November 2017, Vol. 244, No. 11

Features

Strategic Benefits of American Boom in Oil and Gas

History is replete with examples of how countries have either sought to wield their national power to acquire energy, or used their energy resources to achieve foreign policy goals. From the Japanese decision to bomb Pearl Harbor to what had been a rapprochement between the Turkish government and the Iraqi Kurds, energy has animated and shaped pivotal geopolitical decisions around the world.

Energy’s influence on global affairs means major changes in the former always have huge impacts on the latter. The last decade has in fact witnessed a revolution in energy, but not in the way that the U.S. intelligence community was anticipating when it penned the Global Trends 2025 report that anticipated “likely” alternative futures.

Rather than seeing renewable energies displace fossil fuels as this 2008 report considered, the real energy uprising of the last decade has been in oil and gas. Renewables will eventually bring their own new geopolitics, but the revolution in oil and gas has already occurred and, with it, a restructuring of the geopolitical order.

Policymakers and pundits around the world have offered assessments of what the surge in production of unconventional oil and gas will mean for global affairs. Yet, such prognostications are largely wrong. America may or may not reach a status of “energy independence.” U.S. interests in the Middle East will not diminish as a result of the new energy realities. The surplus of oil and gas does not mean certain doom for countries of the Middle East. And Europe won’t be liberated from the need to import Russian energy by the boom in U.S. shale gas.

But while such assessments will disappoint many, the strategic benefits of the boom – to the United States in particular – are even greater than such conventional wisdoms suggest. Although energy will not, of course, be the sole determinant of global politics in the years ahead, it will be at least as or more consequential than many of the other issues currently receiving more airtime from pundits and consuming more calories of policymakers.

Specifically, the new energy abundance will fundamentally shape the global landscape in five key areas over the next decade and beyond. For starters, the new energy abundance weighs in on one of the most vexing questions in foreign policy today: the fate of the current liberal international order. Both in weakening challengers to the order, such as Russia, and mitigating some Chinese concerns about it, the energy boom is a shot in the arm to the international order, creating both more time and space for the United States and others to ensure its preservation.

Second, the new energy abundance weakens regional hegemons – from Iran to Russia to Venezuela. At the most obvious level, lower energy prices mean less revenue for such export-dependent countries. But other changes, particularly in how both oil and natural gas markets now function in an age of energy abundance, also work against their ability to use energy trade as a political weapon. For instance, Russia will continue to be a big exporter of natural gas to Europe, but in a dramatically changed environment, where more fluid and better integrated natural gas markets shift power from the producer to the consumer.

Third, although not necessarily delivering full energy independence to America, the boom does reinforce U.S. sources of power – both of the hard and soft varieties. As is evident to many Americans, there have been economic benefits from the boom, from lower energy prices, more jobs in the energy realm as well as in sectors that support it, and a fillip to types of manufacturing where energy is a key input.

But perhaps less obvious is how the U.S. energy boom has been a persuasive antidote to the perception – held by many worldwide a decade ago – that America was in irreversible decline. The revolution in unconventional oil and gas in the United States was and remains a strong reminder of the power of American ingenuity, innovation, and the ability of the country to remake itself and reverse precarious situations (such as burgeoning dependencies on foreign energy).

Fourth, the changed energy realities have created real impetus for reform in some of the most energy-dependent economies in the world. Facing the prospect of a dramatically changed oil market, the Gulf region of the Middle East, in particular, has embraced some of the most remarkable reform efforts seen in that part of the world in decades. While the success of these reforms is far from certain, key oil producers are finally taking long-overdue measures to diversify their economies – steps that will ultimately also require liberalizing their societies.

Finally, the new energy realities are reshaping existing alliances and affecting the prospects of future ones. American natural gas exports are providing U.S. allies more diversity in their supplies and, in the case of Europe, an insurance policy against Russian energy-backed political coercion. In contrast, the global glut of liquefied natural gas puts another nail in the coffin of a Sino-Russia strategic partnership by further accentuating the imbalance between China and Russia that Moscow has always found so problematic.

Unmistakably, the benefits of the energy boom to the United States extend far beyond the narrow lens of America’s trade balance or the price of gas it pays at the pump. This is good news for Americans, but will require more sophistication than we have yet seen from policymakers for the United States to capitalize on this strategic windfall.

While seeking to ensure the continued production of American oil and gas, Washington also needs to think bigger in order to maximize the benefits of the boom. It should think about how to use its energy prowess to advance non-energy foreign policy goals, adopt measures to take full advantage of the new strategic environment created by the boom, and take care to anticipate possible downsides to these otherwise fortuitous developments. Only then will America truly have moved from an energy constrained future to an energy empowered one. P&GJ

Author: Meghan L. O’Sullivan is a professor at Harvard University’s Kennedy School and author of the recently released book, Windfall: How the New Energy Abundance Upends Global Politics and Strengthens America’s Power. She was the deputy national security adviser for Iraq and Afghanistan for President George W. Bush.