Politics of Power

The North American energy revolution is poised to reach a loud and disruptive crescendo in 2020 as the United States becomes a net energy exporter. Only five years ago this seemed an impossibility with domestic oil production falling steadily from 1990 until 2008 and LNG terminals gearing up for ever-increasing imports. The effects of this transformation are already felt, from economic gains to diplomatic strength, and “declinist” thought about the United States has a strong adversary as the energy renaissance ushers in a new world energy order.

The American energy transformation has been remarkable in both its scope and speed. By combining two independent drilling technologies, horizontal drilling and hydraulic fracturing, U.S. shale gas production rose by over 50 percent each year from 2007 until 2012. In addition, U.S. crude oil production grew by 50 percent between 2008 and 2013, leading to a string of consecutive increases not seen since the late 1960s, when production in Texas was peaking and Alaskan oil first began to flow. These same production numbers will be hard to repeat in other nations. As a recent Foreign Affairs piece noted, a blend of favorable geography, risk attuned financiers, robust property rights that allow landowners to claim underground resources and a strong entrepreneurial spirit have created a unique American energy environment. Other countries might have the right rocks but few have the correct industry structure.

The first tangible benefits accruing from this increased production are seen at the economic level. The McKinsey Global Institute estimates that by 2020, unconventional oil and gas production could increase the United States’ annual GDP anywhere from two to four percent, or roughly $380–$690 billion, and create up to 1.7 million new permanent jobs. This is in addition to the rebalancing of America’s $720 billion trade deficit, of which roughly half comes from energy imports. The secondary and tertiary economic effects of the shale revolution are seen in the renaissance of American manufacturing. Because the heavy manufacturing of steel, cement and petrochemicals relies on natural gas for its energy feedstock, abundant and cheap U.S gas has lent a competitive advantage to industries that were once thought to be lost forever. With American manufacturing gaining steam, increased investment in construction and services has given a much needed boost to an ever-depreciating infrastructure stock.

On an international level, the end of U.S dependence on foreign energy imports will have geopolitical ripples for years to come. It is important to remember that though the U.S will not be importing energy, the country is still connected to global energy markets. This necessitates the support for current systems of international treaties and the maintenance of safe shipping lanes - while stability in key energy producing regions remains of the utmost importance. A disruption in Iraq, Saudi Arabia or any other major producer will still cause the price citizens pay at the pump to spike.

However, the manner in which America deals with the international community will change. Instead of relying so heavily on the stick of military force, the U.S now has the carrot of energy exportation that will allow us to bolster allies and combat the weight of OPEC and Russian directives. Though North America may not assume OPEC’s role as manager of global energy prices, greater production parity will greatly undercut the strength of nations reliant on hydrocarbon exports.

As cries of America’s decline continue to build, the shale revolution will only compound the U.S. economic recovery and continue to bolster the country’s dominant sources of economic, military and cultural power. When U.S. oil production peaked in 1971 and the Oil Embargo shortly followed, the U.S. positioned energy as a matter of national security. This has led to 40 years of strange alliances, enduring conflicts and counterintuitive objectives. The U.S. is poised to realize the tremendous economic and diplomatic gains associated with energy independence and a new system of American foreign policy that may allow rhetoric to match action.