Substantial US tight oil resources could reshape global energy geopolitics, three experts suggested at a Bipartisan Policy Center conference on the subject. But the changes could be subtler and more gradual than some people think, they added.
“A better supplied world is a safer world, but it doesn’t mean there still aren’t above-ground and below-ground risks,” said Daniel Yergin, chairman of IHS CERA. “It could help us play a leadership position in the world that wouldn’t have been possible a decade ago, however.”
Carlos Pasqual, special envoy and coordinator for international energy affairs at the US Department of State, stated, “We have an incredible moment of opportunity that will be good for US business, the US economy, and the rest of the world. If we manage it with environmental responsibility, it will be historic.”
Luis Giusti, a senior advisor at the Center for Strategic & International Studies, said he does not expect the US to change its military commitments to defend overseas oil-producing countries because markets would become very volatile. He also agreed with Yergin’s statement that producing crude from tight shales and deepwater deposits will be more challenging than many believe.
US tight oil resource estimates have indisputably given the nation more clout in its foreign affairs, the trio agreed. More US production has let the federal government successfully encourage countries which buy Iranian crude to reduce their orders, Pasqual said.
“It’s important to sustain this policy,” Pasqual maintained, adding, “Countries understand the need to restrain Iran’s nuclear ambitions. They’re likelier to do something about it if they’re confident they can buy the oil elsewhere.”
Europe’s natural gas relationship with Russia is changing because the European governments realize supplies are available elsewhere, according to Yergin. Russian Prime Minister Vladimir V. Putin and Chinese President Xi Jinping’s recent meeting in Moscow suggests the two countries’ future relationship will be based more on oil and gas than Marxism, he said.
Giusti said Saudi Arabia’s government has accrued enough cash to sustain lower crude prices, and is willing to spend what’s necessary to keep the kingdom stable. “They also would enjoy seeing Iran squirm under sanctions and Putin fail in his Arctic aspirations,” he added.
Pasqual said the US can’t retreat from its overseas commitments because oil and gas are global commodities that react to events, there’s not that much spare crude production capacity outside Saudi Arabia, and Asian and other countries outside the Organization for Economic Cooperation and Development now account for virtually all the growth in global oil demand. “If we can help Asia diversify its gas supplies, its positive influence on global markets will be important,” he indicated.
Yergin said the US should begin to export hydrocarbons, particularly gas, but added that it will be a net oil importer for some time. Pasqual said the US would be exporting LNG into a market where growth is limited. “But a large supply in those markets will help keep domestic prices at a reasonable level,” he added.
Increasing US gas production and using it instead of coal to generate electricity has put the country’s carbon emissions levels at a 16-year low, Pasqual said. Studies in China show that its greatest near-term reductions in carbon emissions would occur with a combination of more gas and increased efficiency, he noted. “In the short term, we’re trying to create a better market for gas so it can be a base fuel as more alternatives are introduced,” he said.