Geopolitical Fallout from the U.S. Energy Revolution
A couple of recent reports about the geopolitical ramifications of the continuing U.S. energy revolutions are worth commenting upon.
I regard the amazing renaissance in U.S. oil and natural gas production as a testament to the American spirit of entrepreneurial capitalism -- a spirit that has succeeded in the face of neo-socialist state opposition. Our innovative heroes have succeeded in using new technologies to make old wells productive again, and using only mainly private land, since the Obama administration has virtually shut down drilling on public lands.
The first report is that America is overtaking -- indeed, probably has already overtaken -- Russia as the number-one energy producer in the world.
To be precise, because of frackng and horizontal drilling, the U.S. will produce more oil and natural gas than the current leader, Russia, sometime this year (and may already have done so). During July, the U.S. produced an average combined total of 22.2 million barrels a day (MBD) of combined oil, natural gas, and related fuels, outstripping Russia's projected 21.8 MBD.
Among the other positive externalities of this American fossil fuel renaissance, we have had to import 32% less natural gas and 15% less oil than we did in 2008. And considering that most of our suppliers despise America almost as much as the current dysfunctional administration does, that is great news, indeed.
Of course, Saudi Arabia produces more oil that either the U.S. or Russia, but when you add in natural gas, we smoke the Saudis. Were we to convert our trucks, locomotives, buses, and cars to natural gas, our imports of oil would plummet still further.
Even in oil, we have a chance to be number 1. Russia produces about 0.9 MBD more petroleum than America does, but our production is rapidly increasing, while theirs is not.
This all means that "Russia looks like the main loser in the global market," according to Tatiana Mitrova of the Russian Energy Research Institute. The Institute has projected that Russia's petroleum exports may plummet by 25%-30% after 2015, which would drop its GDP by over $100 billion and hurt its national budget (40% of which derives from the oil industry).
Considering that Russia is controlled by the dictator Putin, who also despises America almost as much as the current dysfunctional administration, that again is great news.
Now, some in Russia pooh-pooh the longevity of America's energy rise -- like the head of one of Russia's biggest oil companies (Gazprom), who called it "a bubble that will soon burst." And this view is also held by Abdullah el-Badri (OPEC's head, naturally), who predicts that the U.S. shale boom will end within seven years.
But that sounds like whistling past the graveyard to me.
The second piece reports an interesting twist regarding China.
China is about to become the biggest buyer of OPEC's oil, taking that dubious distinction from the U.S. (It passed the U.S. as the biggest importer of Persian Gulf oil a few years ago.) China is now importing an average of 3.7 MBD from OPEC suppliers, compared to our 3.5 MBD. As we continue to drop, China will likely become the biggest importer of OPEC crude on an annual basis this year.
This is quite a change. As recently as 2004, the U.S. was importing 5 MBD from OPEC, while China was importing only 1.1 MBD. China's imports from the Persian Gulf region will soon eclipse the mount of crude that the U.S. imported from the region at its peak in 2001.
More globally, China now has a net import total of liquid fuels of 6.30 MBD, exceeding our total of 6.24 MBD.
The rub here is that China's main source of oil supplies is a region whose security is still guaranteed by the U.S. military -- at a cost of billions of dollars a year -- but China has refused to back American foreign policy regarding the region. This includes especially the goal of stopping Iran from developing nuclear warheads and the missiles capable of carrying those warheads to the rest of the world, and keeping the Syrian dictator Assad from exterminating half the people of Syria.
The fact is that China doesn't yet have the military -- specifically, the navy -- to protect its tankers. So, in one of the most ironic displays of chutzpah in the history of international relations, China is demanding assurances that we will continue to protect the region's shipping!
Recently, when the past head of the Chinese National Energy Administration, Zhang Guobuo, was asked if the Chinese were going to do more by way of securing the oil shipping lanes, he sarcastically replied, "Why don't we let the Americans do the job for now?"
Both Japan and France have set up bases in the area to help police the shipping lanes, but the Chinese haven't.
So far, they are happy to be antagonistic free riders: while we protect the source of oil of which they are now the greatest users, they will continue to support our enemies in the region -- and everywhere else.
Quite clever, indeed.
Gary Jason is a philosophy instructor and a senior editor of Liberty. He is the author of Dangerous Thoughts.