a result, Jones says, the U.S. could be seen as a stable energy supplier.

But he says Washington will have to figure out if it's only going to export natural gas to its allies.

"Are we going to try to use our energy supply as a source of pressure, as a kind of political weapon the way the Russians have tried to do? Or are we going to use it a source of strategic reassurance and stability in these evolving relationships?" he says.

Bordoff, the former Obama energy adviser, says the glut of natural gas gives the U.S. more geopolitical strength in a world hungry for energy even before the first shipment of LNG has been released.

"Foreign countries, when they visit Washington now and meet with officials, they're talking about energy, trade and access to U.S. natural gas and potentially increasingly in oil as well," he says.

It's also an item that's high on the agenda for Asian countries and Europeans in trade negotiations now. Bordoff says foreign officials also want access to the American companies whose technology and innovation led to the shale gas and oil boom in the U.S.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

While Russia may be overly reliant on its energy exports, the U.S., until recently, expected to have to import much of its oil and natural gas. Now, the U.S. finds itself awash in shale gas, thanks in large part to hydraulic fracturing or fracking. That's the controversial method of pumping water and chemicals deep into shale deposits to release natural gas.

While fracking has its opponents, there is little question that the wealth of newfound domestic energy is changing America's geopolitical landscape. NPR's Jackie Northam reports.

JACKIE NORTHAM, BYLINE: If you want to gauge one effect of the natural gas boom here in the U.S., you don't have to look any further than the current crisis between Russia and Ukraine.

MICHAEL LEVI: The United States has far more freedom of action in the current conflict with Russia than it would have had we not had this natural gas boom.

NORTHAM: Michael Levi, a senior fellow for energy and the environment at the Council on Foreign Relations, says if the U.S. was still a big natural gas importer, it would be reacting very differently to what's happening now. There's concern Moscow could cut natural gas supplies to the Ukraine, which, in turn, would disrupt the flow to much of Europe. Levi says even five years ago, Washington would have been alarmed that European nations could turn to U.S. suppliers, driving up the cost.

LEVI: We would be asking ourselves with every policy option we face: Will this disrupt markets and come back to hurt the U.S. economy? We're not asking ourselves that question, because we're not dependent on imports. And that's a surprise, and a good one.

NORTHAM: The shift from dependency toward self-sufficiency came extraordinarily fast, says Jason Bordoff, director of Columbia University's Center on Global Energy Policy and a former senior energy adviser to President Obama. Bordoff says, in early 2010, the administration began to grasp the implications of the oil and gas boom as a result of fracking.

JASON BORDOFF: I think we're still learning and understanding exactly what impact it has in foreign policy and diplomacy. But I do think the U.S. is engaging from a position of greater strength now.

NORTHAM: This is a far cry from 40 years ago.

(SOUNDBITE OF EXPLOSIONS)

NORTHAM: In 1973, Egypt and Syria went to war with Israel. Arab oil producers, angry over Washington's military support for Israel, cut off oil exports to the U.S. President Richard Nixon warned the country about skyrocketing gas prices and long lines at the pump.

PRESIDENT RICHARD NIXON: We are heading toward the most acute shortages of energy since World War II.

NORTHAM: Nowadays, the global oil market is more integrated, and the problem is volatility of prices rather than supply. The U.S. is still one of the largest importers of oil in the world, and so it's still vulnerable to global disruptions. Not so with natural gas, whose price is set regionally. It's half the cost here as it is in Europe, one quarter of the cost it is in Asia.

Bruce Jones with the Brookings Institution says this will give the U.S. a competitive edge when the first exports of American liquefied natural gas, LNG, are released in a couple of years, particularly in Asia.

BRUCE JONES: China has a huge appetite for imported energy now, and that's a source of real vulnerability for China and they're acutely conscious of it. India will start to import more and more energy as well. It's gonna be an ever larger consumer of energy.

NORTHAM: But Jones says Washington will have to figure out if it's only going to export natural gas to its allies.

JONES: Are we going to try to use our energy supply as a source of pressure, as a kind of political weapon the way the Russians have tried to do? Or are we going to use it a source of strategic reassurance and stability in these evolving relationships?

NORTHAM: Former Obama energy adviser Bordoff says the glut of natural gas gives the U.S. more geopolitical strength in a world hungry for energy, and that's before the first shipment of LNG has been released.

BORDOFF: Foreign countries, when they visit Washington now and meet with officials, they are talking about energy trade and access to U.S. natural gas and potentially increasingly in oil as well.

NORTHAM: Bordoff says foreign officials also want access to the American companies whose technology and innovation led to the natural gas and oil boom in the U.S. Jackie Northam, NPR News, Washington.

(SOUNDBITE OF BELL)

MELISSA BLOCK, HOST:

You're listening to ALL THINGS CONSIDERED from NPR News. Transcript provided by NPR, Copyright NPR.