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Gregory Brew

Gregory Brew

Dr. Gregory Brew is a researcher and analyst based in Washington D.C. He is a fellow at the Metropolitan Society for International Affairs, and his…

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Full U.S. Energy Independence Is Impossible

Establishing American “energy dominance” has been a key policy objective of the Trump Administration.

Since coming to office, President Donald S. Trump has made increasing U.S. energy production and energy exports a priority. And for a time, it looked like he might pull it off.

Oil production has doubled since 2008. This year American oil output exceeded 10 million bpd for the first time in decades. Production from the shale revolution, particularly the Permian Basin of Texas, has been booming. Investment into new leases both onshore and off has increased, as the Trump Administration has opened up federal land and the entire coastal plain for drilling.

The EIA predicts that U.S. production will continue to rise, exceeding 11.5 million bpd in 2019.

According to Secretary of Energy Rick Perry, Secretary of the Interior Ryan Zinke and EPA chief Scott Pruitt in a June 2017 op-ed, energy dominance “means a self-reliant and secure nation, free from the geopolitical turmoil of other nations that seek to use energy as an economic weapon.”

Energy dominance, in other words, means “energy independence,” an oft-repeated political slogan deployed by virtually every U.S. President since Richard Nixon.

But the United States cannot be completely independent from the global energy market. Nor cannot it achieve full self-sufficiency in energy consumption while insulating itself from changes in oil and gas prices.

The fallout from the killing of Jamal Khashoggi led a sudden increase in tensions between the U.S. and Saudi Arabia, the world’s top oil exporter. Prices ticked upwards based on fears that a diplomatic spat could disrupt Saudi oil sales to the U.S., which average around 1 million bpd according to the EIA. Related: Cold Snap Could Send Natural Gas To $5

The U.S. imports less from Saudi now than it did in 2008, when imports stood at 1.5 million bpd. But the incident highlighted the fact that the U.S. still relies on imports to cover domestic consumption: in 2017, imports averaged 10 million bpd.

According to the most recent EIA data, the energy trade gap has narrowed, but won’t disappear entirely if current consumption trends continue. Production will continue to rise, but infrastructure constraints will hold back increased output in the Permian.

The Trump Administration could alleviate the pressure by cutting back on consumption, but the government has done just the opposite. Federal fuel economy restrictions have been weakened and research into conservation and alternative transportation has been slashed.

Along with energy dominance, another key aspect of Trump’s policy has been to pressure Iran through economic sanctions, scheduled to go into effect on November 5. A months-long effort to restrict Iranian oil exports has succeeded in slashing them by a half, but this has placed the U.S. in a bind: it needs OPEC producers to keep pumping to make up the loss of Iran’s product on the market. Related: Iran’s Worst Nightmare Is Coming True

While fears of a supply crunch seem overblown, and the market may even be flirting with a glut going into the 2018-2019 winter season, the situation shows that U.S. hopes of energy independence are misplaced. There is no safety for the U.S. consumer in today’s globalized energy market, particularly when the U.S. government upends the market by targeting oil producers.

This realization seems to have hit the Trump Administration. The Wall Street Journal reported that Secretary of the Treasury Steven Mnuchin is urging caution in the administration’s response to the European Union’s attempts to work around Iran sanctions.

Iran is facing a bleaker situation, as oil prices fall and China suspends purchases of Iranian crude. The U.S. may succeed in bringing maximum pressure on Iran in the short term. But if the supply situation tightens, Iran’s crude might find markets again.

If energy dominance means re-positioning the U.S. as a major oil producer and exporter, the Trump Administration has succeeded in following the course set by the Obama Administration. But the U.S. shouldn’t hold out hope for true energy independence if it continues to rely on fossil fuel consumption. In today’s globally integrated world, such a thing simply does not exist.

By Gregory Brew for Oilprice.com

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  • Mamdouh G Salameh on October 31 2018 said:
    Energy dominance and energy independence are not one and the same. The United States is already dominant in the energy field by virtue of its proven reserves and production of oil, coal and natural gas and also its advanced technology in nuclear energy. It is one of the world’s four dominant countries in the energy field. The other three are Russia, Saudi Arabia and China.

    The United States is already self-sufficient in coal and natural gas but not in oil. It will never achieve oil independence and will always be dependent on foreign oil imports for the foreseeable future. This is so because its conventional oilfields are virtually depleted and its shale oil industry is running into some productivity issues that blatantly contradict claims by the US Energy Information Administration (EIA) and the International Energy Agency (IEA) about projected rises in US shale oil output and also the recent projection by the by the US Secretary of the Interior Ryan Zinke that US oil production may rise to 14 million barrels a day (mbd) by 2020. Moreover, the US shale oil industry will never be profitable.

    And while the United States will never achieve oil independence, it will The United always be dominant in the energy field particularly oil in terms of the size of its oil imports estimated at 9 mbd and its ability to manipulate the global oil market and oil prices by claims about rising shale oil production and significant build in crude and products inventories as well as by alternating the value of the dollar and also by the fact that the petrodollar has so far been the currency of global oil transactions. However, the petrodollar is starting to face tough competition from the petro-yuan.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Randy Verret on October 31 2018 said:
    We in a global market, so we are (and will remain) energy inter-dependent...not independent
  • Bill Simpson on November 01 2018 said:
    What the Federal Government should have done 60 years ago was to get the brightest engineers and scientists in the entire country together to design a standardized nuclear power plant with the goal of building them as cheaply, as safely possible. Then build factories to mass produce the components, and construct 1,000 such plants in order to eliminate the use of oil and gas for power generation throughout the United States. They should have cut a deal with Canada and Australia for long term uranium imports.
    Had they done that, the US would be awash with natural gas to sell to pay for oil imports. Or they could have let the gas in the ground until needed. A shortage of either gas or oil will be catastrophic for society. Put that off as long as possible by using nuclear power, wind power, solar power, and hydroelectric power for electricity generation.

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