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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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U.S. Energy Policy Debate too Myopic

Brazilian state oil company Petrobras last week announced it encountered a 984-column of hydrocarbons in an offshore field just days after boasting of a new discovery off the coast of Rio de Janeiro. Further north, while struggling, Mexican oil monopoly Pemex said crude oil production reached 2.5 million barrels per day for July. With energy policies moving front-and-center to the U.S. political debate, a discussion that includes Latin and South American reserves could be a more representative version of an "all-of-the-above" strategy.

Petroleo Brasileiro, the state-run oil company known as Petrobras, announced last week the 984-foot column was discovered off the coast of the northeastern state of Sergipe. Four days earlier, a discovery at the Franco prospect yielded a 967-foot column off the coast of Rio de Janeiro. The state-controlled company is a frequent target of critics who complain output is slow despite the discovery of major oil deposits in the pre-salt areas off the country's coast. While technologically cumbersome, the government expects to reach a daily oil production benchmark of 7 million barrels by 2020. That would put Brazil on near equal footing with Russia, the United States and Saudi Arabia in terms of oil production.

Meanwhile, state-owned Petroleos Mexicanos, or Pemex, reported a lackluster July with exports down 6.5 percent from the June figures at 1.12 million barrels per day. The company ranks seventh in the world in terms of oil production, though aging oil fields and a lack of investments means Mexico might become a net importer of crude oil by the next decade. Nevertheless, the government last year opened the door for private companies to start operations in seven oil fields in the country. 

Much of the politicking during the U.S. presidential campaign of 2012 has centered on energy independence and access to so-called tar sands oil from the Athabasca deposits in Canada. Incumbent President Barack Obama already suffered a setback with green initiatives in the wake of the bankruptcy of solar panel company Solyndra. That being said, oil production in the United States is at historic highs during an administration seen by its critics as shutting the door on domestic energy.  Republican challenger and former Massachusetts Gov. Mitt Romney, in an energy policy unveiled last week, said energy independence by 2020 would come in large part through access to potential reserves off the eastern U.S. coast and in the Gulf of Mexico. The Keystone XL oil pipeline under a Romney administration would shield the U.S. economy from potential oil shocks brought by Middle East conflict while at the same time providing a stimulus to a weak U.S. economy.

With little fanfare in February, U.S. Interior Secretary Ken Salazar signed a transboundary agreement with the Mexican government of Felipe Calderon that would make more than 1 million acres of land available to explorers in the Gulf of Mexico. The agreement is likely stalled as both governments wait out the presidential campaign season. The U.S. Interior Department, however, estimates the western Gulf of Mexico could hold as much as 172 million barrels of oil and 300 billion cubic feet of natural gas. While modest, it could both address U.S. concerns about access to the gulf while supporting the Mexican energy sector and economy.

Latin and South American governments aren't necessarily cozy with Washington. Outside of Canada, however, some of the standard oil suppliers to the United States have their own problems that are likely comparable to any potential issues in the Americas. If the U.S. conversation about the direction of energy policy is about energy security and energy dependence, as opposed to back-room deals for political support, any all-of-the-above energy policy should at least consider a look to the south regardless of the administration.

By. Daniel J. Graeber of Oilprice.com




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