The Experts: How the U.S. Oil Boom Will Change the Markets and Geopolitics

COMMENTARY Coal, Oil, Natural Gas

The Experts: How the U.S. Oil Boom Will Change the Markets and Geopolitics

Mar 27th, 2013 1 min read
COMMENTARY BY

Director, CENRG and Senior Fellow, IAGS

Director, Center for Energy, Natural Resources and Geopolitics, and Senior Fellow, Institute for the Analysis of Global Security

This would be great, as dependence on Middle Eastern and Venezuelan oil is creating geopolitical liabilities and commitments which may be more difficult to manage, particularly when Congress is unwisely cutting military budgets. The U.S. may become a net Liquid Natural Gas (LNG) exporter before it becomes a crude exporter. However, while red-white-and-blue crude exports would be a best-case scenario, this unfortunately flies in the face of certain realities in 21st century America, which is forgetting its bold industrial and especially oil industry roots and becoming increasingly unfriendly to energy business.

Thus far, the Obama Administration is doing all it can to assure that U.S. oil exports just won't happen. President Obama attempted to take credit for the shale-gas revolution in his State of the Union speech, conveniently "forgetting" that shale oil and gas are mostly developed on private lands. U.S. hydrocarbon production has in fact dropped 30% on federal lands. The complicated approval process for gas exports, bureaucratic red tape and expanded federal authority to block projects such as the Keystone XL pipeline from our friendly neighbor Canada are all the evidence you need to understand the untenable status quo.

I prefer to look at the total North American oil and gas production, not just at U.S. production. This warrants some optimism. However, there is a limit to this scenario as well, since natural gas cannot always be substituted for oil. Some truck and bus fleets are converting to natural gas, but most cars still need liquid fuel, and for now, that's oil-based gasoline. So while the figures look good, even if North America is a net producer, Saudi Arabia still remains the market maker for oil, and global crude prices are still being set in Ras Tanura.

-Ariel Cohen (@Dr_Ariel_Cohen) serves as a senior research fellow in Russian and Eurasian studies and international energy policy at the Heritage Foundation. He has published six books and monographs, 30 book chapters and over 500 articles.

First appeared in The Wall Street Journal.