America's Energy Independence: Economic and Geopolitical Consequences

The American energy sector has seen some profound upheavals over the last few years that may have important repercussions from both the economic and geopolitical points of view. During the last seven years, the United States has considerably reduced its level of dependence on oil imports. The International Institute for Strategic Studies noted a 40 percent decrease in American imports of foreign oil since its peak in 2006. The reduction of imports is the result of low domestic demand coupled with increased fuel production on American soil. In effect, Americans have been in the process of reducing their consumption of gas for the past few years. At the same time they have started increasing domestic hydrocarbon production, mostly thanks to the development of unconventional hydrocarbons such as oil or shale gas and even light oil pumped from impermeable reserves which were for a long time considered too costly and difficult to extract. From the deep waters of the Gulf of Mexico to the North Dakota prairie, from California to Pennsylvania, the country is covered with oil drilling sites.

Since 2008, the United States’ production of oil has greatly increased. According to the U.S. secretary of energy, in February 2013 production had surpassed seven million barrels a day, an incredible 16 percent increase in one year. The United States has seen the highest increase in oil production outside of OPEC. In Alaska, the potential of sea drilling sites is estimated by the American Institute of Geological Studies to be around 40 billion barrels of crude oil. The production increase is so high that the International Energy Agency predicted in its last annual report, World Energy Outlook, which appeared on Nov. 12, 2012, that between 2017 and 2020 the United States would become the highest producer of oil in the world behind Saudi Arabia. Experts also predict that the U.S. will be a net exporter by 2030. In light of this prognosis, the U.S. should achieve the Holy Grail of energy independence within a dozen or so years. The energy independence of the most powerful country in the world will no doubt have geopolitical consequences.

In the first place, American politics in the Middle East will probably undergo several strategic adjustments to the extent that the factor of “energy dependence,” or more precisely “securing access and supply of oil,” will be less sensitive. Obviously, this will entail a redefinition of American national objectives. Previously, the United States, which was the biggest oil importer in the world, had not hesitated to start or favor wars or open and underground conflicts in Africa, the Near and Middle East and Latin America with the goal of securing its energy supply. Now soon to be self-sufficient, their interventions in these regions will be under new auspices, notably those linked to China’s growing influence. The International Energy Agency predicts that China could become the greatest oil importer in the world by 2014 or 2015. Consequently, Beijing will be forced to reinforce its presence in oil-rich regions and will have to take international measures to satisfy its oil needs. The access to energy resources is indispensable for China to support its growing economy in the years to come. Failing that, China risks seeing its growth level change in light of an absence of sufficient supply. What is more, so as to not leave the monopoly to the Middle Empire, Washington must ensure that it has allies leading these sensitive regions.

Further, the United States must also take into account the emergence of a true green revolution in China. The country appears as the leader in clean energy, in all categories. These last few years it has invested significantly in wind production, solar panels, electric car batteries, etc. in a vision of power opposed to the American giant. And so the American administration, in choosing the development of fossil fuels as its priority, seems to have left the opportunity open for China in the renewable energy sector. According to data from Bloomberg New Energy Finance, U.S. investments in the clean energy sector decreased between 2011 and 2012 (from 55.9 percent to 44.2 percent), while Chinese investment in this sector has greatly increased (from 47.4 percent in 2011 to 67.7 percent in 2012). Thus, in order to not be outdone, President Obama affirmed during his State of the Union address last February that the U.S. intends to pursue research and development in the renewable energy sector.

Finally, the recent agreement for the construction of an Iranian-Pakistani pipeline, as well as the acquisition by a Chinese company of the management of the port city Gwadar on the Balochistan coast, seems to mark a merger between Pakistan on one hand and Iran and China on the other. Through this accord with Iran, Pakistan seems to swing the pendulum toward the East while it was, until recently, the target for American politics in the war against al-Qaida. Nevertheless, today it seems improbable that Pakistan will maintain this view in the long term, insofar as the Pakistani Sunnis and the Iranian Shiites risk quickly stumbling over ideological barriers. The Iranian-Pakistani accord is perhaps only a commercial agreement (not yet fully funded) whose aim is to restart the Pakistani economy that was stopped by a worrying stagnation. Economic stagnation is never good when one is surrounded by growing countries (India); the risk of a frustrated population cannot be ruled out in the short term. This is something that will probably create new risks of political destabilization. Pakistan’s “brother-enemy” India will, like the United States, no doubt be particularly attentive to these developments, which beyond a purely commercial interest seem to posit the groundwork of a more and more significant Chinese base in the region.