March 06, 2013

The American Oil Boom and African Security

National security and energy policy experts have long called on the United States to diversify its sources of oil imports. These experts correctly asserted that in a time of limited domestic production and tension in the Middle East, ensuring U.S. energy security necessitated a variety of suppliers.

The African continent was often cited as one such potential source of oil. Academics, journalists and politicians predicted that the United States would acquire even larger amounts of oil from African producers, including large exporters like Nigeria and smaller petro-states such as Equatorial Guinea. For a time at least, they were right. Starting in 2002, the United States drastically increased its imports from established producers in Africa, most notably Nigeria, Angola and Algeria (The 5th, 6th and 9th largest suppliers of oil to the United States, respectively), and created relationships with new producers like Chad.  As the United States looked to places outside the Middle East for its oil, several African nations seemed poised to become important suppliers.

All of that started to change in 2010. The international energy landscape began to shift dramatically as companies unlocked tight oil reserves in the United States through the use of hydraulic fracturing and horizontal drilling technologies. For the first time in decades, the United States has seen production increase, to 6.4 million barrels per day in 2012 (up 779,000 barrels from 2011).  And the U.S. Energy Information Administration (EIA) predicts that the United States will increase crude output by another 900,000 barrels a day in 2013, largely from tight oil production.

Predictably, U.S. tight oil has already begun to displace imports, including those from African nations.   According to a recent Reuters article, Nigeria is exporting 67 percent less oil to the United States than it was at its peak, and the United States has slipped from Angola’s first largest market to its third. Even if tight oil production in the United States only reaches the EIA low-end projection of 1.23 million barrels per day in 2035, imports from Africa will likely continue their decline. While some pundits will hail increased domestic production as a great success, replacing African crude may have profound national security and foreign policy implications that policymakers should consider.

First, as the Reuters article describes, the new U.S. oil glut and resulting suppressed demand for African oil could cause a fall in prices to $70-90/bbl by 2020 from current levels of $90-$120/bbl. In fragile states highly dependent upon oil revenue, a price collapse could engender far-reaching economic instability, especially in the midst of rising social spending and high population growth. A country like Nigeria, already plagued by internecine violence and the rise of extremist groups like Boko Haram, surely does not need additional stress and the potential for further destabilization caused by a decrease in oil revenue (which makes up 40 percent of Nigeria’s total revenue and 95 percent of its export earnings). This phenomenon is not unique to Nigeria: many African producers dependent on U.S. oil purchases are classified as fragile or failed states. Chad, a part of the Sahara region that is widely recognized as vulnerable to the spread of Islamic extremism and the influence of Al Qaeda, has relied on the oil sector for up to 80 percent of its revenue in previous years.

Second, as the United States imports less oil from Africa, exporters on the continent will have to look to other markets to sell their crude. China has moved into Africa and established strong trade relationships with many African countries, already replacing the United States as the continent’s biggest trading partner. It appears that oil will be part of this equation. According to Bloomberg, China increased its oil imports from West Africa by 16 percent in 2012 and is on pace to add an additional 18 percent of import growth in 2013.  As China’s presence in Africa grows, so does its potential to undermine U.S.-led efforts at political reform. Unlike the United States and European countries, Chinese development assistance and trade agreements often come with no strings attached.

As U.S. oil imports from Africa wane, U.S. policymakers must consider the numerous implications. If the United States does indeed become a major oil producer, how will U.S. national interests in Africa shift? What does the threat of further destabilization and spread of extremism in West Africa and the Sahara mean for U.S. engagement in the region? How will stronger ties between China and Africa affect U.S. foreign policy, including the military’s rebalance to Asia? What role will the newly formed AFRICOM play?

More to come. 

Photo: The USS Simpson, a guided missile frigate, participates in Africa Partnership Station 2012, an international exercise aimed at strengthening maritime security and safety off Tema, Ghana in February 2012. Courtesy of LCDR Suzanna Brugler and the U.S. Navy. 

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