Energy dominance is leverage for US foreign relations

Energy dominance is leverage for US foreign relations
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The United States now is the largest producer of oil in the world, by far. In fact, the U.S. is  actually producing more oil each day — 12.8 million barrels — than the kingdom of Saudi Arabia says it is even capable of producing. The U.S. also is producing so much natural gas that we don’t know what to do with it. In 2020, we need to understand the strength of our position vis-à-vis energy and employ it to our benefit, especially in foreign policy.

From the 1970s until about 15 years ago, U.S. oil production was not a significant force in the global economy. Old reserves had dwindled and suffered from depletion or lack of maintenance. Other oil opportunities waited for the application of new technologies to release their potential. In this century, we have seen the shale revolution and, most recently, the relaxation of permitting and leasing. We are producing more oil than any country has ever produced before, and we have the potential to produce even more with offshore wells, improvements in fracking, infrastructure improvement and from unexploited reserves. 

With this energy bounty, we get more than just lower gas prices. Ten years ago, the U.S. was still dependent on imported crude oil, and the high cost of energy limited our economic development. Ten years ago, America was building liquified natural gas (LNG) regasification ports to prepare to import natural gas from Qatar and Russia to supply our power plants with cleaner-burning fossil fuels. Much has changed. As we enter 2020, America is a net exporter of petroleum — combined crude oil and products — and some of those regasification ports have been converted to liquefaction ports that are starting to export American natural gas instead of importing it. 

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We should now be talking about how we can use our energy strength to protect American interests and reorient our foreign relations. 

Here are three examples:

Saudi Arabia: Despite Saudi Arabia’s much-publicized attempts to wean its economy off the oil industry, the Saudi economy is still dependent on oil. Sixty percent of Saudi government revenue still comes from the oil and gas industry each year, and now even more Saudis have tied their financial futures to oil and gas by investing in Aramco’s IPO. In short, Saudi Arabia desperately needs its oil business to continue to succeed. Although Saudi Arabia remains reliant on selling oil, the United States no longer relies on Saudi oil imports. In fact, the U.S. imports half as much oil from Saudi Arabia today as it did 10 years ago. America no longer is beholden to Saudi oil the way it once was and, thanks to America’s robust oil industry, Saudi Arabia no longer has control over global oil prices the way it did a decade ago. They need us more than we need them.

Perhaps it is time to rethink or reorient America’s commitment to Saudi Arabia’s military defense, or the U.S. could use its new leverage to push Saudi Arabia for greater concessions on human rights abuses and diplomatic assistance in improving Arab-Israeli relations. 

Russia: Russia is currently the world’s second-largest oil producer and its economy depends on energy sales. The Russian energy sector accounts for at least 60 percent of the country’s GDP and at least 68 percent of the country’s exports. The prevailing view in Congress today is that Russia has great influence over Europe because it of all of the natural gas it supplies. Congress has unsuccessfully attempted to stall the construction of a natural gas pipeline between Russia and Europe with sanctions legislation. However, with our own great energy production success, we need to use our cheap, plentiful natural gas resources to entice European buyers to wean themselves from Russia. 

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Our natural gas strength could and should be our greatest asset in combating Russia’s expanding power over Europe. We have an extraordinary opportunity to help Europe diversify its sources of energy so that it can’t be held hostage to Russia in the future.

China: China is the world’s largest importer of oil and gas. Its manufacturing industry and growing consumer economy depend on foreign energy. Meanwhile, the U.S. is the largest producer of oil. Although China buys most of its fuel from Saudi Arabia and Russia, our control of more than 10 percent of the global supply should be a more important bargaining chip as the White House continues to the next stage of trade negotiations and pushes China on human rights concerns.

In 2020, we need to realize that our energy dominance gives us an upper hand — and not just in the energy sector.

Ellen R. Wald, Ph.D., is a senior fellow at the Atlantic Council’s Global Energy Center and the president of Transversal Consulting, a global energy and geopolitics consultancy. She is the author of “Saudi, Inc.,” a history of Aramco and how the Saudi royal family controls this multitrillion-dollar enterprise. Follow her on Twitter @EnergzdEconomy.