Full U.S. Energy Independence Could Have Huge Ramifications For The Middle East

• In 2023, the U.S. could become a net exporter of crude oil for the first time since 1945.
• Complete U.S. energy independence could change U.S. foreign policy vis-a-vis the Middle East.
• U.S. disengagement in the Middle East leaves a massive hole in the global geopolitical architecture.

Although the U.S. marked an historic shift in 2020 by becoming a net exporter of petroleum, it has remained a net importer of crude oil since the end of the Second World War, according to Energy Information Administration (EIA) data. For the relatively uninitiated, which appears to include Saudi Arabia in its ‘oil output figures’ of anything above its true average crude oil production figure of 8.23 million barrels per day (bpd) from 1973 to the end of last week, petroleum and crude oil are not interchangeable words in global oil market terms. Basically, ‘crude oil’ is just crude oil, but petroleum includes crude oil, refined petroleum products, and other liquids (including gas condensates). This technical but important distinction aside, it is not beyond the realm of possibility that 2023 may see the U.S. finally become a net exporter of crude oil for the first time since 1945 and the ramifications of this for its policy towards the Middle East could be huge. To get the figures out of the way first: the EIA forecasts that the U.S.’s net crude oil imports will fall to 3.4 million bpd in 2023 as domestic crude oil production increases to an annual average close to the all-time monthly high of 13 million bpd in November, all other factors remaining equal. In the run-up from its historic shift in 2020 to become a net exporter of petroleum products, the U.S. was producing an average of just over 11 million bpd of crude oil from the beginning of 2020 to end of 2022. However, in the last few months of 2022, the U.S. produced over 12 million bpd, on a rising trajectory, with the EIA initially forecasting that its crude oil production in 2023 would average at least 12.44 million bpd. On the other side of the supply/demand equation, in recent years, the U.S. has steadily consumed around 20 million bpd of crude oil, leaving a net crude oil import figure of around 7 million bpd. However, according to the EIA, in 2021 the U.S. only imported 6.1 million bpd of crude oil, although this figure rose to 6.3 million bpd in the first half of 2022. Additionally, according to widely circulated U.S. government data, November 2022 saw the U.S. import just 1.1 million bpd of crude oil. 

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Partly this was due to sanctions on Russian crude oil and gas exports but in larger part it was due to the rolling releases of crude oil from the U.S.’s Strategic Petroleum Reserve and to the above-mentioned production increases in U.S. crude oil production in the latter part of 2022. Short-term reductions in U.S. crude oil imports can continue to be affected every now and again by such SPR releases. However, the onus for sustained import reductions to allow the U.S. to become a net exporter of crude oil can come from policies announced by U.S. President Joe Biden’s team when oil prices were spiking around the time of Russia’s invasion of Ukraine in February 2022. 

Back in March, U.S. Energy Secretary Jennifer Granholm said that Biden’s administration had started taking steps that should result in a ‘significant increase’ in domestic energy supply by the end of 2022. Progress on those efforts has been slowed by the cascade of other events surrounding Russia’s ongoing war against Ukraine, but Granholm’s comments underlined that the green energy rhetoric of Biden’s early presidency was beginning to make way for action based on the cold hard fact that high oil and gas prices damage the U.S. economically and are catastrophic for the re-election chances of sitting presidents and their parties. According to Granholm in March, the U.S. was working to identify at least 3 million bpd of new global oil supply, with assurances from several high-level oil and gas executives that their companies were set to dramatically increase investments and bring online new rigs. 

Not being dependent on any country for its crude oil or, even more importantly, for its energy requirements as a whole has rightly been a key concern of the U.S.’s since the onset of the 1973 Oil Crisis during which OPEC members plus Egypt, Syria and Tunisia began to block oil exports to the U.S., the UK, Japan, Canada and the Netherlands. This was in response to the U.S. supplying arms to Israel in the Yom Kippur War it was fighting against a coalition of Arab states led by Egypt and Syria. The spiking effect in oil prices was exacerbated by incremental cuts to oil production by OPEC members over the period and by the end of the embargo in March 1974 the price of oil had risen from around US$3 pb to nearly US$11 pb and then it trended higher again. Saudi Arabia’s then-Minister of Oil and Mineral Reserves, Sheikh Ahmed Zaki Yamani – widely credited with formulating the Embargo strategy – highlighted that it marked: “A fundamental shift in the world balance of power between the developing nations that produced oil and the developed industrial nations that consumed it.” 

This shift in power had also been well-noted in the U.S., particularly by Henry Kissinger, the highly influential U.S. geopolitical strategist who served as National Security Advisor from January 1969 to November 1975 and as Secretary of State from September 1973 to January 1977. At that point in the 1970s, the US lacked the crude oil production capability that made its economy immune from the damaging effects of such future oil embargoes by Saudi Arabia, OPEC and the other big oil-producing countries that were mainly situated in the Middle East.

Economic power was the basis of all US power across the globe, as it remains today, so it was evident to Kissinger – and to the presidents he advised – that a strategy be devised urgently that would make it less likely that such embargoes would happen again. The strategy he used was a variant of the ‘triangular diplomacy’ that he advocated in formulating the dealings of the U.S. with the two other major powers of the time, Russia and China. This strategy was, in turn, a variant of the simple ‘divide and rule’ principle that undermines opponents over time by exploiting existing fault lines in individual countries and their relationships with each other. 

This division of Middle Eastern oil producing countries, Kissinger reasoned, could be done across nationalistic lines, as was highlighted by the U.S. sponsorship of the 1979 Egypt-Israel Peace Treaty, which caused chaos in the Arab world, as did the subsequent assassination in 1981 of the Egyptian President who signed the deal, Anwar Sadat. Or it could be done intra-nationally (and intra-regionally) through the stoking of religious sectarian tensions in key target countries, such as Iraq and Syria most notably in recent times. It is interesting to note that this same Kissinger policy of ‘constructive ambiguity’ is now being used by Russia and China with the twin aims of enhancing their hydrocarbons power (through greater access to supply and distribution, and therefore, pricing) and of turning the Middle East against the U.S. and the West. These efforts, particularly toward the latter objective, have been suffused with subtle anti-U.S. messaging connected to the strain of pan-Arabism that saw a previous resurgence across the region in the 1950s and 1960s. 

As the U.S. moves to becoming a net exporter of crude oil and of petroleum and towards complete energy independence it could be that Washington decides to fully commit to the sort of disengagement from the most troublesome spots in the Middle East that was seen under former President Donald Trump. The U.S.’s withdrawal from the Iran ‘nuclear deal’ in 2018, its withdrawal of troops from Syria (2019), its full withdrawal from Afghanistan (2021), and its end of combat mission in Iraq (2021) can all been seen as part of this move away from the sort of ‘world policeman’ role that Trump wanted to end when he spoke of disengaging the U.S. from fighting  ‘endless wars’ (2020). This, of course, leaves a massive hole in the global geopolitical architecture and one that China, with Russia now playing an eager supporting role to it, appears delighted to fill. 

In the Middle East, there remain two key targets for China – the two key power players in the region, Iran and Saudi Arabia – and it is doing very well in both. Iran, over and above the recent civil unrest, was secured as effectively a client state by China with the signing of the Iran-China 25-year Cooperation Program, exclusively broken by me in a feature article on 3 September 2019. Since China made a face-saving, and possibly life-saving offer, to Saudi Crown Prince Mohammed bin Salman in 2017 over his ill-conceived initial public offering plan for Saudi Aramco, as analysed in depth in my new book on the global oil markets, Beijing has been in prime position to decisively move that country into its sphere of influence as well.

By Simon Watkins for Oilprice.com

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