Oil and gas exports give the US a strategic geopolitical tool
Earlier this month, Judge Terry Doughty of the Western District of Louisiana lifted the Biden administration’s attempt to halt lease sales for oil and gas production on federal lands and waters. Doughty issued a preliminary injunction on the administration’s plan after 13 states sued. The lease of federal lands for oil and gas production provides millions of dollars of revenue for the states and local governments and economies. Beyond the legal arguments, though, the resumption of federal land leases is critical to pursuing America’s geopolitical goals.
The United States is blessed with an abundance of natural resources, among them plentiful reserves of oil and natural gas. We can either use these resources to our own advantage, both domestically and as exports, or we can cripple our own energy production, limiting our potential. In this decision, we must consider that exported fuel is not only a source of wealth; it is also a powerful tool of geopolitical influence.
It can be tempting to dream of a world that uses less fossil fuel, but the Biden administration’s plan to halt lease sales would do nothing to further this aspiration. Rather, the Biden administration’s plan would curb only domestic oil and gas production, not consumption. In other words, it would cut supply while demand keeps rising.
The immediate result would be two-fold: higher prices and increased imports, often from countries that don’t align with our interests. Supply would stagnate or drop if domestic oil and gas production is not allowed to prosper. When supply is lower and demand continues to rise, as it inevitably will, prices rise. Under the Biden plan, we would pay more for our oil and gas.
President Obama lifted the ban on exporting U.S. produced oil in 2015. From then until 2020, U.S. exports grew while imports shrunk to the point where the U.S. actually exported more crude oil and petroleum products than it imported. Increased natural gas production not only enabled the U.S. to reduce coal use in favor of cleaner natural gas, but to start exporting liquified natural gas to other countries. And now the prices for these commodities are rising, so we should be experiencing an economic boon.
However, many oil producers are neglecting to pursue new projects, because they are wary of the Biden administration’s plans for oil and gas drilling. U.S. production is holding steady at 11 million barrels per day, whereas before in 2019, production was at 13 million barrels per day. The U.S. is now, again, a net importer of petroleum instead of a net exporter. Oil and gas demand, meanwhile, is within a hair of May 2019 levels. If the Biden administration continues to constrain production on federal land, we are heading toward a situation in which, despite vast and accessible resources, the U.S. once again would rely on foreign oil and natural gas.
Energy exports aren’t just about trade and growing the U.S. economy. In oil and gas exports, the U.S. holds a critical strategic geopolitical tool. For example, the Trump administration, in its Phase 1 trade deal with China, negotiated a requirement for China, the world’s largest oil importer, to purchase large amounts of American oil and petroleum products. In another part of the world, America’s abundance of natural gas can be used to counteract Russia’s influence on Europe. Through deals like the one recently concluded between the U.S. and Poland, we can halt Russian geopolitical encroachment on a Europe desperate for fuel.
The U.S. recently started selling crude oil to India, which used to rely on Iran and Arab Gulf countries for most of its oil. U.S. oil helps India remain independent of Iran’s influence and also has helped it stand up to OPEC and Saudi Arabia. If American oil is no longer competitive on the global market, a strategic democratic partner in a largely non-democratic region would be at the mercy of those powers.
One of the most important geopolitical benefits of domestic oil production and exports is countering Iran. For three years, U.S. sanctions crippled Iran’s oil exports. Many countries that used to buy Iranian light oil started buying the same type of oil from the United States. Now the U.S. is negotiating with Iran to end those sanctions, which would permit Iran to openly export oil. If U.S. oil leaves the market at the same time Iranian oil returns, the U.S. will hand our market share to Iran, a state sponsor of terrorism.
The future of oil and gas production on federal lands and waters likely will face additional legal wrangling. However, from a strategic perspective, the answer is clear. We must continue to lease federal land for oil and gas production — both for the U.S. economy and to maintain American power and influence around the world.
Ellen R. Wald is a senior fellow at the Atlantic Council’s Global Energy Center, and 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.
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