America’s relationship with the Middle East’s energy resources is changing as U.S. domestic oil production continues to grow. A combination of hydraulic fracturing, horizontal drilling and advanced seismic technologies have contributed to the largest annual growth in U.S. crude oil production since Colonel Edwin Drake first drilled for oil in Titusville, Pennsylvania in 1859. Most of the crude oil is coming from shale formations in North Dakota and Texas – what we call “light tight oil.” Since 2010, the United States has, on average, increased monthly crude oil production by 50,000 barrels a day.
Not all of this U.S. light tight oil is displacing Middle East crude, of course. A number of factors matter, most importantly the crude oil grade. The United States is producing light tight oil, that is, low-density crude oil, whereas the United States imports heavier crudes from the Persian Gulf, including from Saudi Arabia. Moreover, U.S. refineries have been increasingly geared to absorb heavier crudes, from the Persian Gulf, but more so from Canada, Mexico and Venezuela.
Nevertheless, the glut in U.S. crude oil production and declining demand for oil (a consequence of slow economic growth and more fuel efficient vehicles) have contributed to a powerful notion that the United States is relying less and less on oil from the Persian Gulf and could conceivably help wean America off crude oil imports from the Middle East entirely (a debatable point).
Whether or not one believes that the United States can break the tether to Middle East oil, U.S. allies and partners in the Persian Gulf are increasingly nervous about America’s long-term security commitment to the region. After all, if the United States no longer relies on energy from the region, why should American foot the bill for protecting the sea lanes – that backbone of the crude oil trade in the region – or so the narrative goes.
The United States has a number of stakes in stability of the Persian Gulf oil trade even if it does rely less on oil from the region. Supply shocks will contribute to higher global oil prices, which will be felt at home. Moreover, supply shocks are damaging to our allies, particularly those in East Asia that have grown more dependent on oil and gas from the Middle East and North Africa. But there are other legitimate security concerns as well, which were not far from General Martin Dempsey’s mind when he responded to a question on Monday about how the American energy revolution will impact U.S. interests and presence in the Persian Gulf. Here’s what the Chairman of the Joint Chiefs of Staff said:
On Thursday, our friends Caitlin Werrell and Francesco Femia of the Center for Climate & Security will be at the Center for American Progress to release a new study on “Climate Change and the Arab Spring” that “outlines the complex pressures exerted by the effects of climate change on the convulsions which swept through the Middle East in 2010 and 2011, exploring the long-term trends in precipitation, agriculture, food prices, and migration which contributed to the social instability and violence which has transformed the region, and offering solutions for progress.”
The study builds off a seminal piece of work that Werrell and Femia published last February on how climate change and drought have influenced the social and political dynamics underpinning the revolution in Syria.
“Syria’s current social unrest is, in the most direct sense, a reaction to a brutal and out-of touch regime and a response to the political wave of change that began in Tunisia early last year,” they wrote. “However, that’s not the whole story.”
“The past few years have seen a number of significant social, economic, environmental and climatic changes in Syria that have eroded the social contract between citizen and government in the country, have strengthened the case for the opposition movement, and irreparably damaged the legitimacy of the al-Assad regime,” they wrote in February 2012. “If the international community and future policy-makers in Syria are to address and resolve the drivers of unrest in the country, these changes will have to be better explored and exposed.”
Their study was picked up by The New York Times’ Tom Friedman, who noted in April 2012 that “The Arab awakening was driven not only by political and economic stresses, but, less visibly, by environmental, population and climate stresses as well.
“If climate projections stay on their current path, the drought situation in North Africa and the Middle East is going to get progressively worse, and you will end up witnessing cycle after cycle of instability that may be the impetus for future authoritarian responses,” Femia told Friedman.
Friedman will join Werrell and Femia, along with former State Department Director of Policy Planning Anne-Marie Slaughter, on Thursday at the Center for American Progress for what is sure to be an informative discussion.
Check out the event details and RSVP here.
The International Energy Agency (IEA) published its new World Energy Outlook on Monday, projecting the United States to become the world’s largest oil producer as early as 2020, overtaking Saudi Arabia and Russia for the top spot. According to the IEA’s analysis, the United States may even become a net exporter of oil by 2035. The American energy revolution is driven in part by technological developments that have bolstered shale gas and tight oil production, as well as decreased demand for oil due to higher fuel efficiency standards in U.S. vehicles, according to the IEA.
The analysis should be taken with a grain of salt, as it is difficult to project as far forward as 2035 with any meaningful amount of certainty. For example, some of the tight oil projects in the United States may depend on a global price of $70 a barrel in order to remain economically viable. Some analysts are projecting prices to fall as low as $50 a barrel, which could drive developers away from investing in projects that require $70 a barrel to breakeven, upsetting some of the oil production estimates.
Nevertheless, it is possible to make some reasonable assumptions about what the American energy revolution could mean for U.S. policymakers charged with navigating this complex and ever-changing landscape. Here are a couple of things to watch for, in no particular order:
The pace of tight oil production will continue to be dynamic. U.S. tight oil production may speed up or slow down depending on the U.S. energy market. There is some reason to believe that tight oil production is moving faster in the United States than some expected because of depressed natural gas prices. Low natural gas prices have contributed to poor returns on investment for some shale gas producers, with some producers choosing to develop tight oil deposits instead of expanding shale gas production in order to earn a profit. If natural gas prices rebound in the near term though, tight oil production could slow down as development shifts back to a more profitable natural gas sector.
America’s relationship with Middle East energy resources is changing. Technological breakthroughs in hydraulic fracturing (or “fracking”), renewed drilling in ultra-deep waters in the Gulf of Mexico and, soon, drilling in the Arctic Circle are re-energizing U.S. domestic petroleum production and shrinking the demand for foreign petroleum imports. Meanwhile, oil and natural gas production in the Americas — from Canada in the North, to Brazil and Colombia in the South — are beginning to displace U.S. reliance on Middle East oil. These emerging energy trends will affect America’s relationship with the Middle East in important ways. But do not expect a fundamental shift in U.S. foreign policy in the region any time soon.
The Carter Doctrine and U.S. Energy Interests in the Middle East
The United States has had historical concerns about assured access to Middle East petroleum resources that have shaped U.S. involvement in the region. President Jimmy Carter famously declared in his 1980 State of the Union address that the United States reserved the right to use force to protect the flow of petroleum from the Middle East to the United States: “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”
Although U.S. interests in the Middle East have become more complex since the Carter administration – to include concerns about violent extremism, human rights abuse and nuclear proliferation – it has become almost axiomatic to say that U.S. involvement in the Middle East has been tied solely to concerns about securing access to the region’s petroleum resources. Whether or not one buys that, the perception that U.S. interests in the Middle East are tied solely to concerns about energy supplies raises some questions about whether the United States will lose interest in the Middle East as it becomes less reliant on energy imports from the region.
Continue reading the post at ConsumerEnergyReport.com.
A new report from Securing America’s Future Energy (SAFE) debunks the myth about America’s oil boom leading to energy independence.
The SAFE study, The New American Oil Boom: Implications for Energy Security, comes on the heels of recent reports that increased domestic petroleum production – made possible through technological innovations such as hydraulic fracturing, enhanced oil recovery and improvements in offshore oil production – could make the United States energy independent over the next few decades. “The nature and meaning of energy independence, however, is widely misunderstood,” the authors of the SAFE report state. “Although increased domestic oil production will have clear positive effects on the U.S. economy, it alone will not insulate America from the risks of oil dependence. This can only be accomplished by reducing the role of oil in our economy.”
The report correctly notes that while increased U.S. domestic petroleum production will have positive benefits for the U.S. economy (e.g., narrowing the U.S. trade deficit), the United States will still be vulnerable to oil price spikes since oil is a globally traded commodity with prices set by the international market. Consequently, while the United States continues to reduce its reliance on Middle East oil, U.S. security will still be tethered to developments in the Middle East given that events in the region can have immediate and lasting impacts on the price of oil, which has implications for the United States. The only solution, the authors note, is to move away from reliance on oil – that is, diversify our liquid fuel sources, particularly in the transportation sector.
The atmosphere between President Obama and Israeli Prime Minister Benjamin Netanyahu has been noticeably tense since President Obama delivered his Middle East speech last Thursday; Prime Minister Netanyahu delivered his reaction to the president’s remarks. And a meeting between the two leaders at the White House last Friday seemed to do little to improve the perception, with The Wall Street Journal noting that the meeting was “viewed by some as a low point in Washington's relations with the Jewish state.”
Perhaps one area that could potentially strengthen the U.S.-Israeli relationship is around energy security. As both leaders have made pronouncements about the challenges and concerns with their nations’ dependence on fossil fuels, energy security may prove to be fertile ground to engage in greater cooperation and improve good will on both sides.
Far more so than with Latin America, China has historical ties to the Middle East dating back to the Silk Road trading route and beyond. Over the past two decades China has been working hard to reestablish its historical presence in the region, and for good reason: The Middle East is critical for China’s energy security. In fact, its entrance into Africa, which Bailey discussed on Tuesday, was driven by a desire to decrease its dependence on Middle Eastern oil.
More so than in other regions, China must compete with already well entrenched oil relationships in the Middle East. Consequently, it has not been able to purchase stakes in oil fields to the same extent it has elsewhere. One way in which Beijing has tried to overcome the established interests in the region in recent decades is by courting the countries the West has shunned, most notably Iran. Chinese companies have replaced the Western and Asian companies that have by and large left Tehran to comply with sanctions (though in the past year its position on sanctions compliance has laudably changed). As a result, Iranian-Chinese trade spiked from 4 billion dollars in 2003, to over 20 billion dollars in 2009. That same year, Iran constituted 11 percent of China’s total oil imports, making it Beijing’s third largest supplier.
I put this in the category of “things that really surprised me that should not have surprised me in the least.” A major theme at the gathering I attended in Jordan was the wide gulf between policy makers and the academic/science community on all things natural security.