A New Balance Of Power When America Will Start Exporting Gas Germany, Europe and the Ukraine would rather depend on supllies from Chevron than from Gazprom

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By Paolo von Schirach

March 11, 2014

WASHINGTON – If America were capable of exporting oil and gas, the geopolitical situation  in the Ukraine and in Europe would look a lot different. Today Russia has leverage because it is a critical supplier of natural gas to the Ukraine and to several European countries. The Europeans do not want to get into a confrontation with Russia over the Crimea because it is dangerous to get into a bad argument with your main energy provider. But if the same countries got some or most of their energy from the US, then Russia would have far less or even zero leverage.

US as energy exporter?

Until just a few years ago the notion that America, the world main oil importer, could become a net energy exporter would have appeared crazy. Not so anymore. Due to increased domestic production and higher efficiencies, the US is importing much less oil. In the not so distant future it will depend only on imports from the Western Hemisphere (mostly Canada). And when it comes to gas, soon enough the US will be able to export Liquefied Natural Gas, (LNG).

Energy security is good

Imagine for a second what difference it would make if today the US were able to deliver LNG to the Ukraine, now totally dependent on Russian supplies. This would be a game changer.

I have been arguing for years in favor of US energy policies that would increase America’s energy security, while allowing the US down the line to become a net energy exporter. It should be self-evident that in this complicated and conflict-ridden world America should not be hostage of (critical) energy supplies from distant and potentially hostile sources. By the same token, it would be reassuring for America’s allies if the US were in a position to meet at least some of their energy needs. Increasing the sources and the amounts of supply would make disruptions (and blackmail) less likely.

No US energy policy

In the US, the energy picture is steadily improving. But this is not the outcome of well crafted policies. Sadly, America has no energy policy. The positive developments we are witnessing are (luckily) the result of private sector-led efforts and favorable geology. Simply put, the stuff is there and smart people know how to get it.

Driven by the old-fashioned American hope to make money, US energy companies devised new technologies  –hydraulic fracturing (fracking) and horizontal drilling– to extract fossils fuels in a cost effective-way. Hence the amazing shale gas and shale oil revolutions that have literally transformed the world energy map. Yes, today America has more gas than Russia.

A few more things could be done

This is great. Now America is much more energy self-reliant, and this trend is going to get even better as we move on. But we could go even faster. There are a few relatively easy things that could be done now. They are blocked only by partizan politics.

  • First of all, the Obama administration should authorize the construction of the TransCanada Keystone XL pipeline. As we still import oil, it would be a lot better to get more of it (about 800,000 barrels a day) from friendly Canada, as opposed to sourcing it from the Persian Gulf.
  • Then the administration should allow the extraction of oil from Alaska. Again, this would mean more domestic oil, and lower imports.
  • Washington should send a clear signal to US gas producers by stating that the Federal Government will now buy heavy trucks fueled by LNG. The reason for this is simple. We have plenty of cheap natural gas. If we could use it also as transportation fuel, (beyond power generation and heating), this switch to domestic (cheaper and cleaner) energy would reduce imported oil by almost 3 million barrels a day, assuming a total switch involving all US heavy trucks.
  • At the same time, assuming the continuation of all this natural gas bonanza, Washington should authorize the construction of additional LNG terminals, so that America could export some of its natural gas.

Reduce Russia’s leverage

As I said at the beginning, Russia’s leverage in Europe would not be the same if today America were an energy exporter. By the same token, the power and influence of countries like Iran or Venezuela would be reduced or nullified once their leverage as major energy exporters is reduced.

Once again, think about the relations between Russia and the Ukraine and Russia and Europe today and what they could be the day in which America starts exporting its natural gas to Europe.

I believe that, even without ascribing benign intentions to America’s energy companies, (they are motivated by their desire to make money), the Ukrainians and the Germans would rather depend on Chevron than on Gazprom.

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